What is a Mining Pool?
A mining pool is formed when blockchain-based miners share their processing power over a network, combining their resources into a single pool. Miners would form such arrangements to increase the probability of making a profit without wasting energy. If you have questions like what is a mining pool? or how do mining pools work? you will find the answers in this article.
What is a Mining Pool?
Mining refers to the system where miners add new blocks to the blockchain, gaining a cryptocurrency reward for their efforts. Agreements between miners are drawn up to make the mining process more efficient and to make rewards more likely. Mining pools are now one of the most crucial aspects of mining.
Mining pools are established to limit waste and reduce costs for miners. By preventing different miners from working on the same block, energy is allocated in a more controlled and logical manner. Miners are more likely to receive rewards and make a profit.
How Do Mining Pools Work?
Pool coordinators control and organize mining pools. The main role of coordinators is to prevent different miners from working on the same block. They aim to save energy and not waste miner resources.
Pool coordinators must determine how many blocks miners have added to the blockchain and ensure they are rewarded fairly for their contributions. They will often create systems to determine which miners will be rewarded and by how much. The most used are the pay-per-share (PPS) and the pay-per-last-N-shares (PPLNS).
Pay-per-share (PPS)
Pay-per-share, or PPS, refers to the fixed reward paid to miners in line with their contribution to the pool they are involved in. Miners are guaranteed the same reward, regardless of whether they find the block. Miners will receive a fixed proportion of the total takings of the pool.
Pay-per-last-N-shares (PPLNS)
The “N” in “Pay-per-last-N-shares” is a constant or variable determined by any pool’s organizers. Unlike PPS, miners would only receive a proportional payment if the pool was successful in finding a block. Rewards are determined based on the previous block mined and if the pool was unsuccessful, no miners would benefit. This system encourages miner loyalty, discouraging miners from switching pools quickly to maximize their profits.
What Advantages Do Mining Pools Provide to Miners?
Mining pools allow block rewards to be distributed more fairly. It prevents miners from wasting energy on a block that another miner has also started mining. In a system like this, everyone is more likely to make a profit for each block mined.
