A Guide To Mining Pools
Crypto mining is the process of verifying and recording cryptocurrency transactions on a distributed ledger. This process involves a series of mathematical equations solved by massive computer hardware that often use specialized Application-Specific Integrated Circuits (ASIC) chips.
Through this process, miners are rewarded in new cryptocurrency which they can then sell, keep, or exchange for other altcoins. In many ways, mining is the backbone of cryptocurrencies; not only to ensure that transactions are legitimate through verifications but also to record and secure said transactions.
There are two prominent ways to about mining: solo mining and mining pools. Both ways follow the same procedure but offer different results. Solo mining comes out with more rewards, however, mining pools are often more reliable.
How Do Mining Pools Work?
Mining has become so competitive, especially for popular coins like Bitcoin, that solo miners hardly turn a profit. Mining has become an entire industry for big companies that can afford warehouses and investments in massive computers and chips. Since their machinery is far more impressive, they are able to confirm more transactions and get rewarded more. This has left solo miners in the dust. Fortunately, there are mining pools; in which miners come together and each contributes their mining power, and in turn, split the rewards among the contributing accounts.
Since miners only get rewarded once they have found a block—which requires a high Hash Rate (speed of completing a crypto code), the odds are stacked against solo miners. Mining pools attempt to level the playing field and equalize rewards so everyone can win.
Is It Better Than Solo Mining?
Solo miners get to gamble, unlike mining pools which are more stable and reliable. But, if it works for them and they find a block, they are given a reward they don’t have to share. As for mining pools, when a new block is “mined”, the reward is split among members. Profit-wise, pools are able to mine more blocks, so though rewards are split, more rewards are to be had.
Mining pools are easy to join and only need miners to sign up on their website. Some mining pools are known to charge members 1% to 10% of the reward but others have no transaction fees.
Mining Centralization, Are Mining Pools The Answer?
Massive solo mining operations have changed these dynamics slightly. For example, there is evidence that over 50% of Bitcoin mining hardware is now in China. This means that at least half of Bitcoins mined are from large-scale firms that could be connected to one another. This trend could see a small group of entities controlling Bitcoin since they can dominate mining power. With mining pools bringing in members from all over the world and since every member gets a share of the reward, these could be a responsible solution for a future where everyone benefits.