What Is a Mining Pool?

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. This guide will help you to understand the difference between various models of mining pools. Pick a crypto, set up a wallet and join a mining pool!

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.

Pay-per-Share

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.

Full Pay-per-Share

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.

Proportional

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

Pay-per-Last-N-Shares

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.

Score system

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 mining

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.

Related news

As Policy Takes a Positive Shift, Are You Ready to Become the Next Unicorn in Blockchain?

On November 8th, World Blockchain Conference hosted by 8btc was held in Wuzhen. At the special meet up “Keep MOVing” hosted by Bytom, we were honored to have some special guests to share their insights at the roundtable discussion. Our honorable guests include: CEO of Bepal, Hu Yuanquan; Co-founder of 8btc, Wang Chao; CFO of Bytom, Li Zongsheng; founder of TAMC, Lou Jiyue; Business VP of Keystore, Jia Xudong; Marketing VP of Cobo, Sui Ran; Founder of Slife, Gui Bin; CEO of Hangzhou Youlian Cloud, Zhou Bin; Blockchain consultant at Shenzhen Culture Assets and Equity Exchange, Li Jun; Bytom Operation Director, Ma Qianli. Question 1: What is the value and future for cross-chain technology? Sui Ran: Cross-chain is just like local area network in its early stage, and that was able to eventually form the Internet that we are familiar with through cross-chain technology. Cross-chain has huge potential moving forward. Lou Jiyue: Cross-chain is a trending topic in the blockchain industry this year. For traders, the greatest influence is the investment opportunity that will emerge for certain tokens. Li Zongsheng: Without cross-chain, everyone was innovating on the single chain. When you put mainstream crypto such as BTC and ETH on cross-chain platforms, the platform will rearrange and combine these assets together and come up with a package, this will open up more room for innovation and imagination. Hu Yuanquan: Cross-chain is not only cross chain for asset, it is the interaction between different blockchains. In the future, some new public blockchain will be able to use cross-chain technology to support their consensus layer. Question 2: All of you here are crucial partners in Bytom’s MOV ecosystem, what do you think is the most important factor for becoming the node for a blockchain? Hu Yuanquan: First of all, we need to see if the developer’s community is complete in terms of structure. Second, the user community, including the token holders’ action, whether they are good actors or not. Lastly, we want to see what the possible future use cases are. Wang Chao: Our business focus is not on public blockchain’s ecosystem. We wish to work with professional service providers, to provide service for our users. Although we are only selecting service providers, what we are doing is essentially very similar to becoming a node, we need to evaluate the ecosystem, initial inspiration and the quality of the public blockchain. Lou Jiyue: Becoming a node is like becoming the stakeholder of a company, so you have to consider whether that blockchain has the potential for long term growth. We need to consider it from different perspectives: first, the quality of developers’ community; second, whether it’s involved in the mainstream developers’ community; third, investors’ confidence and the campaign nodes’ will to thrive; lastly, whether the development direction align with the newest trend. Jia Xudong: First, we need to use our advantages. Node checks validity of the transaction and apply it in the ledger, it is essentially financial management. Financial management means you need to be responsible to your stakeholders who trusts you with their assets. Security is crucial for crypto assets; it is also what we take very seriously. Second, most of our clients are businesses, they usually have demand in staking, we will be able to meet that demand. We are enterprise level crypto assets service provider, and without enterprise assets we won’t become a node. Third, after becoming a node, we will also see whether there is profit from that. Question 3: How will the policy shift in China impact the future for blockchain industry Jia Xudong: We can sense the positivity from public policy shift, the government is very curious to find out how blockchain intergrate with local businesses, and how will blockchain comply with public policy. Many blockchain startups are struggling right now, because other businesses do not pay attention to this industry, or don’t understand what blockchain is. The positive policy shift will inspire more technology development. I don’t know what the future holds, but I’m looking forward to it. Lou Jiyue: I think the industry will take a huge turn. Some of the existing token incubators will disappear as policy and regulations start to be in place. Blockchain is a great opportunity, we need to see how blockchain disrupts traditional industry in different aspects. The internet has 4 major pillars: search engine, social network, E-commerce, and entertainment. The first “.com” boom fostered search engine, the second wave fostered e-commerce and IM (instant messaging). Blockchain industry and the internet industry are similar to each other, but not exactly the same. The internet disrupted the traditional entity, blockchain will disrupt the finance industry. Li Zongsheng: Public blockchain will remain undisrupted by the policy shift, while token exchange might be impacted negatively. Wang Chao: We can feel that public policy is taking a positive shift globally, governments around the world do not wish to limit innovation with regulation. When the Chinese government released positive signal towards blockchain industry, they were not becoming easy or soft, this demonstrates China’s strong will to take another step forward in the blockchain field, it also hints that Chinese RMB is trying to become more globalized, and eventually leapfrog in the global economic competition. Hu Yuanquan: As regulations and policies are being put in place, many things that were unsettled or unclear will start to clear up, this is actually good news for the entrepreneurs, they will see a clearer path moving forward. Question 4: As the tech tycoons are entering the blockchain industry, is this devastating news for startups and entrepreneurs?  Gui Bin: Your greatest enemy is not the others, but yourself. What’s important is whether we have the patience or technique to take us to where we want to go, while retaining what we had before. Many concepts are still not very clear at this point. In the foreseeable future, a lot of things are subject to change. Zhou Bin: The tycoons’ participation has made the blockchain industry very crowded. But the tycoons are likely to take different approach in the blockchain industry. I believe that the key to blockchain innovation is to focus on value creation. The tycoons’ participation will surmount certain technical difficulties; however, even the tycoons cannot replace value with technology.
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