The mining process for a proof-of-work cryptocurrency like Bitcoin involves many miners trying to be the first to solve or “find” a block. The first miner to find a block receives the rewards for that block in the form of newly minted Bitcoin. At the beginning of 2021, the block reward was 6.25 BTC.
As more and more miners join the network, however, mining difficulty rises. This is thanks to one of the ingenious aspects of the Bitcoin protocol, known as the difficulty adjustment.
Mining difficulty will rise or fall every two weeks according to how much hashing power is currently on the network. The higher the hash rate, the more network difficulty will increase, and the lower the hash rate, the more mining network difficulty will fall.
What’s Mining Network Difficulty
Bitcoin mining difficulty is also known as the bitcoin blockchain network difficulty. According to blockchain.com, the difficulty is a measure of how difficult it is to mine a Bitcoin block, or in more technical terms, to find a hash below a given target. A high difficulty means that it will take more computing power to mine the same number of blocks, making the network more secure against attacks. The difficulty adjustment is directly related to the total estimated mining power estimated in the Total Hash Rate (TH/s) chart.
Source from Blockchain.com
In general, a good hash rate is a high one–because it helps keep a crypto network secure. But with today’s hash rate hovering near record highs (and tending to rise higher as the rising price of Bitcoin continues to make it profitable to engage in mining activity), finding a block as an individual miner has become almost impossible for all but the largest of miners with the most powerful equipment.
That’s where Bitcoin mining pools come in.
A miner pool gathers connections from miners that could be worldwide and pool their hash rate together. This way, they are all mining at a higher level, giving them meaningful odds of solving a block. If they had been mining alone, their odds might have been slim to none.
After a block has been solved, the rewards will be split up among mining pool participants according to how much computing power each contributed.
This calculation is made using “Share Difficulty” for each miner and a “Share Time” for the pool. Pools establish a time when hashes will be submitted by all participants while assigning difficulty to each miner (more powerful miners have a more incredible network difficulty).
All miners will automatically send a “share” of their hashes at set intervals, e.g., every 5 seconds, with larger miners receiving a more significant number of shares each time according to their higher difficulty rate. Pool participants are then paid out with block rewards in proportion to their claims.
Is a Bitcoin Mining Pool Worth it?
A miner pool might be the only feasible option for the average person who wants to get into mining Bitcoin. But when it comes to asking “is a Bitcoin mining pool worth it,” it all depends on how the term “worth it” is defined.
For those who believe in the technology of Bitcoin and simply want to help the network thrive by processing more transactions, mining might be worth it, even on a scale too small to be profitable.
For those who only seek to make a profit, however, the answer is more complicated.
Mining is generally a complex and challenging process for all but the most technical of crypto users. While there are services that help make the process easier for the average person to get into, there are still many nuanced factors contributing to whether mining will be a profitable endeavor.
Miners have to take into account many factors, including but not limited to:
• Cost of equipment
• Cost of electricity
• The amount of time it will take to recoup equipment costs
• How difficulty adjustments might impact profitability
• How BTC price fluctuations might impact profitability
• When it will become necessary to buy newer, more powerful machines and sell old ones
These considerations have to be calculated and recalculated if a miner wants to stay profitable. There are many unknowns, remarkably the Bitcoin price and difficulty adjustment, which are constantly changing.
When Bitcoin was first created, the calculations involved in mining were so simple they could be accomplished by the computer-processing unit (CPU) of an average laptop computer.
Over time, the calculations became more complex, eventually requiring high-powered graphics processing units (GPUs). Today, mining can mainly only be accomplished with advanced Application Specific Integrated Circuit (ASIC) machines. These are computers created for the express purpose of mining Bitcoin.
The hardware required is constantly evolving. Every so often, existing machines become obsolete due to network difficulty adjustments. An ASIC that was powerful enough to be profitable six months ago might not produce enough coins to match the cost of electricity needed to run that same ASIC today. When this happens, miners must acquire new, more advanced hardware.
Finally, it should be noted that mining is perhaps the most difficult way to acquire Bitcoin or any other mineable cryptocurrency. The easiest way is to simply buy cryptocurrency on a crypto exchange.
What is the Best Bitcoin Mining Pool?
For the most part, there’s not a whole lot of difference between crypto mining pools. Besides the small fee, they may charge participants. Pools only differ based on whether they are open to the public and what proportion of the network’s total blocks they mine on average.
Most of the world’s largest Bitcoin mining pools are in China and include Poolin, F2Pool, and Antpool. Together, these pools mine about 43% of all new blocks as of 2020.
How to Join a Bitcoin Mining Pool
One of the nice things about Bitcoin pools is that they allow users to get started mining with any amount of mining power. Whether someone wants to run a small hobby miner that might not even make a profit, or they want to run several large mining machines at once and try to make some serious coin, a pool can be used either way.
The process of joining a Bitcoin mining pool involves programming mining software to direct its efforts to a particular pool. You can do this in a few simple steps:
Choose which pool you want to join.
Add the stratum addresses of the selected mining pool to your mining software client.
Connect the wallet you wish to deposit mined coins into.
Configure your mining client for your chosen mining pool.
The pool itself will provide the information needed to complete this process.
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