Mining is an essential process for many crypto assets to create new cryptos and validating transactions.

Also, mining is an opportunity for individuals who want to own crypto assets by investing a small amount. However, the mining process is becoming harder and harder by day because of increasing competition in the mining process.

Any miner final intention is to make a profit on what they invested that is why miner wants to mine top cryptos to book profits early but as I stated earlier that mining process is becoming harder particularly in top crypto.

Just look at famous cryptocurrency Bitcoin mining difficulty status.

Above image clearly shows increasing Bitcoin mining difficulty level.

The increasing mining difficulty level is a big barrier for new miners also for existing miners.

Then what is a solution?.

No1 solution for the problem is Mining Pool.

What is Mining Pool?.

Name states that it is a pool of miners who share their mining resources to find a block if they succeed then they share the block reward among themself.

Instead of mining individually, miners form a group to mine crypto by sharing their mining resources if they succeed to find a valid block then, they share all the block rewards among themselves.

Also, a new miner can join to the pool to find a valid block by sharing resources.

So far mining pools are the best solution for making a continues income from crypto mining because if you want to do crypto mining solely then probably you start to make a profit in 2 or 3 years if you set up high-end mining rigs or no profit at all that is why by joining mining pool you can earn money continually.

How Mining Pool Works?

Mining pool works on the basis of fair wages for fair work concept, but the real challenge is to make sure everybody working by contributing their resources.

To ensure every participant is working on to find a valid block, the pool makes use of share mechanism.

Shares are near valid blocks and describe how much work a particular member’s computer is contributing to the mining pool.

There are two types of shares.

1. Accepted Shares:
   These shares indicate that work done by a pool member is contributing substantially towards discovering a new block, and eligible for the reward.
   
2. Rejected Shares:
   As a name indicate that these shares represent work that does not contribute to discovering the block and hence are not paid for. Even if a member’s computer performs work successfully but submits it late for that particular block, it constitutes rejected work.

If a member continuously produces accepted share that helped in finding a new valid block, then that member gets a reward using different methods.

Mining Pool Reward Methods.

Pay-Per-Share (PPS).

Here the pool pays a flat fee to the miner for their contribution to the mining and miner also can withdraw their payments immediately because miners are paid out from the pool’s existing balance.

Miners get more benefits from this method. Firstly, all the risk transferred to the pool’s operator, miner just has to participate in mining. Another advantage is, this method allows the least possible variance in payment for miners.

Shared Maximum Pay-Per-Share (SMPPS).

This method is similar to PPS but limits the payout to the maximum that the pool has earned.

Equalized Shared Maximum Pay-Per-Share (ESMPPS).

A method similar to SMPPS, but distributes payments equally among all miners in the mining pool.

Proportional (PROP).

In this method, pool release payment after finding a valid block instead of paying a flat fee to the miner for just participating.

Every time valid block is found, the reward from that block distributes to each miner proportionally how much work they did.

To get the reward, a miner has to send valid shares to the pool that is way risk distribute to both miner and pool.

Geometric.

This payment method is base on the “score based” system.

Here, each share submitted by miners to mine a block receives a score based on its age.

The score granted for every new share, relatively to already existing score and the score of future shares, is always the same. This means there is no advantage to mining early or late in the round.

This method avoids miners switching pools trying to game the system by joining at an advantageous time in the existing round.

Multipool Mining.

Instead of the miner, pool algorithm choose which is a profitable coin at the movement to mine.

After mining, multipool may automatically exchange the mined coin to a coin that is accepted in the mainstream (for example Bitcoin).

At this movement joining the mining pool seems to be a great idea if start mining crypto in low budget, but before joining look at its benefits and drawbacks.

Benefits of Mining Pools.

Easier to Start.

There are no entry barriers to start mining in a pool.

Any individual having low or high computing power join the pool and start doing mining right away.

Generates a steadier income.

Instead of mining individually by setting up high-end processors and hoping to cover all expenses, make profits in 2 or 3 or more years. Miner joins the pool and earns income in days with low computing power.

Allow Small Miners to participate.

As I stated earlier, it is hard to mine top coins like Bitcoin with low computing power. If a miner wants to mine small low altcoins with his low computing power then, miner earns little to no money for years.

But the pool let small miner join and contribute to the mining process of top cryptos.

More Miners Using Updated Validation Software.

The pool makes it easier to upgrade a network because by upgrading a software mining pool is running, that effectively upgrade the software that all of the pool members are running.

Ok, these are the benefits of joining a mining pool.

Here are some drawbacks of mining pools.

Drawbacks of Mining Pool

Vulnerable to Hacking Attacks.

The pool holds a large number of crypto deposits of miners. If an attacker found out the vulnerability in a pool system, then they can easily steal deposits.

Pools Can Suffer Downtime or Network Issues.

The pools rely on multiple parties to keep them running. There is always a chance that there will be downtime or network issues with any one of the members, which would render the mining pool less effective during this time.

Smaller Income.

Pools may give continue income for miners. Pool pay miner for only find a valid block, but if miner set up a big mining farm, they get block reward plus transactions fees on that block.

Until now, transaction fees are not cashed out by any pool.

Faulty Reward System.

A miner should check out pool reward system before joining it. Some mining organizations will simply recruit to gain processing power and not reward all participants equally.

Conclusion.

Pool mining plays an important role in crypto mining in fact majority of crypto mining activities are done through pools.

For example, at the time of writing this post, 80% of Bitcoin mining is done through the pools.

Know about how mining pool work, their benifits, drawbacks are important before getting into crypto mining pools.

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