What Is A Mining Pool?
A mining pool is a conglomeration of cryptocurrency miners who put their computations together for more effective mining. All miners in a mining pool combine their resources to increase their chances of finding a block on a cryptocurrency blockchain and consequently get the mining reward for the block found.
Cryptocurrency mining has become a costly venture due to the growth and widespread acceptability of blockchains and the increasing number of miners all over the globe. Mining difficultly has increased, which is a measure of how hard it is to find a new block and get block rewards. The formation of mining pools helps to solve these complexities by pooling computing resources. The mining reward realized from this pooled mining is then shared among all participants of a mining pool. These rewards are usually split based on agreed terms and contributions to the joint mining activity.
Mining pools have different protocols. In proportional mining pools, all contributing miners will continue to receive shares depending on how much computing power they are contributing to the pool. When the collection eventually finds a block, the reward is shared in proportion to the number of shares owned by each miner. In the peer-to-peer system, the proceeding is more decentralized to prevent any form of cheating.
Mining pools are beneficial because they increase the chances of miners finding mining rewards. Individual mining is highly profitable because the miner takes all the rewards for finding a new block. However, there is a very low likelihood of finding a new block due to the high energy and hardware requirement. Mining pools are more likely to find new blocks since resources for many participant miners are put together.
A mining pool is division-of-labor in cryptocurrency mining and, of course, the division of mining rewards. Mining pools also allow people without the costly mining rigs/mining farms to participate in mining processes. The apparent downside of mining pools is that miners are without absolute control of the mining process, and they are also forced to share mining rewards with others.
It is also worthy of note that mining pools usually require a mining fee to join, and it is important to research properly on a mining pool before deciding to join it.
Mining Pool Example
Popular mining pools are Binance Pools, Antpool, ViaBTC, Poolin, Foundry USA, Awesome Miner, and Minergate.« Back to Glossary Index