Do Captain America and Iron Man share a common worldview? No.
Even so, they put differences aside during missions. The magic happens as they work as a team. Take a closer look at any Avengers film. When they assemble, they create a greater whole than the sum of their individual strengths.
Pool miners follow a similar approach to solve cryptographic puzzles as a cohesive unit. They share computational resources over a network to increase the chances of finding cryptocurrency blocks and earning rewards. These miners use cryptocurrency mining software to pool resources, hence the name 'mining pool'.
What is a mining pool?
A mining pool is a group of crypto miners who combine their computing power to increase their chances of discovering new blocks. The earned rewards are then distributed among the pool members according to their contributions during the mining process.
Anyone wishing to profit from cryptocurrency mining can either go solo or join a pool to improve the odds of winning. Pool mining remains the first choice for novice and experienced miners alike because of regular payouts.
A mining pool distributes rewards based on each individual’s contribution to the processing power of the group. To receive rewards, individual miners may need to show proof of work for a pool mining duration or the period between mining new blocks.
What is a Bitcoin mining pool?
Bitcoin's network design makes it the most popular yet challenging cryptocurrency to mine. The network increases puzzle difficulty proportionately with popularity and decreases difficulty when it’s less popular.
This relation between network difficulty and popularity is fundamental to how cryptocurrency works. That’s why mining Bitcoin requires more computing power today than ever.
A Bitcoin mining pool consists of miners who contribute hash rates and cooperate to mine Bitcoin blocks together. Bitcoin miners earn block rewards based on their hash rate contribution. Pool coordinators charge a small fee before distributing blocks among pool members.
Pro tip: If you’re a first-time miner with no access to powerful hardware, you’ll be better off mining cryptocurrencies based on the scrypt algorithm than secure hash algorithm 256 (SHA-256).
Small-scale miners join Bitcoin mining pools to reap small rewards over time. Some of them also join these pools to leverage Bitcoin’s merged mining. Merged mining allows you to use solved Bitcoin blocks for other currencies with similar proof of algorithms.
The idea here is simple: mine two or more cryptocurrencies without affecting the mining performance.
History of mining pools: Timeline
- 2010: Marek Palatinus launches SlushPool, the first Bitcoin mining pool.
- 2011: DeepBit mining pool becomes available for beta testing.
- 2012: Eclipse mining consortium (EclipseMC) launches, becoming one of the significant early mining pools in the Bitcoin ecosystem.
- 2013: CEX.io, a cryptocurrency exchange, launches GHash.io. By 2014, it will control more than 51% of Bitcoin's computing power.
- 2013: F2Pool launches and takes over GHash.io to become the largest mining pool.
- 2014: The Beijing-headquartered mining hardware manufacturer Bitmain launches Antpool, an open-access mining pool.
- 2016: ViaBTC launches cloud mining services.
- 2016: BTC.com launches an open-source mining pool on Github.
- 2018: BTC.com founders launch a Bitcoin & multi-cryptocurrency mining pool called Poolin.
- 2018: Rawpool becomes the largest Bitcoin Cash (BCH) mining pool.
- 2018: Huobi Pool releases Huobi Pool Token (HPT) and sees a massive increase in computing power.
- 2019: Blockstream launches Blockstream Pool, emphasizing the importance of decentralization and providing miners with the option to use BetterHash.
- 2020: Binance releases Smart Pool, allowing miners to automatically switch hash rates and mine different currencies with the same algorithm.
- 2020: Luxor launches the DASH pay-per-share (PPS) mining pool.
- 2021: Foundry USA Pool rapidly rises to become one of the largest Bitcoin mining pools.
- 2022: Increasing regulatory pressures and environmental concerns lead to shifts in mining strategies, with a focus on sustainable practices.
- 2023: Foundry USA Pool rises to become one of the largest Bitcoin mining pools.
- 2024: Tech innovations, like more efficient ASICs and better cooling systems, are making mining more accessible and profitable.
Want to learn more about Crypto Mining Software? Explore Cryptocurrency Mining products.
Why do mining pools exist?
Cryptocurrency mining is expensive because of sky-high electricity costs. However, many currencies have inherent economies of scale, meaning miners can save money when production increases.
Mining pools exist around the world since cheap energy is readily available across many countries instead of a few.
Key features of a mining pool
- Collaboration: Miners work together, contributing their hash rates to improve the odds of finding new blocks.
- Reward distribution: Rewards are distributed based on each miner’s contribution to the pool’s total computational power.
- Types of mining rigs: Miners can join a pool regardless of their rig type—GPU, CPU, or ASIC.
Economies of scale
Crypto mining operations generate massive heat. For that reason, miners require dedicated cooling systems to ensure mining rig efficiency and longevity.
Larger companies use mining pools to increase the scale of operations and gain cost advantages while meeting cooling, operating, warehouse, and machine maintenance costs.
These companies also negotiate with utility companies for large energy purchases. Utility service providers benefit from consistent, large volumes; mining pool operations benefit from economies of scale.
Geographic energy distribution
Slim profit margins force Bitcoin miners to look for cheap energy sources. This hunt leads them to explore different energies like natural gas, wind, geothermal, or even hydroelectric energy. Mining pools exist because of the worldwide geographic distribution of these energy sources.
Crypto mining pools use these energy sources to produce cheap electricity. Some sources are more expensive than others. Because of these price dynamics, mining pools take advantage of different energy sources like hydroelectric power during monsoon season in China, geothermal energy in Iceland, and stranded oil in the Texas Permian Basin.
How do mining pools work?
Mining pools bring together individual miners who work as a single entity on a blockchain network. These miners contribute with their hashing power (computational power per second during mining). The higher the hash rate, the better the chances of mining blocks.
For example, a pool with six devices, each with 335 mega hashes per second, can generate two giga hashes (GH) of mining power which speeds up hash function processing.
Mining pool operations depend on three factors: the cooperative work protocol, the mining server, and the mining client or software.
“Mining pools delegate tasks to miners in the pool. When any miner finishes the work, the entire pool receives a reward. The reward is split proportionately based on miners' contributions. Pools use a URL to track miners' work and help them mine.”
Keegan Francis
Global Cryptocurrency Editor, Finder.com
Cooperative work protocol
Mining pools bring together miners to discover ways to solve the same block. This combined effort helps miners earn rewards faster. The cooperative work protocol facilitates communication and cooperation while targeting blocks.
Earlier, this protocol was called “Getwork”, and it allowed Bitcoin miners to concentrate on specific objects. Getwork helped miners communicate but had some weaknesses.
The rise of the getblocktemplate solved those issues and helped miners with scalability and security. Today, miners use the cooperative work protocol to minimize network delays, focus on particular goals, and combine computing power.
Cooperative mining service
In a mining pool, a server or cooperative mining service keeps up with block production, allowing even small-scale miners to enjoy profits. This server acts as a link to bring together computing power of miners.
What does a mining pool server do?
- Controls and monitors the mining work
- Receives blockchain network transactions
- Shares correctly solved blocks with the network
- Communicates information to mining pool participants
- Counts solved blocks and verify contribution of miners
- Sends corresponding profit to participating pool miners
Once miners install and configure a service software, they can establish a communication channel with the server. A registered account is essential for miners to use the services and listen to incoming connections.
Mining software client
Miners use mining software to connect to the pool mining server. A software client helps a miner solve crypto puzzles with information from the server. Once a miner solves a block, the software client proceeds with the next block.
Mining software solutions also help miners manage authentication and receive payments. A software client points and directs a username, password, and payment address to the IP address in order to process payments.
How do mining pools assign work?
A mining pool acts as a coordinator. It assigns work to all pool members or lets them choose their work units. Some mining pools allow miners to choose the amount of work but no two miners can have the same work unit ranges.
Mining pools assign work using either of the following two methods.
1. Work unit assignment: This method involves assigning work units with specific nonce ranges. Nonce is a number in the blockchain's hashed block, revealing numbers that miners need to solve. Miners can request another work unit after completing their work.
2. Freedom to choose: This method offers participants the freedom to choose the amount of work. The pool doesn’t assign any work but ensures that no two participants work on the same range.
If a pool allows miners to work on the same range, miners will pick the nonce that no one has picked for better chances of block solving and earning rewards.
What are the functions of a mining pool?
- Provides unique work units to each miner
- Manages members’ hash rates
- Records each member’s work
- Distributes rewards among members
How do mining pools distribute rewards?
Mining pools reward miners using different methods. The majority of pools reward their miners based on their contribution to the pool during mining rounds, regardless of reward sharing method. Pools have the freedom to accept or reject work shares.
Accepted work shares are contributions that a pool deems to be beneficial to its chances of finding a new block.
Rejected work shares denote work with no impact on a mining pool’s success in finding new blocks. Pools can also reject work shares that don’t meet submission deadlines and therefore have no impact on the coin discovery process.
Types of mining pools
The crypto world has three types of mining pools. Explore the offerings of each type below.
Cloud-based pools
Cloud mining offers miners a great way to earn rewards without worrying about noise, hardware, or electricity costs. They simply rent mining power to cloud mining service providers. These companies usually have large data centers with cloud mining equipment.
Individuals sign contracts to purchase hash power from these companies and mine via the cloud. Miners from countries with high energy costs opt for cloud mining to earn from cryptos. They pay upfront to service providers in digital or fiat currencies.
Miners typically choose contracts up to 1,000 gigahashes per second for a year or more.
Consider reading detailed reviews of cloud mining providers or vendors before trusting them with your money. Also, look for what mining specs they require for different digital asset types.
Did you know? Bitcoin Pooled Mining Server is the first cloud mining pool. After launching in 2010, this pool has mined more than one million Bitcoin to date.
Mining farms
A mining farm is a mining pool with miners at a single location, often a warehouse or large data center. Search any crypto mining farm images online - you’ll see how they’re just rooms with a large number of computers and servers.
Mining farms usually accommodate servers and power supplies. Some crypto miners also create home-based mining farms but often struggle with excess energy consumption and computer overheating.
Crypto mining farms solve these problems with ventilators and huge equipment cooler fans. As a result, these farms maximize hash rate and computing productivity.
How to start a Bitcoin mining farm
Bitcoin mining can be rewarding if you know the basics and have the courage to start. Begin with the tools below to create a Bitcoin mining farm from anywhere in the world.
- A Bitcoin wallet with password protection to store Bitcoins
- A crypto mining software to support ASICs
- A mining pool membership to participate in Bitcoin block discovery and earn rewards
- A mining rig or ASIC machine to mine
Multipool mining
Multipool miners move from one cryptocurrency to another to find the most profitable one. They consider a currency’s exchange rates and network mining power before investing in mining. The name multipool mining comes from these miners mining Bitcoin along with multiple alternate crypto coins (altcoins).
Mining pool methods
Prior to joining a pool or connecting their rig, pool miners must understand the pool's sharing formula.
Below are some of the most common mining pool methods used to distribute rewards.
Pay per share
The pay per share (PPS) method distributes a flat payout for each solved share. Mining pools using the PPS method deduct pool fees and offer miners a stable income. However, miners might not receive transaction fees.
The PPS method is ideal for miners placing low-priced orders for an extended period or during a coin’s declining trend.
This method pays based on what’s statistically probable rather than what actually happens. If you contribute 10% of the computing power, you receive rewards for it. If you're the one who discovered a block, you still receive the same reward.
This payout system removes luck from mining. All the risk lies with the operator. Miners using this method see payout variance in the short term but balance out in the long run. Only large pools with reserves use the PPS method, as they have to pay out immediately.
PPS remains a popular method for altcoins.
Full pay per share
The full pay per share (FPPS) method is similar to the PPS method. The difference is that FPPS also pays out standard transaction fees along with block rewards. Miners receive payments regardless of whether a pool finds a block or not.
Pools using the FPPS method usually calculate transaction fees for a specific period and distribute them among miners based on their hash power contributions. Miners should choose the FPPS method while placing low-priced orders with pools that aren’t mining constantly.
Pay per last n shares
The pay per last n shares (PPLNS) method allocates profits as a percentage of the shares miners contribute to total shares (n). This payout system relies on a shift system to calculate share submission and profits.
A pool might discover multiple blocks during a day, but that doesn’t necessarily mean they’ll earn rewards. That’s because this method considers your share submission during the block discovery period. As a result, miners see huge fluctuations, especially when new miners leave or join a PPLNS pool.
The PPLNS model has a high correlation with a pool’s luck in the short term. Ideally, loyal pool members benefit more from this model than pool hoppers.
This model is ideal for placing orders on big pools with higher chances of finding blocks within the mining round, or pools with miners connected for longer periods.
Pay per share plus
The pay per share plus (PPS+) method combines PPS and PPLNS.
Pools using this model reward blocks using the PPS model and transaction fee using the PPLNS method. The transaction fee distribution considers the miners’ hashrate contribution.
PPS vs. FPPS vs. PPLNS vs. PPS+
Most mining pools use PPS, FPPS, PPS+, or PPLNS to distribute rewards among miners. Check out the table below to see how these mining pool methods differ.
| PPS | FPPS | PPLNS | PPS+ | |
| Block reward | Expected value | Expected value | Actual value | Expected value |
| Transaction fees | None | Expected value | Actual value | Actual value |
| Luck factor | No | No | Yes | No |
| Regular payout | Yes | Yes | No | Yes |
Shared maximum pay per share
The shared maximum pay per share (SMPPS) method is similar to PPS but never pays more than what the pool earns or receives.
Recent shared maximum pay per share
The recent shared maximum pay per share (RSMPPS) method uses the SMPPS method to reward miners but prioritizes recent miners. Miners with shares closer to block discovery receive higher rewards in this model.
Score based system
Mining pools employing score based systems (SCORE) distribute blocks in proportion to mining time and hashing power. These pools consider scores instead of shares to calculate rewards.
Miners staying longer on these pools earn more rewards. They lose score if they stop mining, and their shares drop in value.
Geometric method
Meni Rosenfeld invented the geometric method in 2011. The score based system prevents pool-hopping, a cheating technique in which miners participate early to increase payout.
This model grants the same score for every new share, meaning there’s no benefit in participating early or late during the mining round.
Double geometric method
The double geometric method (DGM) combines the advantages of PPLNS and geometric method. This hopping-proof model eliminates operator risk with low share based variance like PPLNS.
The operator can absorb pool-based variance later using the geometric method. The payout per share remains the same regardless of the time of submission.
Proportional
The proportional (PROP) method pays out miners based on the number of shares they submitted since the last block. Pools using this model divide the block reward by the total number of shares to arrive at the reward per share. That’s why miners submitting shares early receive higher rewards.
Pay on target
The pay on target (POT) is a high variance PPS variant. This method rewards miners based on the difficulty of work they return to the pool instead of the difficulty of the work that a pool serves.
Peer-to-peer
Peer-to-peer mining pool (P2Pool) prevents the pool structure from being centralized. This structure does so by removing the chances of a pool operator cheating or any other single point of failure. P2Pool miners must run a full Bitcoin node, meaning they bear the hardware and network bandwidth expenses.
Miners participating in P2Pool work on a side blockchain or share chain. They mine at a lower difficulty rate of one share block per 30 seconds.
The share gets merged to the Bitcoin blockchain after reaching the network target. Miners receive rewards in proportion to the shares submitted prior to the target block.
Below are some of lesser known mining methods.
- Solo mining rewards the entire block to the miner who discovers the block. Miners with large capacity join working pools to benefit from solo mode mining.
- Equalized shared maximum pay per share (ESMPPS) doesn’t prioritize additional payments like SMPPS. Pools using this method reward miners regardless of their connection time to the pool in case of block discovery.
- Recent shared maximum pay per share (RSMPPS) is a variant of the SMPPS model. This method pays an additional surcharge for users who recently joined the pool.
- Capped pay per share with recent back pay (CPPSRB) uses the MPPS method and the income from finding blocks to pay miners.
- Hour-based pay per share (HBPPS) uses the PROP principle to distribute rewards but measures by the hour instead of the entire time spent on the network.
- Round-based pay per share (RBPPS) is similar to HBPPS. This method considers the calculation time equal to the block search round on the pool.
- Bitcoin pooled mining (BPM) considers low-cost early shares to reward miners.
Puddinpop pool reward method pays out immediately via block generation. This method sends a meta-chesh pool or a hash chain to remote miners. - Eligius pool reward method combines BPM and PPS. It considers the previous block’s shares to calculate contribution and distribute rewards.
- Triplemining pool reward method is a common method for new pools that rewards the entire block to the miner who discovers it.
How to join a mining pool
Joining a mining pool is the first step toward mining cryptocurrencies.
Miners join pools to benefit from pool hashrate and solve blocks faster. A mining pool isn't difficult to join, but you should do some research before joining. Go through the steps below to join a mining pool.
- Choose a mining pool that you want to join.
- Enter the pool’s stratum address into the mining software.
- Connect a cryptocurrency wallet to receive payouts.
- Configure mining rigs for the mining pool.
If you’re looking to switch mining pools, you can easily do so by replacing the pool address in the mining software. Consider asking a pool’s support team for more help joining and assistance with the configuration process. Also, time your switch so you don’t miss payouts from the previous pool.
How to choose a cryptocurrency mining pool
Miners look into different factors before joining mining pools. These factors help find the most suitable pool.
Pick out mining pool equipment
The right equipment is crucial for mining on different devices.
Mining applications may require you to have a CPU, GPU, or ASIC. However, GPU or CPU mining isn’t as profitable as they used to be. They consume more energy and take more time to discover blocks. That’s why it’s best to design a mining rig or multi-GPU computers for mining.
You can also purchase ASICs. Consider hash rate and energy consumption while building ASIC rigs. The higher hash rate enables you to mine faster but you’ll end up paying more.
Select a currency
Some cryptocurrencies are more profitable than others. The former help you earn more for the same hash power. That’s why you should avoid currencies with low profitability.
Some miners believe that old currencies are less profitable but that’s not always true. The best way to choose a currency is to use a crypto mining calculator to see if the coin is worth your hash power.
Ensure mining pool transparency
Another important factor to consider is pool transparency. Crypto miners should look for trust signals before joining a pool.
For example, miners can examine the truthfulness of hash rate at the pool level. They can also dive deep into whether pool operators are using lower payout schemes.
Another great way to find out pool transparency is to look for pools with real-time dashboards.
Review payout scheme
Evaluating payout schemes can help you decide whether a pool is authentic or not.
For example, pools using PPS will pay out a fixed amount regardless of the computing power. They consider each submitted share of work to distribute rewards.
Miners using low-end hardware should avoid higher payout threshold pools. Their lower computational output will reduce their earnings.
Consider pool stability
Pool stability plays a key role in offering a consistent mining experience. For example, pools suffering from consistent downtimes may affect profitability.
That’s why it’s ideal to start by asking questions like:
- Does the pool offer a secure or open connection?
- How does the pool prevent denial-of-service (DDoS) attacks?
- What’s the history of the pool’s threat prevention?
You can also look for information on pool communities, tutorials, or support pages. Another way to look for pool downtimes is to research online but not all sources are trustworthy.
Dive deep into pool fees and size
Mining pool fees help operators manage the infrastructure and keep the network safe. Some pools require fees, while others don’t.
For example, SlushPool, the oldest mining pool, charges 2% of coin rewards. Pools without fees may be a bit slow because of lower hash power.
You should also consider pool size and power before choosing one. Pools with more miners take less time to mine and, therefore, increase your chance of earning rewards.
7 factors to keep in mind while choosing a mining pool
- Be aware of pool mining ideology to prevent transaction fee manipulation or throughput challenges.
- Consider pool reputation to avoid being a victim of fraudulent schemes or hashrate stealing.
- Don’t fall for guaranteed profits as these pools make false claims.
- Avoid anonymous pools to be on the safe side.
- Stay away from pyramid schemes that reward miners for bringing in more miners.
- Steer clear of proof-less pools that aren’t able to offer verifiable hash rate statistics.
- Avoid pools offering unlimited hash power purchases as these pools tend to scam miners in the long run.
Pros of mining pools
Solo miners often struggle to earn rewards because of their high computing power and resource needs. Plus, crypto block discovery has been challenging in recent years. This is where mining pools come in.
Look at how you can benefit from joining mining pools.
- Faster computation: Mining pools bring together individual miners to contribute computing power and create coins as rewards. Multiple miners in a network speed up block discovery. As a result, pool miners observe reduced latency and higher profit.
- Stable income: Pool miners are likely to make consistent income because of higher chances of block discovery. However, your income depends on the reward method of the pool you join.
- Minimal investment: Cryptomining can be expensive because of equipment and electricity costs. As a result, solo miners take longer to recover investment. The crypto market volatility can add to that timeframe. Since all stakeholders share costs in mining pools, you can do away with minimal investment.
“Mining pools create a method for individual miners to participate in solving blockchain blocks. Pools large enough to influence the blockchain can impact daily payout or hash rate, thus shaping the blockchain's decentralized nature.”
Phil Roberto
COO, Verakari
Cons of mining pools
As Roberto points out, mining pools have cons, too. Whether you're joining a pool for the first time or already are a part of one, be aware of these cons.
- Centralization and control: Cryptocurrency operations have shifted from individual computers to centralized mining pools. This shift leads to pools bringing cryptocurrency into a centralized validation process. As a result, bigger mining farms have absolute control over rewards.
- Profit sharing and fees: Another disadvantage of pool mining is that miners need to pay recurring fees and split crypto rewards with other miners. Miners pay fees from their share of rewards.
- Increased energy usage: Mining pools make the mining process efficient by adding more machines, but they also increase energy usage and utility costs.
- Frauds: Pool miners also become victims of fake pools that scam and extract money from interested miners. That’s why it’s super important to check a pool’s authenticity before joining.
Top five crypto mining pools in 2024
According to Statista, the top five crypto mining pools are:
- Foundry USA
- AntPool
- F2Pool
- ViaBTC
- Luxor
Mine your first block together
Ready to start mining in a pool? Choose the best cryptocurrency mining pools for beginners and run due diligence before joining a pool. Work with other miners to discover your first block using your computer’s processing power.
Once you mine the first block, use cryptocurrency custody software to store and secure crypto assets.
This article was originally published in 2022. It has been updated with new information.
