The era of solo mining is long over. Nowadays, the only way to get cryptocurrency is to join Mining Pool. We recommend CFX mining for successful and profitable mining. Nevertheless, many miners fail when choosing a pool due to the lack of understanding of work principles, specifics, differences, and other features of mining pools.
Definition of a mining pool
A mining pool is a kind of server. The main task is to divide computing tasks into many subtasks. The latter is distributed among all the members who are connected to the Pool. Initially, mining existed on processors. Their computing power was enough for the independent mining of cryptocurrency.
As the complexity of the network grew from attracting new members, the sphere of mining “coins” moved to video cards. Mining on processors was a thing of the past due to the minimal profitability (and later the complete absence of benefits).
Subsequently, increasing the complexity of mining led to miners no longer mining cryptocurrency without combining capacities. It is essential to remember that a mining pool is not a fully collective, evenly distributed mining operation. Instead, it is a division of tasks, where each participant makes a profit, depending on the invested effort (capacity).
How it works
The contribution is estimated by the concept of a “share,” which is a part of the computationally hash function for signing a block. The task of the server is not only to distribute tasks but also to check their validity. The operation is confirmed when the “share” matches the necessary complexity values for signing the block.
The reward received by the Pool is distributed to all miners, depending on the number of valid “shares” passed (depends on the method of rewarding in a particular pool). Moreover, the “share” that signed the block does not affect the final distribution of the reward.
Each such server is a business financed by the commissions charged to users. Mining pools may underestimate the overall computing performance to gain additional profit from “unaccounted power” (the so-called “hidden commission”). Still, such servers instantly fall into negative ratings and blocklists, losing all members.
Technically, the device of a mining pool can not be called complicated. It is a dedicated server that distributes tasks. Moreover, the Pool does not require a complicated setup (if already ready-made templates). Nevertheless, the critical aspect is the attraction of participants, which is based on:
– Powerful advertising.
– The reputation of the mining pool.
– Advantageous conditions for participants (low commissions and other privileges).
It would be best to keep in mind the “51% rule”, which is a direct threat to centralization and allows an attack on any cryptocurrency. When this mark is reached, the Pool should potentially announce its liquidation if the high capacity collection is not for a specific purpose.
Types of mining and methods of reward
There are three types of mining
2. Collective (in Pool).
The latter stands out noticeably because it does not require equipment, often categorized as an investment rather than mining. Solo mining is almost entirely a thing of the past. This is due to the increasing complexity of networks and the demand for digital money mining.
New “coins” are betting on solo mining, but as they develop and attract members, solo mining will be quickly displaced. Pooled mining, with the pooling of capacity, is the only way to compete in cryptocurrency mining.
One of the critical factors when choosing a server is the reward method used on a particular resource. It can affect the final earnings and increase and decrease the potential income. There are more than 20 methods of reward, although the most popular and massive are PPS and PPLNS. The most straightforward method, PROP, is becoming less and less popular and is slowly becoming a thing of the past.
PPS or Pay Per Share – this type of reward is considered the most promising for participants. Each participant receives income for each “share” sent when a block is found. The amount is calculated for the user based on dividing the reward by the complexity of the network. While this distribution principle is most profitable for miners, it is riskier for pool owners, resulting in higher commissions.
PPLNS – Pay Per Last N Shares – this method is considered profitable and does not include payments for each “share.” Payments are made not for finding a block but for the so-called “shifts” that represent specific time intervals. The method is similar to PROP in many ways but differs in the “slow start” when calculating the reward.
The indicator of the calculated power will gradually increase to the maximum (only after reaching the peak value, the payments will be complete). But even if you disconnect from the mining pool, payments will be made until the calculated power is reduced to zero.
How to choose a good mining pool?
Choosing a mining pool for beginners can be difficult, especially with the wide variety of servers. First of all, the Pool must be financially profitable. It is the primary and the only important criterion. The following parameters will help choose the most beneficial, safe, and durable option.
- Hashrate. The power of a particular pool directly affects its potential to find new blocks, hence the members’ income. This is why resources created among the first are the most popular.
Any new servers, despite their features, cannot attract the same large number of members, and therefore will lose power and efficiency in the search for blocks.
- The amount of commission. This criterion can not be called decisive, but it also contributes to the income received from mining. Before choosing a server, make at least a superficial comparison of the different pools by the size of the commission. In the future, this may affect your earnings.
Chasing the minimum commissions is not recommended. It is often an illogical approach in terms of safety and quality of service, but choosing resources with large commissions is also not worth it. It is financially unprofitable.
- The reward system. An important indicator that should be correlated with your capacities to extract the most favorable conditions. For example, with proportional profit-sharing, in the case of low power, the level of income will be shallow because of the insignificant contribution.
Therefore, the choice of the reward system will be vital if it corresponds to the conditions (for ASICs, farms, or large centers, it is different and chosen individually).
- Location. Important parameter. There is an opinion that it is best to choose servers located as close to the equipment as possible. This will provide a stable connection and minimal ping.
The close geographic location is of secondary importance. Use the “ping” command with the server address to choose the best connection.
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