Mining Pool Definition
A mining pool is a joint group of cryptocurrency miners who combine their computational resources over a network to split the reward equally, according to the amount of work they contributed to the probability of finding a block. Essentially, it’s a method of increasing the miners’ earnings by sharing the computing power and resulting blocks.
Mining Pool Key Points
- Mining pools are groups of cooperating miners who agree to share block rewards in proportion to their contributed mining power.
- They increase the regularity of payouts for miners and reduce the ‘luck’ aspect of solo mining.
- Most pools use an approach called ‘Pay Per Share’ (PPS).
- They require a fee to be paid by the users which tends to be around 2%.
What is a Mining Pool?
In the context of Bitcoin and other cryptocurrencies, a mining pool is a collective of miners who pool their resources together over a network to increase their chances of mining a block. Rather than waiting for a single miner to mine a block, in a mining pool, the work is divided among different miners, and the reward is split according to the computational power each has contributed to mine the block.
Where do Mining Pools operate?
Mining pools exist virtually and consist of miners organized from various locations around the world. They are not bound by geographical constraints. Technically, miners connect their mining rigs to the pool using internet connection and mining software. Some major mining pools are located in countries like China and the US, mainly because of the availability of cheap electricity.
Why do Mining Pools exist?
Mining pools were created to address the problem of increased mining difficulty as cryptocurrencies like Bitcoin gained popularity. As more people started mining, the chances of any one individual miner solving the mathematical problem and earning rewards became slim. Mining pools increase the consistency of rewards by creating a cooperative group, where the reward is shared among all contributors.
Who can join a Mining Pool?
Any individual with mining hardware and an internet connection can join a mining pool. However, there might be membership fees or other requirements established by the pool admin. The capability of the mining hardware often determines the proportionate share of rewards from the pool.
How does a Mining Pool work?
In a mining pool, all participating miners get paid a share of the reward when the pool finds a valid block. The amount each miner receives is proportional to the amount of computational power they contributed to the pool. The pool distribution methods can vary – it can be pay-per-share, where miners are paid based on the number of shares they have submitted, or it can be proportional, where miners are paid based on the proportion of shares they hold.
