An overview of the concept of a mining pool and how to get started with it, different mining pools and their individual approaches to splitting the reward and preventing cheating.
Unless you have invested a fortune in mining, you are probably better off mining in pools. A mining pool is a group of miners that combine their processing power to improve their chances of winning block rewards. Rewards are split among pool participants according to the work each of them did.
Mining pools appeared as a solution to a progressively growing mining difficulty. Before mining pools, a miner would get a reward randomly once in several months. Pool-mining ensures a steady income evenly spread across the entire time you are mining.
A mining pool must make sure that you indeed are trying to solve the puzzle. It sets a valid difficulty range. If your solution is within that range, you have contributed a ‘share’ to find the block. You get rewarded based on the number of your shares. However, different mining pools use different approaches as to how they split the reward and prevent cheating.
The most common payout structure. A PPS model keeps count of all your shares and pays a certain fixed amount for each. You can withdraw your money at any time because your payout is taken from the pool’s existing balance. Examples: Nicehash, AntPool, LitecoinPool, SparkPool, and many more.
FPPS model is similar to PPS with the exception that it includes a portion of transaction fees into your payout, whereas PPS-based mining pools leave fees to themselves. FPPS was invented by BTC.com, and there are not many pools that use this model.
You are rewarded at the end of a mining round (when a block is found) based on how many shares you contributed to finding that individual block. All shares are equal, and it does not matter whether your share was the one that solved the block. Example: NoobPool
PPLNS is similar to Proportional model but your reward is based on the fixed number N of your last shares without any regard for round boundaries. PPLNS is quite common and used in SparkPool, DynastyCoin Mining Pool, ViaBTC, KanoPool.
Slush Pool keeps score of all shares during a mining round. Early shares are more valuable than those submitted late in the round. This prevents ‘pool hopping’, a cheating strategy where miners switch pools within a round.
To learn more about reward strategies and mining pool, visit Mining Pool Comparison page.
Multipool is the first service that automatically switches its miners to a more profitable coin at the moment. Multipool uses Proportional reward system. Multi-pool mining leads to spikes in the difficulty of currencies, which is not healthy for the network and discourages loyal miners.
Pool-mining gives small miners an incentive to participate in the mining process, which is obviously good for the network. However, if a mining pool possesses more than half of the network’s total hashrate, it can execute a 51% attack. The pool then can seize control of the network, compromise it, and create an all-around big mess.