In the early days of Bitcoin (BTC), crypto enthusiasts only needed a basic personal computer with an internet connection to generate new BTC tokens through a distributed computing process called mining.
However, with more people chasing the same number of block rewards, the Bitcoin mining process has become more difficult over time. In fact, the quantum of rewards will gradually halve every four years, making it less rewarding for individual miners who will need to allocate greater compute resources over time.
Available on blockchain protocols that use a proof-of-work (PoW) consensus mechanism, this mining process requires the deployment of application-specific integrated circuits (ASICs) in the form of large rigs in order to complete the complex nature of math problems within the time it takes to mine a block.
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With the increasing difficulty of the mining algorithm and the rewards for mining a block decreasing over time, it has become impossible for a single personal computing device to successfully mine a block.
This has brought to the fore the concept of a cryptocurrency mining pool, where individual miners or users come together and pool their computational resources to improve their chances of mining a block and share the rewards received between them.
Has been around since 2010 when Slush Pool was formed as the first bitcoin mining pool, now there are many popular mining pools for cryptocurrencies like Ether (ETH), Zcash (ZEC), Bitcoin Cash (BCH), Bitcoin SV (BSV) and more to choose from.
Filled with their own dashboards that provide information on aspects such as mining hardware status, current hash rate, estimated earnings, and other metrics, mining pools offer crypto users the ability to consistently participate in the mining process of a particular cryptocurrency and earn regular rewards. proportional to the computing power provided.
Understanding the Cryptocurrency Mining Process
Before we dive into what a cryptocurrency mining pool is and how an individual can join one, let’s take a look at how cryptocurrency mining takes place and understand the main difficulties involved.
First, for any PoW blockchain protocol, the process of mining its native token involves solving mathematical problems using computing power, where the correct answer is represented by the hash number of the block, and the rewards are presented to the entity that solves the fastest.
These rewards are presented in the form of native tokens, with the mining process being programmed such that a new transaction block is mined after specific durations. In the case of Bitcoin, this time is about ten minutes and the complexity, or hash rate, is adjusted according to the computing power available on the network.
With more computing power, the hash rate increases proportionally and requires even more powerful computing power to have a chance of solving the mathematical puzzle at each cycle time.
This is why cryptocurrency miners have shifted from using personal computers or mining CPUs to using Graphics Processing Units (GPUs) and are now turning entirely to custom rigs using hundreds of ASICs to mine cryptocurrency.
These ASIC miners continue to evolve and use the latest chip technology to provide a hash rate that can increase the chances of mining Bitcoin or any other cryptocurrency. Based on hash rate, power consumption, noise produced and profitability per day, ASIC miners such as Bitmain Antminer S19 Pro, AvalonMiner 1166 Pro and WhatsMiner M32 are favorites of the crypto community today -minors.
From releasing new tokens into the system to verifying and adding transactions to the public ledger as blocks, the mining process becomes more difficult as more miners get involved. argue the same thing.
Since the reward for mining a Bitcoin block is 6.25 BTC, it is quite lucrative from a monetary perspective and has motivated many miners to increase their computational capacity by purchasing expensive ASIC miners .
Alternatively, those who prefer to devote their existing computing capacity to earning smaller but consistent rewards prefer to join a cryptocurrency mining pool like F2pool, Slush Pool or AntPool, and they like to combine resources and earn daily rewards for their contributions.
A cryptocurrency mining pool is a collection of miners who work together as a single entity to increase their chances of mining a block and share the rewards between them in proportion to the computing power they contributed to successfully mine a block. block.
The mining pool operator manages activities such as recording the work done by each member of the pool, managing their hashes, assigning reward shares to each member, and even the work to be done by them individually.
In return, a mining pool fee is deducted from the rewards distributed to each member, which is calculated based on the pool sharing mechanism and depending on how these cryptocurrency mining pools share the rewards, they may be proportional type, pay-per-share type or completely decentralized peer-to-peer (P2P) pool type.
In a proportional mining pool, miners who contribute their computing power receive shares until the moment the pool successfully mines a block, which are then converted into rewards proportional to the number of shares received by each member of the pool.
Pay-per-share pools differ slightly from proportional pools in that each member can cash out the shares received daily, whether or not the pool was successful in finding a block.
Last but not least, P2P cryptocurrency mining pools are more advanced versions where all pool activity is integrated as a separate blockchain to prevent the operator or any single entity from tricking pool members.
Regardless of the type of pool chosen, it is important to check whether the crypto mining pool is profitable after analyzing the computing power needed, the electricity costs involved, the applicable mining pool fees and the frequency of mining. payment of crypto mining pools.
Usually, different cryptocurrency mining pools charge between 2% and 4% of the revenue made, with most offering a daily payout mechanism at a pre-determined time of the day.
For contributors, however, the cost of purchasing dedicated ASIC miners and the regular cost of electricity needed to power them must be carefully determined to understand if crypto mining pools are profitable.
There are a number of reputable cryptocurrency mining pools available for individual miners to join and start contributing.
Binance, AntPool, F2pool, BTC Pool, and Slush Pool are some of the best-known cryptocurrency mining pools that have an exemplary track record of uptime efficiency and regular payouts to pool members.
In fact, Slush Pool has been responsible for mining over 1.3 million BTC since its inception, helping over 15,000 small individual miners to collectively mine Bitcoin at a total hash rate of 5-8% of the network. Full bitcoin.
Instead of participating in a Bitcoin mining pool, individual miners can also participate in mining other cryptocurrencies like Litecoin (LTC), Bitcoin Gold (BTG), Monero (XMR), ETH and Ethereum Classic (ETC) among other things, by joining the right mining platform.
Among the Ethereum mining pools, Ethermine, 2Miners, F2pool, Nanopool, and Ezil are some of the more established options that users can choose from, each offering a different network hash rate and comprising hundreds to thousands of individual miners. .
The choice of cryptocurrency with which to start mining depends on its price stability, the hash rate required to earn decent rewards on a regular basis, and the mining rig fees which will be lessened from the overall revenue.
Along with signing up for a cryptocurrency mining platform, individual miners will need to have mining hardware in the form of one or more ASIC miners, mining software installed, and a secure cryptocurrency wallet to store rewards and other crypto assets for trading.
The more capital invested in advanced mining rigs or equipment, the higher the chances of earning higher rewards, provided that all hardware is dedicated to cryptocurrency mining.
Additionally, a fast internet connection and uninterrupted power supply are essential to complete the work assigned by the mining pool operator at the fastest pace possible.
Advantages and disadvantages of a crypto-mining pool
Cryptocurrency mining pools offer even smaller miners the opportunity to use their compute resources to earn a steady income without having to invest heavily in developing a dedicated mining rig that can cost millions. of dollars.
Periodic payouts, clear, real-time visibility of reward potential, and the benefit of professional pool operator management are just a few of the benefits of joining a crypto mining pool.
However, not all crypto mining pools are safe, as demonstrated by Poolin, which recently announced that it was suspending BTC and Ether (ETH) withdrawals due to liquidity concerns. Additionally, since crypto mining pools make money by deducting mining pool fees from the rewards earned from mining activities, the actual earnings of each pool member are significantly lower than what is possible in the case of a single minor.
Additionally, the equipment needed to even continue mining pool operations can be very expensive, and profits can be disproportionately affected by any increase in electricity or internet costs.
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What is a Cryptocurrency Mining Pool? – Tech Tribune France
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