Titan’s Mining Guide (TMG) #5 — Choosing the best mining pool
Unless you plan to spend hundreds of thousands of dollars building a mining farm, you will most likely have to join a mining pool to earn revenue. It’s essential to choose a pool that you’re comfortable contributing to because each has different rules and methods to define rewards. In this chapter, you’ll learn everything you need to know about them.
What are Bitcoin mining pools?
Essentially, mining pools are coordinated groups of individual miners who combine their computing power to increase their chances of successfully solving a block.
Mining pools are necessary for miners who don’t enjoy a big budget to mount mining operations. These miners can’t compete with enterprise-level mining farms and thus would never be able to solve a block. Mining pools “buy” their computing power and pay them for it proportionally to their work contribution relative to the pool’s total.
We won’t dive into the matter in this chapter, but we strongly recommend you visit our mining pool article to learn all there is to know about mining pools and better understand this chapter of the guide.
Key aspects to consider when choosing a mining pool
Many variables affect mining pools, such as task assignment methods, reward distributions, size, total hashrate, hardware and software compatibility, and so on. Each of these factors will affect miners and, in turn, their revenue.
That said, choosing the best pool will primarily depend on your priorities, what you think is most important for your mining operation, and what you feel most comfortable with. There’s no point in joining a mining pool with better rewards if you are constantly worried about transparency, for example. It comes down to personal preference.
Now, let’s take a closer look at the most relevant aspects of mining pools that you’ll have to evaluate when making your decision.
Hardware and software compatibility
In chapters 3 and 4 of this series, we’ve mentioned that there are many hardware and software options respectively to mine Bitcoin. Furthermore, new, more advanced mining equipment is coming out every year.
With the frenzy of this industry, it’s hard to keep up with the latest technology. This applies to mining pools too. Indeed, as mining hardware advances, pools may discontinue their support for certain devices.
Additionally, although still compatible with older mining hardware, you should be attentive to each pool’s recommendation and general hashrate. If you want to join one mainly composed of ASIC miners with a GPU rig, it is most likely that your earnings will be insignificant compared to your peers’.
On the same level, some pools may not be accessible if not through specific mining software. Sometimes they may even require their own exclusively developed program to function. Remember that you have an in-depth guide on choosing a mining software in the previous chapter of this guide.
Compatibility for your mining setup should be the first thing you should investigate, as no other feature or characteristic will be relevant if that pool doesn’t support your equipment.
Pool payment system
Not all pools pay their miners for the same work or the same time periods. Pool operators use different systems to calculate, distribute, and execute payments. As we’ve listed in our mining pools article, some of the most commonly used are:
- Proportional payments: Payments are calculated based on a division to rounds, where a round is the time between one block found by the pool to the next. At the end of every round, when the pool finds a block and receives the reward, the operator keeps a fee and payments are distributed among the miners in direct proportion to the number of shares they submitted during this round.
- Pay-per-share: When a participant submits a share, they are immediately rewarded correspondingly to the expected value of this share’s contribution, minus fees — no matter if the pool finds a block or not. The operator gets to keep all the rewards for solved blocks. The payment per share is thus a deterministic value known in advance.
- Pay per last N shares (PPLNS): Similar to proportional, but instead of paying per round, pool operators define a specific period of time (N). Miners get rewarded for the shares submitted within the defined period.
These are only three popular examples of the many payment systems mining pools can use. For a more detailed list, click here.
Additionally, pools may also establish a minimum threshold miners have to reach before collecting payments. This is especially important for miners with low output, as they may take longer to hit that level and thus, will have to wait to earn revenue. On the other hand, operators may also set a cap for how much each miner can withdraw from the pool for given time periods.
Again, consider your setup and your computing power to decide which payment system suits you best and allows you to earn the most profits possible in the most convenient way.
Task assignment methods
Mining pools have different mechanisms to assign work to their miners and thus determine their share earnings.
Some Bitcoin mining pools allow total freedom to individual miners to choose difficulty targets and work ranges. This enables them to do as much work as they please without needing task assignments from the pool.
Other pools assign work units — specific nonce ranges — to miners according to their relative hashrate. Most powerful miners may get a larger amount of work while their less powerful counterpart receives fewer tasks. Of course, the pool adjusts their rewards accordingly. It may do so to ensure maximum output and performance, thus optimizing revenue for every miner.
You should carefully learn about the task assignment method the pool you’re considering joining uses and see if it’s the most convenient for your current setup.
Pool size and total hashrate
Although it tends to be pretty much the same proportionally in the long term, the pool size is another aspect that could affect your mining revenue.
Large pools, of course, have better chances to solve blocks, but having to distribute rewards among more miners, these are often lower. On the contrary, small pools offer higher profits when solving a block, but this happens less regularly.
It comes down to what you prefer the most: high probability for lower rewards or low probability for higher revenue.
There is another aspect to pool size that doesn’t have to do with profits, though, and it is mining reputation. Generally, if a pool has lots of loyal miners, it means that its operators are trustworthy and don’t let them down.
Pool transparency and fees
Each mining pool has its operator — the entity or organization that manages it, chooses the task assignment method, the reward payment system, etc. Individual miners who connect to pools have to know its metrics to ensure that the operators are honest and not taking advantage of them. For example, miners can use the pool’s total hashrate to see the share of the hashrate they hold accurately and thus the reward they should receive.
To achieve greater transparency, some mining pools make this information available to everyone — even those who aren’t mining in the pool — online and in real-time.
On the same level, each pool has a different way of making money, often — but not always — by charging a participation fee, calculated based on various formulas. Other pools have no participation fees but may have additional costs, like entry commissions, the need to purchase their exclusive mining software, or keeping the transaction fees and distributing only block rewards.
You must evaluate these factors and see that the pool operators are well-intended, provide transparent information about pool performance and fee calculations, and generally act fairly to their miners.
As you can see, there is a wide range of variants that pools can differ on, thus making them very distinct from each other.
If you’ve been following this guide, you know what hardware you’ll be mining with and what kind of software you will use. When analyzing what pool you’ll join, you must consider these, as they will significantly affect your earnings.
Remember, it is better to join a pool you trust and feel comfortable in, even though it pays lower rewards, than to be in one where you can make more money but constantly worry about transparency and honesty.
Now, you’ve got your mining equipment ready. You’ve downloaded and installed your mining software, and you’ve chosen and connected to a pool. What’s next? Collecting! The next chapter will address Bitcoin mining profitability and how to calculate your revenue.
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