How Mining Pools Work

Mining crypto has become increasingly difficult and competitive, with ever-growing demands for computing power, hardware upgrades, and strategic reinvestment for optimized results. Let’s continue and dive into details on how mining pools work. 

General Overview

Cryptocurrencies run on blockchains, which can be explained as a sequence of blocks, where every new block is a piece of data. Each block contains vital information about transaction history.

But how each new block is created? We know that each block contains a unique “puzzle” based on the data from a previous block. It leads to miners trying to solve this riddle to get their reward, which is the cryptocurrency. As all these blocks are 100% irreversible, hackers can’t delete or substitute any of them.

So, when the process begins, we need computing power in the first place, as all these little  “puzzles” are solved by processors, graphics cards, FPGA or ASIC hardware (even the most modern computers have a hard time doing it, and it requires a big amount of time).

Let’s use Bitcoin mining as an example. The BTC network has on average 144 blocks a day nowadays. The desire for more Bitcoin doesn’t stop growing, so miners worldwide compete for this limited amount.

Explaining Mining Pools

And that’s here where Mining Pools step into the game, as several mining devices work altogether within a single pool to solve a “puzzle”, meaning a mining pool is a server where miners can join efforts to reap more crypto.

A mining pool sends the mining job to his miners, receiving the solution of those block “puzzles” as a consequence. In layman’s terms, the successful pool is the one that solves the puzzling period.

Inside a mining pool, all miners are connected to find solutions, and if one of these solutions appears to be ideal, the pool automatically creates a new block in the blockchain and gets a reward for this new block.

Rewards are shared proportionally to effort, meaning that the miners who applied most effort will receive more, with the value being forwarded to their wallets. The network is agnostic, meaning it never knows which miner has found a specific solution.

Despite the ever-growing addiction for more blocks, some cryptocurrencies are still easier to mine, so users can find solutions for blocks within a reasonable amount of time, even when mining alone.

How Can I Start Mining?

There are 3 options when it comes to mining in the blockchain:

In this article, we will only cover Solo Mining, but feel free to research the others as well.

How Does Solo Mining Work?

When someone does the mining aby himself, purchasing all the hardware, assembling it, installing the BIOS and OS, overclocking the machine, and babysitting it throughout the whole process, we call it SOLO mining. Plus, the user has to deal with a lot of noise and heat, which are inherently part of the process.

Without any help from other miners, if you find a solution for a block (you get the coins if you don’t) you’ll pretty much get nothing.

Learn more: The reasons why there are only 21 million Bitcoins?

Any crypto-fond person can either mine solo on his own or via individual solo pools. The last is the most recommended option for people with no experience whatsoever.

Before the hustle begins, the miner has to calculate the probability of finding a block with his hardware (for this, we recommend 2CryptoCalc.com) and also check the network hash rate chart (you can easily find this info all over the web).

What are the Best Crypto Options for Solo Mining?

Based on previous experience, it is secure to state that the more powerful the hardware is, the greater is the increment of profit. Don’t forget to check the best mining motherboards that will bring the highest ROI.

As it is in life, so it is in crypto mining, the more effort you put in, the more value the result will have.

Any new user has to understand that some regular payment doesn’t hurt at all, so definitely is not recommended to go straight trying to mine Ethereum or other harder blockchain while just having one GPU.

There is plenty of coins which can be easily mined, but one must pay attention to these type of coins as they are more volatile and more exposed to changes in the exchange rate. However, if you are interested enough to explore different networks seeking opportunities you have a chance to make some good money out there.

Solo Mining Pools

understand crypto mining

As we said before, it is also possible to choose using a Solo pool as well. When a user chooses it, he still needs a lot of computing power.

Learn more: How to start mining Tron (TRX) with high profits

In this Solo pool method, the graphic cards are constantly searching for “puzzle” solutions and forwarding them to the pool. If one particular solution appears to be the right one, the miner whose GPU found the solution will get all the reward, with no share or division whatsoever.

Final Words

So, if you are IT-savvy and ready to invest a lot of money (for hardware, especially) and energy into the process, solo mining (whether on your own or via solo pools) is a possibility for making money in the blockchain.

If you still have some questions on how mining pools work, don’t hesitate and share your confusion in the comment section.