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2021 Bitcoin Mining: What is a Mining Pool

2021 Bitcoin Mining: What is a Mining Pool

What Is a Mining Pool?

A mining pool is a collaborative group of cryptocurrency miners who combine their computational resources over a network to strengthen the probability of finding a block or otherwise successfully mining for cryptocurrency.

Cryptocurrency mining pools are groups of miners who share their computational resources.

Mining pools utilize these combined resources to strengthen the probability of finding a block or otherwise successfully mining for cryptocurrency.

If the mining pool is successful and receives a reward, that reward is divided among participants in the pool.

How a Mining Pool Works

Individually, participants in a mining pool contribute their processing power toward the effort of finding a block. If the pool is successful in these efforts, they receive a reward, typically in the form of the associated cryptocurrency.

Rewards are usually divided between the individuals who contributed, according to the proportion of each individual's processing power or work relative to the whole group. In some cases, individual miners must show proof of work to receive their rewards.

Rewards are usually split among the miners based on the agreed terms and their respective contributions to the mining activity.

Anyone who wants to make a profit through cryptocurrency mining can either go solo with their own dedicated devices or join a mining pool where multiple miners and their devices combine to enhance their hashing output. For example, attaching six mining devices that each offers 335 mega hashes per second (MH/s) can generate a cumulative two gigahashes of mining power, thereby faster processing of the hash function.

Mining Pool Methods

Not all cryptocurrency mining pools function in the same way. There are, however, several standard protocols that govern many of the most popular mining pools.

Proportional mining pools are among the most common. In this type of pool, miners contributing to the pool's processing power receive shares up until the point at which the pool succeeds in finding a block. After that, miners receive rewards proportional to the number of shares they hold.

Pay-per-share pools operate somewhat similarly in that each miner receives shares for their contribution. However, these pools provide instant payouts regardless of when the block is found. A miner contributing to this type of pool can exchange shares for a proportional payout at any time.

Peer-to-peer mining pools, meanwhile, aim to prevent the pool structure from becoming centralized. As such, they integrate a separate blockchain related to the pool itself and are designed in order to prevent the operators of the pool from cheating as well as the pool itself from failing due to a single central issue.

Benefits of a Mining Pool

While success in individual mining grants completes ownership of the reward, the odds of achieving success are very low because of high power and resource requirements. Mining is often not a profitable venture for individuals. Many cryptocurrencies have become increasingly difficult to mine in recent years as the popularity of these digital currencies has grown. The costs of expensive hardware necessary to be a competitive miner and electricity often outweigh the potential rewards.

Mining pools require less of each participant in terms of hardware and electricity costs and increase profitability. Whereas an individual miner might stand little chance of successfully finding a block and receiving a mining reward, teaming up with others dramatically improves the success rate.

Disadvantages of a Mining Pool

By participating in a mining pool, individuals give up some of their autonomy in the mining process. They are typically bound by terms set by the pool itself, which may dictate how the mining process is approached. They are also required to divide up any potential rewards, meaning that the profit share is lower for an individual participating in a pool.

According to blockchain.com, a small number of mining pools, such as AntPool, Pooling, and F2Pool, dominate the bitcoin mining process, according to blockchain.com. Although many pools try to be decentralized, these groups consolidate much of the authority to govern the bitcoin protocol. For some cryptocurrency proponents, the presence of a small number of powerful robust pools goes against the decentralized structure inherent in bitcoin and other cryptocurrencies.

Focus on the investment opportunity in storage mining

Here a low wattage and more decentralized mining model with less policy risk - Storage Mining on OXBTC

Storage mining is a kind of mining for earning tokens by storing data for clients on distributed storage platforms, e.g. Filecoin and Swarm. Storage mining has become quite popular among investors after Bitcoin and Ethereum as the distributed storage networks, typically Filecoin, gradually come of age and there are growing needs for decentralized storage.

The OXBTC team bets on the investment potential of storage mining. As one of the earliest platforms in the world that offer storage mining investment services, OXBTC currently renders the Filecoin (FIL) mining investment service and is going to introduce the Swarm (BZZ) mining service.

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Filecoin Hashrate for 30-day Experience

This OXBTC mining service adopts a clustered server deployment solution, raises certain funds through crowdfunding, and uses the advantages of the supply chain to centralize procurement deployment and operation and maintenance management to solve IPFS mining problems for small and medium-sized miners.