How can the Bitcoin miners divide their resources equally? There is such thing as a Bitcoin mining pool. It divides the reward into equal parts based on the number of shares used to solve a block. That is how miners are treated fairly regarding financial rewards.
What Is Pool?
A mining pool is a gathering of miners that cooperate in order to minimize the volatility of profits. It is similar to diversification in portfolio management: having 10 stocks is more beneficial than having a single one. One of the examples could be CEX.io.
Each time the miners attempt and manage to discover a hash to the right block, they take part in a lottery. A sold puzzle means winning a specific reward made of the bitcoins and transaction fees.
To get a reward, a miner should perform a proof of work (PoW). It is the proof of the solved puzzle. The experts start thinking about introducing a new method of dealing with puzzles after their complexity achieved the peak. That is how pool mining was born. Without this novelty, it would take ages for sluggish miners to solve a math problem and create a block.
By pooling their resources, the miners found the way out. Nowadays, it allows developing blocks much faster and obtains a share of prize regularly instead of barely, once in a few years or even a decade.
Some people prefer mining all alone without support. It means mining separately from a Bitcoin mining pool. It might stand for greater risks, but it’s your right to choose. Solo-miners have to make sure they meet the network’s requirement. The BitCore client will help to ensure this condition.
Mind certain risks. For instance, several developers have risked creating apps that could lead to the certain damages to the system.
A participant alone should ensure the Bitcoin mining power directed to a pool does not try to enforce network consensus principles that a user would not accept.
How can one relay segwit-style blocks? How should the player start mining? Here is the list of software you may use to answer both questions:
- Bitcoin Core14.1
- Mining software:
- Pool software:
- Relay software:
- Bitcoin FIBRE
Do not forget to upgrade the software to let it support the BIP9 and BIP145 modifications to GBT. Examine the infrastructure update by mining with the help of segwit. You will need a tiny amount of hash rate and testnet.
Bitcoin Mining Pools
Luckily, the number of Bitcoin mining tools is growing all the time so that you will have a choice. Experts recommend mining with smaller pools. The best hash rate is present when it is divided among more Bitcoin mining pools.
If you are looking for the completely decentralised pool not controlled by any third party like central bank, try p2pool. Among all Bitcoin mining pools, Litecoin mining pools, zCash mining pools, Monero mining pools, and Ethereum mining pools, please mind joining these ones as they are totally validating blocks:
- Slush Pool
- Kano CKPool
- BW Pool
Mining Pool Payment Methods
It is hard to estimate the value of a share that takes part in the process of mining. Luckily, the developers offered various estimation approaches. The most famous types are PPS and DGM. The first one shifts the threats to the network while PPS is a warranty that each contributed share will be covered in full. It is a fair method. Its payment schemes demand a huge reserve of bitcoins; many mining pools refuse to support it.
On the other hand, we have DGM. It is a more popular payment approach as it aims to provide a balance of the short-round and long-round blocks. It means that the participants should wait for full-round verifications.
Let’s look at other options.
PROP: This is a proportional method. It stands for the proportional division of the prize each time one discovers a block. The reward depends on how many shares every worker has discovered.
PPLNS: This abbreviation stands for The Pay Per Last N Shares method. The main point is to pay attention to the recent N shares ignoring the limitations of the round.
SMPPS: With this system, you will not receive more than the mining pool has obtained.
ESMPPS: This approach reminds of the SMPPS. The only difference is that ESMPPS divides rewards equally among the miners.
CPPSRB: It is like 2-in-1 approach as it also applied Maximum Pay Per Share. The miners obtain as large rewards as possible thanks to the revenue from detecting blocks. It prevents the participants from losing all their money.
BPM: It is “Slush’s pool” that applies a method, in which outdated shares form the block’s start round receive less value than the latest shares. It minimizes the opportunity for cheating in the system. Thus, sincere players always win.
SCORE: This one applies a system whereby a proportional distribution of the prize is present. It is estimated by the period during which a job was submitted. As a result, the later shares’ value is higher. The prize depends on the scores instead of the amount contributed.