One of the most important decisions any bitcoin miner can make is whether to work alone or join a pool. In the latter, you join a community of other bitcoin miners from around the world, pooling your resources to improve your collective mining output and processing. While there are pros and cons to both decisions, many miners agree that the perks of joining a mining pool undeniably outweigh those experienced when relying on your own mining devices alone.
Before we continue, you might want to refresh your memory and look at exactly what bitcoin mining is and how it works, as discussed in a previous article. Once you understand the bitcoin mining process, you can comprehend mining pools better.
What Is A Bitcoin Mining Pool?
Bitcoin mining pools exist to help miners mine better, together. The goal is to increase the chances of successfully mining a block as a collective, which is much higher than when working alone. While the rewards might seem smaller when shared among a group, this is still better than walking away with nothing – which is much more likely should you choose to mine bitcoin alone.
Most mining pools work by charging each member a fee to be a part of the community. From there, BTC miners are put to work in one of two ways. Traditionally, members are assigned to a work unit in which they must complete a certain amount of work. Once the assigned range has been fulfilled, the team can put in a request for more work to be assigned to them.
Alternatively, pool members can choose how much work they are able to take on, without accepting specific assignments from the pool. The pool will make sure that no two members explore the identical territory.
So, How Are Miners Rewarded?
Once a block hash has been successfully identified, the pool is rewarded. The way in which this reward is shared depends on the bitcoin mining pool’s specific mechanism. Shares also depends on how much each member’s computer contributes to the mining pool.
Essentially, there are two different types of shares. Accepted, or rejected. The prior refers to work completed by a member who makes a significant contribution and regularly helps discover new bitcoins. The latter – rejected – represents work that is unpaid, seeing as it doesn’t contribute to a blockchain discovery.
Obviously, every pool member wants their work to be accepted, never rejected. However, it’s important to note that rejected shares are an inevitable part of being in a mining pool. Still, most BTC miners experience more accepted shares than rejected. And when shares are accepted, rewards generally occur via one of the following methods:
Pay Per Share (PPS):
Instant pay-outs based on accepted shares, available for instant withdrawal.
Rewards made at the end of a mining round, relative to how many shares the member earns in comparison to the total offered by the bitcoin mining pool.
Equalized Shared Maximum Pay Per Share (ESMPPS):
Pay-outs are distributed among all miners in the pool equally.
Shared Maximum Pay Per Share (SMPPS):
Similar to PPS and ESMPPS, but pay-outs are limited to the maximum earned by the mining pool in total.
There’s certainly no shortage of bitcoin mining pools out there, and it’s crucial for BTC miners to choose carefully.