AlgoBlocks
- Aug 11, 2022
- 3 min read

What is a Mining Pool?

Cryptocurrency mining is a core activity to verify transactions before the data can be added to the blockchain. Miners who complete these are rewarded with cryptocurrency.

The mining process involves complex mathematical functions. Back around 2009, it was easier to be an individual miner to run the hardware and solve mathematical puzzles during mining.

Joining a mining pool to share resources with other miners will increase the probability of success in mining. This gives members of mining pools an added advantage due to faster output and better chances to discover Bitcoin and other cryptocurrencies which require Proof-of-Work.

Learn the basics of a mining pool in this guide.

How does it work?

As compared with solo cryptocurrency miners, mining pools allow a group of individuals to share and utilize combined resources to further the probability of mining for cryptocurrency.

A mining pool will have its own set of rules for its miners to work methodically.

As part of the process, a mining pool can assign members a work unit called “nonce” or the number that blockchain miners will be computing for. In ensuring that members of a pool are working on the same block.

In another mining method, pool members will be given the liberty to take work without being assigned.

A mining pool also manages the members’ hashes, looks for rewards through pooled efforts of available processing power, and records work performed by each pool member. The same manager assigns reward shares to each pool member, depending on the sharing protocol of the mining pool.

What equipment do you need?

The cryptocurrency mining process involves using an internet-connected computer, along with special mining hardware devices and software programs.

Mining applications require a graphics processing unit or central processing unit. But an application-specific integrated circuit (ASIC) is the best option for cryptocurrency miners.

ASIC, as it implies, is a circuit chip intended for a specific purpose — cryptocurrency mining. Why is it ideal? Because it runs the mining process faster than regular or less powerful computing devices. ASICs are optimized to run hash functions efficiently.

Building multi-GPU computers intended for mining can also be an option, but these have a much lower computational power than an ASIC. So, this is one of the first things you’ll need before joining a mining pool.

Types of Mining Pool

When your equipment is ready and you’re now set to hop onto a mining pool, look into those groups that fit your preference. Here are a number of common protocols that govern many of the most popular mining pools:

Proportional mining pool

This is the most common type of mining pool. In a proportional mining pool, each miner that contributes to the group’s processing power receives shares until they succeed in finding a block. In the event the pool finds a block, miners receive rewards corresponding to the number of shares they hold.

Pay-per-share pool

In this type of mining pool, each miner receives shares based on their contribution. But in contrast to proportional mining pools, the pay-per-share pool offers instant payouts regardless of when the block is found. A miner in this type of pool can exchange shares for a proportional payout at any time.

Peer-to-peer mining pools

This mining pool integrates a separate blockchain related to the pool, intended to prevent the pool operators from cheating and avoid the pool's failure due to a single central issue.

Final tips when joining a mining pool

There are various factors to be considered when choosing a pool, such as its reputation, size, stability, payment rules, and fees.

Look into a mining pool operator that is transparent, such as those that provide a real-time dashboard and truthfully declare the total hash rate at the pool level.

How many members does the mining pool you’re eyeing have? The size of a mining pool would tell a lot about its stability. Larger mining pools can have a higher probability of mining cryptocurrencies, while smaller ones have lesser potential.

Also ensure stability by a mining pool by looking into whether they use secure network connection, such as a VPN, or if they have dealt with cyber-attacks or downtimes, and how these affected their operations.

Mining pools also take certain fees from individuals’ rewards. Find out the percentage of fees they charge and how it will impact your potential rewards.

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