In the early days of Bitcoin mining, all you had to do was start the CPU miner inside the Core wallet and you’d be on your way to making a profit. As you probably know, the mining scene is much more complex than it used to be. As difficulty rises and block rewards fall, solo-mining just isn’t going to cut it. If you want to make any profit whatsoever, you better start “pooling” your resources with other ambitious miners. You need to join a mining pool.
What is a mining pool?
A mining pool is a way for a large number of miners with the common interest of mining a specific cryptocurrency to gather, or “pool” their resources together in order to mine said cryptocurrency more efficiently. The amount of CPU and/or GPU processing power contributed to a pool’s network by a miner determines his or her overall reward. This reward is measured in shares, which are assigned to miners who successfully present a valid proof-of-work. Miners redeem their shares and are thus paid out consistently and periodically, versus having to wait a couple years to randomly receive an award when solo-mining.
Popular mining pools and their respective cryptocurrencies are:
Why join a mining pool?
The reasons for joining a mining pool are purely economical. As time has progressed, the difficulty of mining a block of any given cryptocurrency has increased astronomically, while rewards have halved time and time again. Solo-mining no longer turns a profit. Pool-mining, on the other hand, allows miners to turn a profit regardless of the size of their rigs. No matter whether you’ve got one GPU or one-hundred GPUs, you’ll make more mining than you’ll spend on electricity. Pool-mining is a win-win situation for everyone involved, as long as you join a pool that charges few (if any) fees.
Mining pools and centralization
Although you have a lot to gain from joining a mining pool, there can be one significant downside: centralization. Since pools require people to coordinate their processing resources, it can become very easy for a popular mining pool to dominate the overall hashrate of a given cryptocurrency’s network. ZCash, for example, has faced a similar dilemma. Leaders of these popular pools could use this position of dominance to attack the network. These attacks can include a 51% attack and a double-spend attack.
Solo-miners, on the other hand, don’t point their hashrate towards a specific central entity and thus don’t contribute to the risk of centralization.
If you wish to join a pool but don’t want to support the centralization of a cryptocurrency’s network, be sure to join a pool with a smaller hashrate. This helps build up competition against larger pools and helps balance out the network. Keep an eye on your pool’s hashrate as you mine; if it begins to become a dominant mining pool, switch pools once more.
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