Do I need a mining pool?

Mining pool
Lost in a mining pool

The amount of calculations needed to earn a single Bitcoin are immense.  The best way to hedge your bets is to get to a mining pool.  These are organizations that allow you to share the workload for small fee and increase the likelihood of return.   There are several out there each one with its own advantages.  If you are going to make profit you will need to be in a mining pool.  Each crytpocurrency has its own variations  on how their mining is set up.

What’s the next step?

 

 

Deeper Dive

Mining pools have been around since the dawn of crytpomining, even before there were application specific rigs and business ventures based around the idea.  Challenges in mining pools arise around cheating the miners out of coin. Several different methods to pooled mining have been created.

Pooled mining is a mining approach where multiple generating clients contribute to the generation of a block, and then split the block reward according the contributed processing power. Pooled mining effectively reduces the granularity of the block generation reward, spreading it out more smoothly over time.

The slush approach

Bitcoin Pooled Mining (BPM), sometimes referred to as “slush’s pool”, follows a score-based method. Older shares (from beginning of the round) have lower weight than more recent shares, which reduces the motivation to cheat by switching between pools within a round.

The Pay-per-Share approach

The Pay-per-Share (PPS) approach, first described by BitPenny, is to offer an instant flat payout for each share that is solved. The payout is offered from the pool’s existing balance and can therefore be withdrawn immediately, without waiting for a block to be solved or confirmed. The possibility of cheating the miners by the pool operator and by timing attacks is thus completely eliminated.

This method results in the least possible variance for miners while transferring all risk to the pool operator. The resulting possibility of loss for the server is offset by setting a payout lower than the full expected value.

The Full Pay-per-Share approach

The Full Pay-per-Share (FPPS) approach, created by BTC.com team, aims to benefit miners from the high transaction fee. It will calculate a standard transaction fee within a certain period,add it into the block rewards (12.5 BTC every block for now) and then distribute the whole to miners according to PPS mode.

This method keeps advantages of PPS and pay more to miners by sharing some of the transaction fees.

Luke-Jr’s approach (“Eligius”)

Luke came up with a third approach borrowing strengths from the earlier two. Like slush’s approach, miners submit proofs-of-work to earn shares. Like puddinpop’s approach, the pool pays out immediately via block generation. When distributing block rewards, it is divided equally among all shares since the last valid block. Unlike any preexisting pool approach, this means that the shares contributed toward stale blocks are recycled into the next block’s shares. In order to spare participating miners from transaction fees, rewards are only paid out if a miner has earned at least 0.67108864 BTC (400 TBC). If the amount owed is less, it will be added to the earnings of a later block (which may then total over the threshold amount). If a miner does not submit a share for over a week, the pool sends any balance remaining, regardless of its size.

P2Pool approach

P2Pool mining nodes work on a chain of shares similar to Bitcoin’s blockchain. When a block is found, the reward is divided among the most recent shares in this share-blockchain. Like the puddinpop and Luke-Jr approaches, p2pool pays via generation.

Comparison

The cooperative mining approach (slush and Luke-Jr) uses a lot less resources on the pool server, since rather than continuously checking metahashes, all that has to be checked is the validity of submitted shares. The number of shares sent can be adjusted by adjusting the artificial difficulty level.

Further, the cooperative mining approach allows the clients to use existing miners without any modification, while the puddinpop approach requires the custom pool miner, which are as of now not as efficient on GPU mining as the existing GPU miners.

Puddinpop miners receive coins directly.

Additionally, the puddinpop and Luke-Jr approaches of distributing the earnings by way of including precise sub-cent amounts in the generation transaction for the participants, results in the presence of sub-cent bitcoin amounts in your wallet, which are liable to disappear (as unnecessary fees) later due to a bug in old (before 0.3.21) bitcoin nodes. (E.g., if you have a transaction with 0.052 in your wallet, and you later send .05 to someone, your .002 will disappear.).

Puddinpop and Luke-Jr miners receive coins directly, which eliminates the delay in receiving earnings that is required on slush-based mining servers. However, using some eWallet services for generated coin will cause those coins to be lost.