If you are a novice trader, of course you should learn the basics of Cryptocurrency investing. You do this so that you can maximize profits and minimize losses. Have you ever heard the term mining pool? If not, our article this time will help you to understand it, from what mining pools are to how they work.
Mining Pool Is …
Before looking further into what a mining pool is, you must first understand what is meant by the term mining in the crypto world. As an example, we will explain the process of mining bitcoins.
Mining bitcoins means that you are trying to verify transactions for new bitcoins. Every cryptocurrency transactional data (in this case bitcoin) will be stored in a place called a block. This transactional data must be verified first before the block is added to the blockchain system which is permanent and cannot be changed.
This verification activity is carried out by a miner or miner by solving complex computational mathematical problems supported by equipment such as hardware, software, digital storage space, guarantees, and others.
Mining in the crypto world is very important to maintain a crypto system (a kind of ledger) where all transactions are recorded.
A trader can mine bitcoin or any other crypto currency. Anyone who wants to profit from cryptocurrency can choose to become a solitary miner or join other miners. The term where there are many miners is called a mining pool or mining pool.
So, a mining pool is a place for a bunch of miners. They all contribute to a common goal, which is to find new blocks.
Every time a miner manages to verify a transaction in the new block, they will receive an incentive known as a block reward.
Mining Pool Advantages
Your chances of finding new blocks and getting block rewards are very small if you do it alone. You will find it difficult to mine cryptocurrency as its popularity skyrockets.
In addition, it takes expensive hardware and a large power supply to become a competitive miner. Joining fellow miners in a mining pool is the same as combining the power of your computer with others.
This means increasing your chances of successfully reaping rewards. The reward you get will be proportional to the contribution of the mining power you give.
Mining Pool Disadvantages
Joining other miners was not entirely tempting. It is true that the process of mining a block becomes easier. However, the consequence is that the profit you get will be less because you have to share it with other miners.
The second disadvantage relates to the blockchain technology used. One of the characteristics of cryptocurrencies is that their transactions are safe because of the decentralized technology.
This is in contrast to the working process of a mining pool. Several popular mining pools that dominate the bitcoin mining process such as AntPool, Poolin, and F2Pool allegedly violate the bitcoin protocol which makes blockchain technology centralized.
How to Join a Mining Pool?
The process includes registering an account and connecting to one of the mining pool servers. When joining a mining pool using local hardware, you have to configure your software as well to work with other miners.
If you already have a mining rig (a set of tools for mining cryptocurrencies), Binance Pool is a pretty good platform to start mining algorithm-based bitcoin and SHA-256 coins. Your mining rig will automatically switch from bitcoin, BCH, and BSV to maximize your profits, BSV runs on the BSV Blockchain.
You can find out what your profit is by looking at the Binance Pool page. Bitcoin earnings will be transferred daily to your wallet or virtual wallet.
How to Enjoy Reward Sharing in Mining Pool
Finding new blocks means that you and other miners in the same pool will get rewards. Later, the reward will be distributed with a different mechanism based on the share of each miner. Share here refers to how much miners contribute to their mining pool.
There are two types of shares, namely accepted shares and rejected shares. Accepted share means that the miner’s contribution is recognized as having a major influence on the process of finding new blocks. This accepted share is then appreciated with a reward. A rejected share is the opposite of an accepted share. Miners’ contributions do not support the discovery of a block.
Some methods of reward distribution in a pool include:
Pay-per-share
Instant payouts based on each member’s share in the mining pool. Each miner member can withdraw their earnings at any time from the pool balance regardless of when the block was found.
Proportional
Miners will receive a reward at the point where the pool manages to find a new block. Miners will receive a reward commensurate with their share.
Shared maximum pay-per-share (SMPPS)
This method is similar to pay-per-share, but the pool has a maximum payout limit.
Equalized shared maximum pay-per-share
Similar to SMPPS, only all members get the same amount of rewards.
In addition to the methods above, there are several other methods such as DGM (Double Geometric Method), RSMPPS (Recent Shared Maximum Pay-per-share), and others.
Before deciding to join a mining pool, a miner must pay attention to which method is the basis for reward distribution and whether there are additional fees charged to join the mining pool.
The final word
Well, that’s the explanation of what a mining pool is. How? Are you interested in joining other miners? Hopefully the article above is useful for you, yes! Keep trying and good luck!
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