HomeCrypto MiningWhat Is a Mining Pool?

What Is a Mining Pool?

Last updated 16th Feb 2023

A mining pool is a collective group of cryptocurrency miners who pool their computing power across a network to increase the likelihood that they will successfully mine the block. According to their contribution to the group, each miner is rewarded.

The guide below explains how a mining pool works and what are the benefits and challenges of joining these groups. Here’s what you should know about mining pools!

Understanding Crypto Mining

Blockchain networks using a Proof-of-Work protocol require network members to use computer power to solve complex math puzzles that approve transactions over that network. The users validating the transactions generate a new block and are rewarded in return for their efforts in keeping the network up and running.

But mining requires a lot of computing power, which could be expensive for an individual. That’s where mining pools come into play.

How does a Mining Pool work?

Individually, participants in a mining pool contribute their processing power toward the effort of validating a block. If the pool is successful in these efforts, they receive a reward, typically in the form of the associated cryptocurrency.

A mining operator is in charge of the pool’s activities. After you become a group member, you can access your profile to view information on work performed, assigned rewards, and other details.

Once the pool completes generating a new block, the platform distributes rewards to its members. The reward comes in the form of that block’s tokens.

The pool calculates your contribution based on the computing power used. It’s why users with stronger setups might receive more generous rewards. The mining pool platform charges a small fee for those rewards.

What Are the Mining Pool Methods?

Different mining pool methods are available, allowing future miners to consider which option fits their preference. The frequent protocols used include the following:

  • Proportional pools. According to how many shares miners have submitted since the previous block, the proportional (PROP) approach rewards them. The reward per share is calculated by pools employing this approach by dividing the block reward by the total number of shares. Because of this, miners who submit shares earlier are rewarded more.

  • Pay-per-share pools. These also use the concept of shares. However, the difference is the payout doesn’t depend on when the pool generates a block. Instead, you can get paid for the collected shares at any moment.

  • Full pay per share. The full pay-per-share (FPPS) method is similar to the PPS method. The difference is that FPPS also pays out standard transaction fees along with block rewards. Miners receive payments regardless of whether a pool finds a block or not.

Pools using the FPPS method usually calculate transaction fees for a specific period and distribute them among miners based on their hash power contributions. Miners should choose the FPPS method while placing low-priced orders with pools that aren’t mining constantly.

  • Pay per last n shares. The pay-per-last n shares (PPLNS) method allocates profits as % of shares miners contribute to total shares (n). This payout system relies on a shift system to calculate share submission and profits.

A pool might discover multiple blocks during a day but that doesn’t necessarily mean they’ll earn rewards. That’s because this method considers your share submission during the block discovery period. As a result, miners see huge fluctuations especially when new miners leave or join a PPLNS pool.

  • P2P pools. These are peer-to-peer pools, and their principal benefit is to maximize decentralization. The idea is for the pool to have a unique blockchain. Since nobody can mess with info on the blockchain, P2P pools offer maximum protection against operator scams. Also, a single problem shouldn’t affect the overall pool’s performance.

Why You Should or Shouldn’t Join a Mining Pool?

The main reasons to join a mining group are:

  • Regular payouts. If you are seriously into the mining business, joining a pool could secure a fairly regular income.

  • More affordable. Mining is an expensive project that includes equipment and electricity costs you need to cover. But with pools, you can start mining with a minimal initial investment.

  • More chances of discovering a block. You only get rewards when you find a block and if you work with higher computing power, you have more chances of being successful.

But not everything is perfect, and mining pools also have some drawbacks. These include the following:

  • Rewards could be low. If your contribution is minimal, you shouldn’t expect generous rewards. Large miners are the ones benefitting the most from a pool.

  • Mining pool charges. These fees are only another cost associated with mining.

  • Potential scams. You need to stick to reputable mining platforms. Otherwise, you risk encountering fraud and losing money or not getting rewards.

  • Hiding generated blocks. Some miners of mining pools may hide their generated blocks from the main blockchain. This creates a lot of confusion for other miners in the mine and in the meantime, the mining pool has to generate additional blocks quickly. They reveal the hidden blocks only after half of that blockchain is mined.

How to Join a Mining Pool?

You can use any computing power for a pool. However, it’s strongly recommended to have a decent setup, and maybe even a computer only used for that purpose. Now, follow these steps:

  • Step 1: It all begins by choosing a pool you want to join. Best Bitcoin pools include Bitfury, F2Pool, Slush Pool, and AntPool.

  • Step 2: Download the suitable mining software client.

  • Step 3: Enter the stratum addresses provided by the pool.

  • Step 4: Create a wallet to collect rewards and enter their details.

  • Step 5: Configure your client by following the instructions and start mining!

Mining Will Exist as Long as There’s Crypto to Generate

Due to the limited and maximum Bitcoin supply, it’s clear that BTC mining will stop. Although the intention was for it to stop in 2140, the miners’ interest will probably ensure all BTCs are mined before that year.

A big problem for miners is that rewards are lower over time. The incentives drop with the BTC mined, which raises the question of whether mining will remain profitable.

But that doesn’t mean mining pools will cease to exist anytime soon. If there’s no more BTC mining, you can move to other crypto pools. Mining groups remain a viable option to explore if you are interested in crypto. It’s worth giving it a shot if you see it as a worthwhile opportunity!


What is the point of a mining pool?
How long does it take to mine 1BTC in a pool?
Are there other mining pools than Bitcoin?
How much Bitcoin is left to mine?
Aneeca Younas

Aneeca Younas