Mining Pool
A mining pool is a service that aggregates the computational power (hashrate) of many individual miners, allowing them to work together to find blocks and share the resulting rewards proportionally based on each miner’s contribution.
Understanding Mining Pools
Section titled “Understanding Mining Pools”Solo mining — where a single miner tries to find blocks independently — is like buying a single lottery ticket. You might win the entire jackpot, but the odds are extremely low and you could go months or years without earning anything. A mining pool is like a lottery syndicate: everyone pools their tickets together, wins more frequently, and splits the prize.
When you connect your ASIC miner to a pool, the pool server assigns you work (via the Stratum protocol). As you mine, you submit shares back to the pool, proving you are doing work. The pool tracks everyone’s shares and, whenever any participant finds a valid block, distributes the block reward according to the pool’s payout scheme.
Pools offer different reward distribution methods, each with its own risk-reward trade-off:
- PPS (Pay Per Share): Fixed payment per share, regardless of whether blocks are found. Low variance for miners, high risk for the pool.
- FPPS (Full Pay Per Share): Like PPS but also includes estimated transaction fee revenue.
- PPLNS (Pay Per Last N Shares): Payment based on shares contributed in a window around when a block is found. Higher variance but potentially higher returns.
Practical Example
Section titled “Practical Example”A miner with 500 TH/s joins a pool that has a total hashrate of 50 EH/s. The miner represents 0.001% of the pool’s total hashrate. When the pool finds a block worth 3.475 BTC (subsidy + fees), the miner’s share of the reward is roughly 0.00003475 BTC (before pool fees), credited according to the payout scheme. The miner receives small, regular payments instead of waiting potentially years for a solo block.