What is a mining pool
The mining pool provides an opportunity for miners to combine their efforts. Miners who decide to come together in a pool share their computational resources. This arrangement increases the probability of finding blocks. Usually if miners find a block, they get a reward. The same thing happens with mining pools, the only difference is that the reward should be divided among all the participants.
Types of mining pools
Single coin mining pool
As the name shows this type of mining pools allows to mine only one particular cryptocurrency. For example, there are Bitcoin mining pools or Ethereum mining pools.
Multi-coin mining pool
Multi-coin mining pools give people an opportunity to mine several coins. Some of them have a special feature to switch automatically and choose the most profitable cryptocurrency.
Cloud mining pool
There is also an option to use leased equipment. This is called the ‘cloud mining pool’. Users do not have to install any hardware. The good thing with cloud mining is that users do not pay for electricity or equipment. Also more people from long-distance locations can participate. To join a cloud mining pool users only have to open an account on the company’s website and choose certain options.
The main reason to become a miner is the desire to make a profit. When choosing a mining pool, it is important to pay attention to how profitable the mining pool is.
If miner works alone, he/she gets all the reward. In the case of working in mining pools, there are several most popular schemes.
Maximum pay per share
Each miner shares processing power. The fixed value of each submitted share is known in advance. If the pool has enough funds, it covers the reward. If it does not, the credit is recorded.
Pay per share
Each share worths a fixed amount of BTC.
The reward for each block is split among all miners according to their contribution.
Each share receives a score, then miners are rewarded according to the calculated scores they have.
Advantages of mining pools
Mining requires a lot of resources, such as equipment and expensive hardware. It is much easier to get the necessary resources together than individually.
Although a user can contribute the same amount working individually as well as mining in a pool, being a part of the mining pool increases miner’s chances for success.
Due to a very high interest in mining, it is getting more difficult for individual miners to receive a profit. Since pools can accumulate more resources, they are more competitive.
Disadvantages of mining pools
When a user becomes a part of the mining pool, the reward is shared among all the participants.
Being a mining pool participant, a user does not get to decide anything. Users follow the terms which exist in the mining pool.
There is a number of pools which dominates some coin’s mining process. Some of the mining pools are trying to become decentralized, but the majority is not going this way so far. Anyway, the important thing about mining pools is that miners join a team and cannot make their own decisions anymore.
How to choose a mining pool
Mining pool should follow several criteria:
- Reputation. Do not hesitate to check the reputation of a pool. There are a lot of scams out there.
- Hashrate. Hashrate should differ from your own. The whole idea of mining pools is in the maximum hashrate.
- Location. Speed depends on the location. It is important to broadcast a new block very fast.
- Uptime. It is crucial for the mining pool to stay online. Otherwise, everyone loses profit.
- Payments. Mind two things: schedule and scheme. You want to know how much and when you get paid.