What is a Mining Pool
A mining pool is a group of miners who combine their computational power to mine cryptocurrency together.
Instead of each miner trying to solve complex mathematical problems on their own to add a new block to the blockchain, pool participants work together, increasing their chances of successfully solving the problem and earning a reward.
How does a mining pool work?
đ” Each participant in the pool contributes their share of computational power. The more power the pool has in total, the higher the chances of finding a new block and earning a reward.
đ” When the pool successfully mines a new block, the reward is distributed among the participants proportionally to their contribution to the overall computational resource. Typically, more power means more income, but all participants receive a share.
đ” Participating in a mining pool reduces the risk for miners, as they receive a more stable, albeit smaller, income compared to solo mining, where they might not receive any reward at all.
Disadvantages of mining pools:
đ” Most mining pools charge a fee for their services, which reduces the overall income of the participants.
đ” The success of large mining pools can lead to the centralization of cryptocurrency mining, which goes against the idea of a decentralized network.
đ” If a mining pool ceases operations or encounters technical problems, it can temporarily halt payments to participants.
