Crypto Mining Pools: What Are They and How Do They Work?
Every blockchain enthusiast must have heard about mining pools. In simple words, mining pools are collective enterprises in which a group of crypto miners joins forces to enhance their competitiveness and profitability. But what’s the point of joining a mining pool, and how exactly do the mining pools work?
The History of Mining Pools
In the early days of crypto, shortly after Bitcoin was launched in 2009, crypto mining was done only by a very small number of individual hobbyists. Back then, almost nobody had heard about cryptocurrencies, and most of the people who’ve heard about BTC weren’t interested in putting any effort into actually mining it.
Originally, people were able to mine Bitcoin using their ordinary PCs or even laptops. All it took was downloading the Bitcoin software and configuring it. No specialized hardware was needed, and anyone could earn hundreds of bitcoins simply by letting the mining software run in the background while they browse the Internet.
As cryptocurrencies became more popular and more valuable, crypto mining evolved into a much more complex process. Nowadays, mining cryptocurrencies like Bitcoin requires specialized machines called “mining rigs”, which are expensive, complicated, and consume a lot of energy.
The crypto market has expanded so much that even owning a mining rig isn’t enough to be a competitive miner. Specialized crypto mining companies founded in countries with cheap electricity were able to create massive mining farms utilizing hundreds or even thousands of mining rigs in one place.
In order to be able to compete with giant mining farms, crypto miners around the world decided to join their forces together and create mining pools. Thanks to mining pools, miners are able to profit from contributing hashing power without having to actually mine entire blocks by themselves.
How Do Mining Pools Work?
Some people still decide to mine crypto completely on their own. The reward for mining a Bitcoin block individually is massive: 6.25 BTC or almost $223,364.38 with today’s prices (June 2021).
However, the chance of earning that reward with just a single mining rig is as probable as winning the lottery.
Joining a mining pool means that a miner agrees to share the hashing power of his mining hardware with other miners. All the miners work together, and they also share the profits together.
Most of the mining pools on the market are proportional. What it means is that each member of the pool is awarded proportionally to their input. Someone who contributes 0.1% of the total hashing power of the pool will be eligible to earn 0.1% of the profit, while a miner that provides 10% of the mining pool’s hashpower will take a 10% share of the profit.
Are Mining Pools Profitable?
As described above, mining pools operate according to a simple principle: the more you contribute to the pool, the more you will profit. If you only own a single, small mining rig, or no mining rig at all, your rewards will be very small as most of the block reward will be distributed to people providing more hashing power than you to the pool.
In other words, mining pools are only a feasible option of earning blockchain-based income for people who already own a considerable crypto mining setup, and are simply willing to increase the stability and profitability of their returns.
If you’re not already an experienced crypto miner, mining pools might not be the best choice for you. However, this doesn’t mean that you can’t profit from crypto mining in other ways.
Hashpower Platforms: An Alternative to Mining Pools
Hashpower platforms like GHPEX are an alternative to mining pools. They allow anyone, anywhere in the world to benefit from crypto mining. Even if you’re not a crypto miner and you don’t own any mining rigs, with GHPEX you’ll be able to profit from mining by purchasing a fraction of somebody else’s hashing power.
GHPEX is one of the most accessible ways of getting into cryptocurrency mining. You can lease as much hashing power as you want for as long as you need, and the process of buying and selling hashpower is as easy as buying and selling crypto on an exchange like Binance or Coinbase.
