Written by Wijdan Khaliq, Coinbureau
Compiled by: Glendon, Techub News
In the early days of Bitcoin, anyone with a computer could mine blocks independently and receive rewards. But as Bitcoin's popularity soared, competition intensified. Gradually, mining became a race, and the computing power required to solve cryptographic puzzles increased dramatically. After this, the chances of miners working alone receiving sustained rewards became slim, and the rules of the game changed, and mining pools emerged.
This key development enabled miners to pool their resources to better mine blocks and receive rewards. Today, mining pools have become an important pillar of the Bitcoin ecosystem, enabling multiple participants to join together and share profits based on their contributions.
So why have mining pools become such a dominant force in the cryptocurrency space? Can miners still mine Bitcoin on their own, or is it a futile exercise? How do mining pools work? What makes one mining pool better than another?
The above questions are just some of the questions that miners (especially newbies) face when dealing with the complexities of modern Bitcoin mining. In this article, we will examine Bitcoin mining pools, take a deep dive into how they work, and highlight the best Bitcoin mining pools currently available.
01 What is a Bitcoin mining pool?
As competition in Bitcoin mining becomes increasingly fierce and resource demand increases, the concept of mining pools came into being.
A Bitcoin mining pool is a group of individual miners who combine their computing resources to improve their chances of successfully mining a Bitcoin block. Through this collaboration, miners can share rewards based on their contributions, which are measured in hash power, which is the amount of computing work spent on solving cryptographic puzzles when validating transactions and adding new blocks to the Bitcoin blockchain.
As more and more miners join the Bitcoin network, the difficulty of solving cryptographic puzzles gradually increases. Today, it is almost impossible for individual miners with limited resources to receive rewards on a consistent basis. In contrast, by pooling resources, miners can obtain a more stable source of income, because when many participants contribute computing power together, the probability of finding a block is greatly increased.
Advantages of joining a mining pool:
Stable payouts: Miners can receive regular rewards compared to independent mining, where rewards can be sporadic and unpredictable.
Lowered barriers to entry: Pooling resources allows smaller miners to participate without requiring extensive hardware or power resources.
Shared expertise: Many mining pools offer support and resources to help less experienced miners navigate the complexities of mining.
Furthermore, mining pools also help improve the overall security of the Bitcoin network. By increasing the number of participants involved in solving blocks, they help maintain decentralization and reduce the risk of any single entity gaining excessive control over the blockchain. As a result, this collective effort also ensures that transactions are processed efficiently and securely.
Solo Mining vs. Pool Mining
The main difference between Solo Mining and Pool Mining is how miners handle the task of validating transactions and earning rewards.
Solo Mining: In this method, a single miner works independently to solve a cryptographic puzzle. While this method allows the miner to own 100% of any rewards mined, it comes with significant risk. The probability of successfully mining a block is low for a solo miner, especially considering that large entities with vast resources dominate the current size of Bitcoin mining operations.
Pool Mining: Pool mining involves joining forces with other miners to increase the collective hashing power. This method enables participants to share rewards based on their contributions, resulting in more frequent payouts.
Pros and Cons
There is no doubt that pros and cons are the key to determining the success or failure of a transaction.
Advantages of independent mining:
Complete control over mining rewards.
No fees need to be paid to the mining pool operators.
Disadvantages of independent mining:
Income varies widely and rewards are not earned for a long time.
Requires significant investment in hardware and electricity.
Advantages of pool mining:
Through joint efforts, we can obtain more stable income.
The initial investment is lower compared to independent mining.
Disadvantages of pool mining:
Fees deducted by mining pool operators may reduce overall revenue.
The mining process is less autonomous as decisions are usually made by mining pool operators.
Today, many miners prefer mining pools because of their reliability and lower risk. The competitive environment makes it increasingly difficult for individual miners to receive rewards without cooperation. By joining a mining pool, miners can ensure regular returns while still contributing to the security and decentralization of the Bitcoin network.
02 How does a Bitcoin mining pool work?
As mentioned above, Bitcoin mining pools have revolutionized the way miners operate in the cryptocurrency competitive landscape, and by pooling their resources, miners increase their chances of earning stable returns while sharing the workload. So what are the mechanisms behind these mining pools, and how do they distribute rewards among participants to ensure that everyone benefits from the collective effort?
Mining pool mechanism
How do Bitcoin mining pools work? Essentially, these mining pools are the product of teamwork. When miners join a mining pool, they combine their computing power to solve the complex mathematical puzzles faced in verifying transactions and adding new blocks to the blockchain. This cooperation greatly increases the chances of successfully mining a block compared to individual miners working alone.
Mining Share Allocation: Each miner in a mining pool is assigned a certain number of "shares" that represent their contribution to the mining effort. These shares are based on the hash rate each miner contributes - essentially, the computing power they bring to the mining pool. The more shares a miner has, the greater their potential reward when the mining pool successfully mines a block.
The role of hash rate: Hash rate is crucial in pool mining, and it measures how many calculations a miner can perform per second. A higher hash rate results in more shares and increases the likelihood of finding a block. When a miner's hardware solves a puzzle, they submit the solution to the pool operator, who verifies it and broadcasts it to the Bitcoin network.
Understanding Proof of Work (PoW): The underlying mechanism that makes all of this possible is called Proof of Work (PoW). In short, PoW requires miners to solve complex mathematical problems to prove that they have done the necessary work. This process ensures network security and prevents malicious activities such as double spending. When a mining pool member successfully mines a block, the reward for that block (currently 3.125 BTC) is distributed to all members based on their shares.
Reward Distribution Model
There are three reward distribution models commonly used by major mining pools:
Pay Per Share (PPS): In this model, miners receive a fixed amount for each share they submit, regardless of whether the pool finds a block or not. This provides a steady stream of income, but is usually accompanied by higher fees.
Pay per Last N Shares (PPLNS): PPLNS rewards miners based on the last N shares submitted before a block was discovered. This model encourages miners to stay in the pool longer and can lead to higher payouts when luck is good, but may result in lower returns when luck is bad.
Full Payment Per Share (FPPS): Similar to PPS, FPPS includes transaction fees in addition to block rewards, providing a more favorable payment structure for miners.
The main difference between these models is how rewards are calculated and distributed. PPS offers stable payouts but at a higher cost; PPLNS can generate higher returns but with lower predictability; and FPPS combines elements of both, potentially leading to greater gains.
Which model will different types of miners choose?
New Miners: Miners who are just starting out in mining may prefer PPS due to its reliability.
Experienced Miners: Experienced miners may choose PPLNS as they can better handle the variance and maximize profits over time.
Profit-focused miners: If transaction fees are high, FPPS may be extremely attractive as it maximizes revenue through block rewards and fees.
In short, Bitcoin mining pools simplify the mining process by pooling resources and distributing rewards based on contribution. Understanding how these mining pools operate and their various reward distribution models can help miners choose the right settings for their needs, ultimately improving their chances of consistently earning Bitcoin.
03 Best Bitcoin Mining Pools
1.F2Pool
F2Pool charges a 2.5% mining reward fee; Image from F2Pool
F2Pool, also known as "Fish Pool", is one of the world's largest Bitcoin mining pools, controlling about 20% of the network hash rate. The company was founded in 2013 and allows miners to mine a variety of cryptocurrencies including Bitcoin.
Payment Methods
F2Pool provides three payment modes for Bitcoin mining:
PPS+ (Pay per Share +): Miners receive a fixed amount for each valid share submitted, regardless of whether the pool finds a block or not.
FPPS (Full Pay Per Share): This method includes block rewards and transaction fees.
PPLNS (Pay per Last N Shares): Rewards are based on the last N shares submitted, which benefits loyal miners over time.
Fees: F2Pool charges a 2.5% fee on mining rewards, and the minimum withdrawal threshold is set at 0.005 BTC to ensure miners can get their earnings in a timely manner.
Multi-currency support: In addition to Bitcoin, F2Pool also allows mining of various cryptocurrencies such as Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).
advantage:
Stable and continuous income: Multiple payment modes ensure that miners can choose the option that best suits their needs.
Multi-currency support: In addition to Bitcoin, F2Pool also allows mining of various cryptocurrencies, providing flexibility to miners.
Transparent operations: Mining pools regularly publish information on their hashrate and mining revenue, helping to promote transparency within the community.
shortcoming:
Centralization Issue: As one of the largest mining pools, F2Pool has been controversial for promoting the centralization of Bitcoin mining, which may pose risks to the Bitcoin network.
2.Foundry USA Pool
Foundry USA Pool is a Bitcoin mining pool launched by Digital Currency Group in 2020 and has quickly become an important player in the Bitcoin mining field.
Main Features
Market share: Foundry USA Pool currently controls approximately 30% of the Bitcoin network hash rate, making it one of the largest mining pools in the world.
Payment model: The mining pool mainly uses the FPPS model, which ensures stable and consistent payments including block rewards and transaction fees.
Security and Compliance: Foundry has features like KYC (Know Your Customer) compliance and SOC (Service Organization Control) certification. This focus on security helps build trust among miners.
Analytical Tools: The platform provides advanced analytical and performance tracking tools, allowing miners to effectively monitor their operations.
advantage
Stable income: The FPPS model provides stable income.
With security measures: With security protocols and compliance standards, Foundry USA Pool prioritizes the safety of user funds.
shortcoming
Centralization Issues: Since Foundry controls a large portion of the hash rate, there are concerns about the centralization of the Bitcoin network and the risks it could lead to associated with a 51% attack.
Limited cryptocurrency support: Foundry is focused on Bitcoin mining, which doesn’t offer many options for miners interested in switching to other cryptocurrencies.
3.Brain's Pool（原 Slush Pool）
Braiins Pool has mined more than 1.3 million BTC. Image from Braiins Pool
Braiins Pool (formerly Slush Pool) is recognized as the first Bitcoin mining pool. It was launched in 2010 and has mined more than 1.3 million BTC as of the time of writing.
Main Features
Payment model: Uses a Pay Per Last N Shares (PPLNS) model to reward miners based on their most recent contributions.
Fees: 2% fee, minimum withdrawal threshold is 0.001 BTC.
Transparency: Provides detailed statistics and real-time monitoring tools.
advantage
Innovative payment structure: As a pioneer of the PPLNS model, Braiins Pool has developed various mechanisms to minimize the risk of pool hopping, thereby ensuring that miners receive more stable returns.
Detailed Analytics: Comprehensive statistics help miners track performance effectively.
shortcoming
Variable expenses: PPLNS may result in volatile earnings.
Fees are high compared to some mining pools: 2% fees may discourage small miners.
4.Antpool
The Solo Option allows miners to independently obtain the entire block reward. Image from Antpool
Antpool is operated by Bitmain Technologies and was launched in 2014. It is one of the largest mining pools in the world.
Main Features
Payment Mode: Flexible payment options are available including FPPS (Pay in Full Per Share) and PPLNS (Pay in Last N Shares).
Fees: Variable fees range from 0% for PPLNS to 4% for FPPS.
Solo Mining Option: Provides miners with the option to attempt to earn the entire block reward independently.
advantage
Flexible payment structure: Miners can choose from a variety of payment models.
Multi-currency support: Supports various cryptocurrencies such as Litecoin and Ethereum.
shortcoming
Poor user experience: Some users may find the platform’s interface unintuitive.
Different fees impact profitability: Depending on the payment model chosen, higher fees may impact earnings.
5.ViaBTC
ViaBTC supports multiple cryptocurrencies and provides cloud mining services. Image from ViaBTC
ViaBTC is a well-known cryptocurrency mining pool founded in 2016 that controls about 11% of the Bitcoin network hash rate. It supports a variety of cryptocurrencies and provides cloud mining services.
Main Features
Payment Mode: FPPS and PPLNS payment options are available, with FPPS ensuring consistent payments including transaction fees.
Multi-currency support: ViaBTC supports mining of multiple cryptocurrencies, including Bitcoin, Ethereum, Litecoin, Bitcoin Cash, etc., allowing miners to diversify their business.
Cloud mining services: allow users to rent hashing power without having to maintain physical equipment.
advantage
Diverse mining options: Widely supports multiple cryptocurrencies.
User-friendly interface: Intuitive platform with real-time statistics and performance tracking tools.
shortcoming
Cloud Mining Risks: There are risks associated with scams and market volatility.
Higher fees for certain models: Fees can vary significantly depending on payment method, with FPPS fees being as high as 4%, which can impact overall profitability.
6. Clover Pool (formerly BTC.com)
Clover Pool charges a fee of only 1%, which is competitive among major mining pools. Image from Clover Pool
Clover Pool, formerly known as BTC.com, is a major player in the Bitcoin mining pool space. Launched by Bitmain in 2016, it is known for its user-friendly platform and advanced analytics capabilities.
Main Features
Payment model: Mainly use FPPS to obtain stable income, including block rewards and transaction fees.
Fees: 1% fee.
Multi-currency support: Clover Pool supports mining of various cryptocurrencies, including Bitcoin, Bitcoin Cash, Litecoin, and Ethereum.
Analysis Tools: Provides comprehensive analysis, allowing users to effectively track performance indicators.
advantage
Low Fees: Clover Pool’s fees are only 1%, which is competitive among major mining pools.
Real-time data tracking: Advanced analytics help optimize operations and closely monitor revenue.
Diverse Cryptocurrency Support: The ability to mine multiple cryptocurrencies enhances flexibility for miners seeking to maximize profitability.
shortcoming
Minimum withdrawal thresholds may apply: Small miners may face challenges in obtaining returns quickly.
04 Key factors to consider when choosing a mining pool
Choosing the right Bitcoin mining pool can greatly impact a miner's mining success and profitability. With so many options to choose from, several key factors must be considered before making a decision, including pool fees, pool hash rate and size, as well as security and reputation.
Mining pool fees
Fees are a big issue for mining pools. Different mining pools charge different types of fees, and if miners are not careful, these fees can eat into their profits.
Commission Fees: Most mining pools take a percentage of the miners’ earnings as a commission for their services. This is usually around 1% to 3%, but can vary greatly between pools.
Maintenance Fees: While some mining pools may charge a maintenance fee to cover operating costs, many pools primarily deduct fees from their revenue rather than charging a fixed maintenance fee.
It is crucial to understand how these fees affect the overall profitability of a miner. For example, if a mining pool charges a 2% commission but offers higher returns due to its hash rate, it may still be worth joining.
Typical fee structure
Popular mining pools usually have transparent fee structures. For example:
F2Pool: Full Pay Per Share (FPPS) fee is 2.5%
Braiins Pool: Pay Per Last N Shares (PPLNS) Fee is 2%
Antpool: FPPS is 2.5%, PPLNS is 1.5%
Hash rate and mining pool size
The hash rate of a mining pool is another key factor to consider. A higher hash rate means that the pool can mine blocks faster, resulting in more frequent payouts. Joining a mining pool with a high hash rate increases the chances of a miner receiving rewards consistently. In simple terms, the greater the computing power of a mining pool, the greater the chances of finding a block.
Large mining pools vs. small mining pools
Large mining pools: Due to their strong hashing power, they generally provide more stable and consistent payouts. However, the downside is that the rewards may be split among many miners, resulting in less individual earnings.
Small mining pools: Since there are fewer miners sharing the rewards, these pools generally offer higher returns per block. However, due to the lower overall hash rate, their returns may be less stable.
Current hash rate data
Here is a breakdown of some of the top mining pools and their hashrate, presented in a more visual way:
Foundry: accounts for about 30% of the entire mining capacity of the Bitcoin network.
Antpool: accounts for about 20% of the network hash rate.
ViaBTC: Contribution to the overall hash rate is about 10%.
F2Pool: This mining pool has a share of approximately 8%.
Security and reputation
Security is of utmost importance when choosing a mining pool.
Factors that affect the security of the mining pool: Look for a mining pool that can effectively defend against DDoS attacks and maintain server stability. Stable servers mean less downtime and more mining opportunities.
Evaluate the reputation of the mining pool: Check user reviews, community feedback, and any history of security breaches. Reputable mining pools will have transparent operations and good customer support.
Security Vulnerabilities
Unfortunately, some mining pools have faced serious security issues in the past:
In 2014, Ghash.io temporarily controlled more than 51% of the Bitcoin hash rate, sparking concerns about centralization.
In 2020, Poolin suffered a DDoS attack that temporarily disrupted service.
Recently, F2Pool has received attention for filtering transactions from OFAC-approved addresses, raising concerns about internal censorship in mining operations.
05 Risks of Bitcoin Mining Pools
While Bitcoin mining pools offer numerous advantages, they also come with inherent risks that miners should be aware of. Understanding these risks can help miners make informed decisions about where to invest their time and resources.
Centralization Risk
One of the biggest problems with mining pools is centralization. Large mining pools can control the entire network, leading to the centralization of power, which is contrary to the decentralized spirit of Bitcoin. When a small number of mining pools control a significant portion of the hash rate, they may launch a 51% attack to manipulate transactions, censor blocks, or double-spend. This centralization not only threatens the integrity of the Bitcoin network, but also undermines trust among users.
To combat this risk, diversifying mining efforts across multiple mining pools can help maintain decentralization. By spreading hashing power across different mining pools, miners can reduce the likelihood that any single entity will gain excessive control over the network.
Mining pool operator risks
Another key risk involves the mining pool operators themselves. If the mining pool operators are poorly managed or dishonest, it could lead to significant financial losses for miners. Issues such as low transparency, lack of communication, or even outright fraud could jeopardize miners’ income.
Therefore, to find reliable mining pool operators, it becomes particularly important to look for those with a good track record and positive community feedback. Research their history and check if there have been any incidents of fraud or mismanagement in the past. For example, some mining pools have come under scrutiny for failing to distribute rewards fairly, or for engaging in questionable practices. Some examples have been shared above.
While mining pools offer the opportunity for steady profits, they also come with risks associated with centralization and the integrity of the operators. By staying informed and vigilant, miners can effectively navigate these challenges.
Summarize
Bitcoin mining pools have become an integral part of the mining landscape, especially as mining difficulty continues to rise. While solo mining may be attractive to miners seeking full control over their operations, for most miners the risks and inconsistencies often outweigh the potential rewards. Mining pools, on the other hand, offer a more convenient and reliable way to participate in Bitcoin mining, especially for those without access to large hardware or significant financial resources.
However, choosing the right mining pool requires careful consideration. Factors such as fees, payment models, hash rate, and security measures play a key role in influencing a miner's overall profitability. It is important to weigh the pros and cons of different mining pools based on the individual needs and resources of the participants, with larger pools potentially offering stability while smaller pools may offer higher returns at the cost of greater variability. The key is how miners align their goals with the pool that offers the best balance of security, rewards, and operational transparency.
