Crypto Mining Pools & How They Work?

Crypto Mining Pools consist of a collection of miners who have pooled their resources together in order to mine a cryptocurrency. As the mining difficulty of a cryptocurrency increases, so too does the computational power required to mine it. This increase in computational power can often be too expensive for a solo miner to handle. As it could result in higher energy costs, or the requirement of more specialized hardware. Therefore, miners form collectives in order to better limit the cost of their mining activity. If you are unsure of what exactly the mining process is, we will explain further on in this article. With mining, it is important to understand the different types of blocks that come with it. This is because of the effect it can have on your expected income.

Multi-pool Mining.

Even though there are Single Mining pools that only mine a single cryptocurrency, Multipools allow a user to constantly switch between the mining of a cryptocurrency depending on the profitability of the coin at any given time. In-order to determine the most profitable cryptocurrency to mine at a given time, a Multipool will take into account:

• The difficulty of mining the coin.
• The exchange rate between coins.
• The block generation time.
• The hash rate.

Multipools are incredibly useful. That`s if a user is uncertain about which coin is best to mine, at any given time. Although the price of the mined cryptocurrency can often end up declining slightly, once sold off!

Mining Pool Rewards

There are a range of ways in which a mining pool could share the reward. Once a block has successfully been added to the blockchain. A few pool reward structures to take into consideration include the following:

• Pay-per-share (PPS): As one of the most basic and common pool reward structures, the PPS approach offers an instant payout for each share of the cryptographic puzzle solved. Payout is made from the pool’s wallet.

• Full-pay-per-share (FPPS): As well as benefiting from the block reward, the FPPS method allows for contributing miners to benefit from transaction fees. A transaction fee is calculated over a certain period. Then added to the block reward, its distributed to the miners according to the PPS model mentioned above.

Example reward structures can be found on Bitcoin Wiki page.

Advantages Vs. Disadvantages of Mining Pools

To wrap up this post, all mining pools have their advantages & disadvantages.
A few things to consider when deciding whether to join a mining pool include:

• More stable income
• Potentially lower costs of mining
• Potential of generating a higher income

Conversely, disadvantages of mining pools include:

• Mining pools may suffer interruptions
• Sharing Block rewards.
• Potentially unfavorable pool reward structure

It is important to fully understand what a mining pool is before actually joining one. I hope this article I published gave you an insight into mining pools?