In this article, you will learn what is a mining pool. Crypto mining is a calculation-intensive computation process that requires high processing power along with high electricity consumption. In mining pools, the mining process stays the same, but miners work as a group or collective, and they join their computing power and effort of finding and verifying blocks of transactions.
What is a Mining Pool?
A mining pool is a group of miners who combine their computing resources to collectively mine a cryptocurrency. Instead of mining individually, miners can join a mining pool to increase their chances of earning rewards by sharing the work and rewards of mining together.
When a miner joins a mining pool, their computer hardware is connected to the pool's mining software, which coordinates the mining efforts of all the participating miners. The mining pool distributes the work of validating transactions and solving cryptographic puzzles among each of the miners, contributing a portion of their computing power to the overall mining effort.
Once a block is successfully mined by the mining pool, the rewards are distributed among the miners based on their contribution to the mining effort. The rewards are usually distributed based on the proportion of computing power each miner contributed to the pool.
Joining a mining pool can be beneficial for individual miners as it increases their chances of earning rewards, especially for smaller miners who may not have sufficient computing power to mine solo. However, mining pools also charge a fee for their services, which is typically a percentage of the rewards earned by the miners.
Evolution of Mining Pools
In 2011. the increasing expected revenue gained from mining led miners to create new large pools such as BTCGuild and SlushPool. The appearance of these two pools participated in the rise of market share concentration until the beginning of 2012. In the second market cycle of Bitcoin, existing pools increased their hash power, and new pools experienced significant growth (F2Pool and GHash.IO), especially in 2014.
After the decrease of bitcoin's value in 2015. the market price raised again and reached peaks at roughly $450 in December 2015 and even $750 in June 2016. During this period, F2Pool and AntPool largely increased their hashpower.
At this time, newly created pools (Bitfury, BTCC Pool, and BW.COM) considerably enhanced their hash rate. The fourth cycle was driven by the sharp rise of Bitcoin market price at the end of 2017. Most existing large pools, and in particular BTC.com and AntPool, increased their hash rates. Both pools are owned by BitMain, the Chinese Bitcoin mining hardware manufacturer.
Until 2015. most pools were located in Europe and the US. The rapid growth of two important Chinese pools (F2Pool and AntPool) profoundly modified this landscape and made China the largest pool hosting nation from 2015 to 2018.
Bottom Line
Mining pools can be seen as a way to lower the barrier for entry for individuals who want to reap the benefits of block rewards. One doesn't need to invest their time and money in building a huge mining setup. This is about what is a mining pool.
