What Are Bitcoin Mining Pools?
The Truth about Bitcoin Mining Pools
At the beginning of Bitcoin, mining used to be quite easy and was a great way for individuals to harvest large amounts of Bitcoin in just a short while. At the time, with just a small mining rig, you could plug it in, leave it, and collect your Bitcoin. However, achieving the same goals today is almost impossible.
In the traditional method of mining, each single computer races to find the solution to a mathematical puzzle. Once it solves the puzzle, others confirm if the answer is correct, and the first machine to solve it is awarded a small amount of Bitcoin.
How Mining Pools Differ
In a mining pool, you all join forces and use your combined computing power to solve an equation. Since the equations are so complex today, a single computer would have difficulty solving the equation alone. However, it is still possible to find a solution if you have a whole garage full of GPUs with near-arctic temperatures.
However, when you eventually solve the equation, you will not get to keep the whole Bitcoin amount. Instead, everyone in the mining poll will share the reward. The policy on how rewards are shared is usually determined by each mining pool.
In some mining pools, you may end up mining only for the pool to disappear with all the Bitcoin. Thus, you should join mining forums to find out about the reputation of a pool. That way, you do not end up incurring mining costs with no payment.
Choosing the Right Mining Pool
Choosing the right mining pool can be quite tricky. On the surface, it may seem like joining the biggest mining pool is the best decision. However, if you are part of a large pol, it also means the payouts are likely to be tiny.
However, if you join a small mining pool, it means you will be mining blocks less frequently. Then again, payouts will be large in such a pool. There is also the issue of single and multi-coin mining pools. In some pools, you will only mine Bitcoin. However, others will switch to other currencies, based on which one they think is most profitable at the time.
You also have a choice between local and cloud mining. When you decide to use cloud mining, it means you will not need to purchase any equipment. You will only contribute to the shares offered by the mining company. After a while, you will then be issued with the dividend.
Pool Mining Is the Only Way to Go
Today, solving Bitcoin equations is so difficult that pool mining is the only viable option. If you go it alone, you may incur huge electricity and hardware costs but come up with nothing at the end of it. With a mining pool, at least you are assured of breaking even, especially when you consider the rising value of the cryptocoin.
Would you consider joining a mining pool? Leave your thoughts below in the comment section.