Pool Mining (also known as Mining Pools)
For the majority of cryptocurrencies, mining from home is not efficient or practical. It takes a lot of mining equipment, as well as cooling or fanning equipment, takes up a lot of space (mining rigs and the cooling equipment/ fans required are large) and creates high energy bills. The mining kit can frequently break, doesn’t last long due to the constant pressures put on it – rigs are typically expected to last 2-3 years max, and will need continuous maintenance. This all means that you will need to either be very tech savvy yourself, or be willing to pay a professional for help.
One solution that the crypto industry has come up with are mining pools.
What are Mining Pools? How do they work?
Mining pools are effectively groups of individual miners all pooling their hashpower together to put that to mining a selected cryptocurrency. Finding blocks – where one is rewarded by winning the coins allocated from that block reward- is rare and takes a lot of resources. Mining is also a gamble – whilst in theory, one is rewarded with roughly a fair share of the blocks relative to the mining effort one puts in, in practice this isn’t always the case, with large mining farms tending to win a disproportionate number of blocks compared to solo miners.
In mining pools, the block difficulty will still be the same, but the chance of finding a block will increase. So mining pools will find block rewards more frequently, which will then be shared proportionately amongst all participants in the mining pool. In theory, this means that by joining a group mining pool, you would win smaller rewards, but more often – creating a more regular and predictable income.
Mining pools charge a certain part of the block rewards as a fee for their services. This is different for each pool, but usually around 1% – 2% of the reward. The remaining part of the reward is shared between members.
One of the downsides of mining pools is that they are heavily centralized- they tend to be run by large companies, with each pool having an owner, who tends to get a concentration of power and control by having all the hashing power of the pool directed at them. Individuals in a pool are however free to redirect their hashpower to another mining pool at any time – they don’t tend to have contracts that stipulate minimum periods of commitment. These owners own and operate the server of the pool. Each user can allocate a part of its computing power to this pool and increase the chance of finding a new block. The more users a pool has, the easier to find a block. However, block rewards will be less for each user too: For example, if the block reward is 25 BTC and there are ,.000 users, each member of the pool will get 0.025 BTC only.
Pool payments are modest but they are steady. You will be getting paid less but on a constant basis. In the long run, your profits will most likely be higher than solo-mining because of group cost savings on equipment. Almost all crypto-currencies have a mining pool and anybody can join them. In fact, some crypto-currencies such as Bitcoin are impossible to solo-mine, so if you don’t own a set of ASICs, the only way to mine Bitcoin is to join a pool at the moment.
Solo Mining vs. Pool Mining
The advantages of solo mining over pool mining
In solo mining, you get the full block reward. There are also no pool fees.
- In solo mining, You control the mining computer and do not have to rely on an unknown third party.
- If the fee for the pool is higher than 1% – 2%, your profits might be higher if you are solo- mining.
- Pools (especially if they are known and famous) become the subject of network attacks such as DDOS. Their uptime is usually shorter than solo mining. You have to depend on the pool owner for keeping the server on at all times.
The advantages of pool mining over solo mining
- In solo mining, your income will be more erratic – and you may put a lot of hashpower to mining and not find any rewards at all. Finding a new block will be much harder and take a much longer time. In pool mining, you will earn less per block if you do win a reward, as this will be shared between the pool with a % going to the pool owner as a service fee, but you will earn more regularly.
- Pool mining is easier for beginners and the cost of mining will be lower. You are still using your own hardware, but since the job is shared between users, you waste less electricity and do not strain the hardware that much.
- In solo mining, it is up to you to operate the rigs 24/7 which might not always be possible or practical. Mining pools would usually have operators to manage the running of the equipment so you don’t have to.
- In solo mining, your hardware will wear faster. You will use more resources to mine and for example, waste more electricity. These hidden costs will lower your potential profit in the long run.
What is Cloud Mining vs Pool Mining?
Lastly, we should mention the difference between cloud mining and pool mining because most of the people think they are the same- they’re not! In pool mining, you still use your own computing power and hardware to contribute to the pool. Cloud mining, on the other hand, requires no contribution from users. They operate independently and users only “hire” a part of their computing power. You can use cloud mining even if you don’t own a computer. You “hire” a computer to do the mining in a remote location. Cloud mining is riskier as you have to invest upfront, and are relying completely on a third party to not close down operations and run off with your money.
The Biggest Mining Pools
It is a hard job to list the “best” mining pools. There are hundreds of mining pools out there and most of them are focused on Bitcoin mining, since it is the most valuable cryptocurrency and impossible to solo mine. For this reason, we used the size of the pools to prepare the list below. The bigger the pool is, the higher the frequency of finding new blocks and getting paid. Moreover, these pools are the oldest ones in the world and in theory present less risks and problems, especially in terms of uptime.
|BTC.com||Medium||4.00%||China, US, EU|
|Slush Pool||Medium||2.00%||Czech Republic|
|Bitminter||Small||1.00%||EU, US, Canada|
|BTCC Pool||Large||2.00%||China, Japan|
(*) The pool’s relative size on the network. Small: 2% Medium: 3% - 10% Large: 11% and higher
If you are not sure which currency to mine through a pool, you can join a “multi-pool” too. These pools mine more than one cryptocurrency and use your resources for the most profitable altcoin automatically. They tend to update every 30 minutes, check for the most profitable altcurrency, and start mining that one.
However, please note that almost all multi-pools are operated by a single person and they are not reliable (nor trustable enough) when compared to regular pools. The risk is yours if you choose to invest.
Some examples are:
|Name||Algorithms It Can Mine (**)|
|Multipool||Scrypt / SHA-256 / X11|
|ZPool||Lyra2REv2 / Scrypt / NeoScrypt / Qubit / X13 / Quark / SHA-256 / Argon2 / X11|
|Hexpool||Scrypt / Nist5 / X11|
(**) The pool can mine all crypto-currencies that use these algorithms