What Is a Cryptocurrency Pool for Mining and How It Works

Definition of Cryptocurrency Mining

Mining is a way to create new cryptocurrency units and verify transactions on the network. It involves solving complex mathematical problems that require special programs and equipment. A successful result entitles the miner to add a new unit to the blockchain and rewards them with new coins.

Cryptocurrencies that function in networks with the Proof of Work consensus mechanism are mined using this method. These include Bitcoin, Dogecoin, Bitcoin Cash, Litecoin, Monero, etc.

What Is a Mining Pool?

When Bitcoin first appeared, the process of mining it was uncomplicated, but things soon changed due to growing competition and high computing speed. In 2010, miners realized that instead of competing with each other, they could pool their resources by creating a mining pool. This accelerated the process of solving problems and receiving rewards, which are shared among all participants.

How a Mining Pool Works

How to join a group of miners and take part in mining crypto? We explain step by step:

1. Purchase equipment: most often, miners use ASICs — devices designed exclusively for mining crypto.
2. Find a mining pool whose conditions suit you and register on its website.
3. Get a unique identifier, by which the administration will track your contribution to the organization.
4. Configure the mining equipment according to the specified parameters.
5. Get a task and complete it using computing resources. For example, it could be finding a hash for the next block.
6. If your computer finds the right solution, send it to the pool server, which will start the process of creating a new block.
7. Get rewarded.

In the pool, even miners with weak equipment regularly receive shares of rewards; the main thing is to stay active.

Features of a Mining Pool

When choosing a mining pool, pay attention to the following points:

• Hash rate: it is an indicator of the speed of calculations in the process of cryptocurrency mining (the higher its value, the easier it is to find a block);
• Principles of funds distribution: miners can receive fixed amounts or dynamic payments;
• Fees: there may be a fee for participation in the pool, as well as commissions from balance maintenance fees, withdrawal fees, etc.;
• Wallet compatibility: check which storage methods the pool supports.

Types of Mining Pools

First, let’s find out what the shares are. In the mining parlance, these are the results that participants send to the pool to show that they are working on finding a block.

The activity of miners affects the amount of rewards, but it is not always the case. Let’s look at the basic types of pools:

• Fixed (Pay-Per-Share): Pool participants receive a stable and regular payment for their work, even if the block is not found for a long time.
• With a full payment cycle (Full-Pay-Per-Share): In addition to a fixed amount, rewards include commissions for transactions made by users of the network and included in the block.
• Proportional (Proportional Mining Pools): Rewards are distributed in proportion to the number of shares each miner provides before finding a block.
• With payment per the last N shares (Pay-per-last-N-shares): The amounts depend on the participants’ individual contributions to the most recent shares.
• This approach protects against “tricky mining,” when users connect to the pool only for a short time before finding a block.

Pros and Cons of Mining Pools

Mining pools accelerate the process of mining blocks and provide a stable income. At the same time, some aspects make this type of earning less profitable.

Let’s first consider the advantages of pools:

Stable rewards

In pools, miners receive more regular payments compared to solo mining, as the amounts are distributed among all participants.

Additional resources

Pools often provide tools to monitor and manage mining, which simplifies the process and makes it more convenient for miners.

Support and training

Joining a pool gives you access to a community of miners where you can share knowledge.

Why might joining a mining pool not be right for you? Let’s take a look at the cons.

Commissions

Pools charge a commission for their services, which reduces a miner’s overall income.

Dependence on the pool

Participants depend on the reliability and honesty of the pool. Due to technical failures or fraud, it is possible to lose income.

The Biggest Pools for Cryptocurrency Mining

The list of top pools includes:

1. Foundry USA (USA)
2. AntPool (China)
3. ViaBTC (China)
4. F2Pool (China)
5. SpiderPool (China)
6. Luxor (USA)
7. Binance Pool (Malta)
8. SBI Crypto (Japan)
9. BTC.com (China)
10. BraiinsPool (Czech Republic)

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