Mining pools what they are?

By Lumai Mubanga. mlumai@gmail.com



Due to the potentially higher costs related to the mining of bitcoins, mining pools were born. Just what are they and what are some pros and cons?


Before we explain mining pools, let us briefly explain the types of bitcoin miners. Bear in mind that types of miners are different from types of users. Here we mention only two; reference clients and solo miners. “Reference Clients”--these control a wallet to store private keys, a routing node to communicate with others, a blockchain to validate transactions, and mining software to submit hashing power to the network. Solo miners, on the other hand, have no wallet functionality, probably have some other separate wallet software, and solely mine.


Many investors have joined mining pools as opposed to going solo. The cost of mining hardware, cost of electricity, and the need for additional infrastructure have pushed many bitcoin mining enthusiasts to embrace the mining pool business.



Mining pools are like a community enterprise that puts its meager resources together to achieve a common goal with a view to share profits. In short, it is similar to a startup company that brings equity partners to contribute financial resources to make profits from the efforts of many.


Mining pools are individual miners who pull their hash power together with the sole purpose of collectively finding blocks and are rewarded more often.

Examples of Mining pools by Market percentage share.


Why join a mining pool in the first place? There are several advantages. Pool managers or pool operators manage mining pools. These managers ensure that they run the bitcoin full node and distribute jobs to other miners. They also take a reward as compensation for their work. This setup relieves the other miners from storing the whole blockchain. Similar to cloud computing, they give pools access to their hardware in exchange for a share of profits from the pool.


The pros of mining pools are that they give individual and smaller miners the opportunity to make profit without waiting decades to get payment. On top of that, software changes are easy to make. Only one person is running a full node for the mining pool, and that person can upgrade on behalf of the pool.


Cons include trust in the pool manager. You have to rely on them not to squander your mining power or withhold rewards.


Some sections dislikes large mining pools. For example, GHash.io once approached 50% of the network mining power. Miners within GHash voluntarily pulled out of the mining pool because they were aware of the dangers of approaching 51% of the network.


In addition, another concern is that a single entity might be hiding their total amount of mining power. BTC.com had about 29% of the mining power in their pool, but what could stop them from submitting hash power to other pools? This is known as laundering hashes, by hiding the origin of mining power.


This allows investors to leverage great amounts of mining power without revealing your prowess to the community. By doing so, they experience no backlash while still receiving major profits.

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