Any crypto enthusiast who is ready to reap profits through the standard crypto mining process either does so by doing it himself solo using his or her own mining devices, or such person either join a mining pool where his or her mining resources are joined with the other resources of other pool miners to improve the crypto mining output with enhanced processing. In this article, you will get to understand how the crypto-currency mining pools work.
The physical gold which is extracted beneath the earth surface is the world’s oldest currency; it is being gotten through the process of gold mining. Successful mining enables the individual digger or the mining company to claim ownership of the gold.
The Cryptocurrency mining works similarly with that of the physical gold, just as virtual coins can be discovered digitally with the basic use of computer programs. The bitcoin system has set up a limit of a total of 21 million bitcoins.
All the bitcoins are lying within the blockchain system are either dug out or “mined,” or either owned by different participants, while some of the rest are still in the process of getting mine, and after that, eventually, they become available.
Getting To Understand the Cryptocurrency Mining Process
Two functions are involved in the cryptocurrency mining process which is; releasing new cryptocurrencies into the system and adding and making verifications to transactions on the blockchain public ledger.
Usually, this is performed with the use of an internet-connected computer device which is often equipped with some kind of special mining hardware devices and software programs that is used to manage and control the mining process.
Cryptocurrency mining is like a calculation-intensive or puzzle-solving process that requires a high processing power with high electricity consumption. The crypto miner who solves the puzzle first gets to place the next block on the blockchain and he claims the rewards.
The rewards include that the miner becomes the owner of the newly released bitcoin, or he or she will claim the fees linked to the transactions performed in the blockchain.
This cryptocurrency discovery process (mining) is developed in such a way that if more crypto miners are working, the difficulty level goes up, but a decline in the number of miners will lessen the difficulty level. The rewards of the mining process made cryptocurrency mining a lucrative activity for people to get monetary gains.
The mining pool is a group of miners who collaborated to increase their chances of finding a block at the group level, compared to that at the individual level where miners do it singlehandedly.
Through such pools, crypto miners combine their individual computational resources with other members to improve their processing power and get their desired result faster.
For instance, if a gold digger has the capacity to dig 100 square meters of land in a day, it would take that gold digger 100 days to explore a hectare of land for gold. But if 100 gold diggers will combine their efforts together, they can complete the same job in just 1 day. This is how it applies to cryptocurrency mining as the mined gold can split across to all 100 diggers if they all combine equal efforts to mine the gold.
In the same way, one can combine nine mining devices with each one generating a mining power of 335 megahashes per second (MH/s) which can generate a combined output of 3 gigahashes. The result is faster and the miners retain a better chance to discover more bitcoins.
Pooled work comes with better output and higher chances. The reward gained from combined crypto mining can be split among pool members.
Functions of a Mining Pool
A mining pool performs the job of a coordinator for the pool members. The functions involve recording the work performed by each member, managing the pool members’ hashes, assigning tasks to members, looking for rewards through the combined efforts of the available processing power, and assigning reward shares to each pool member in proportion to his or her effort in the mining process. Mining pool charge some fees on each member miner.
Work given to each pool member can be assigned in two ways. The first is the traditional method which involves assigning pool members a work unit which makes up a particular range of nonce, the number that the blockchain miners are computing for.
Once the pool member completes the work within the assigned or estimated range, such a member makes a request for a new work unit to be assigned to him or her.
The second mining method enables pool members to retain the liberty to pick and choose as much work as they like without any form of assignment from the pool. This methodology ensures that no two members can take the same range (just like 2 gold diggers exploring the same piece of land). To enhance and improve more output, they can also be a pool of pools.
The successful identification of the block hash creates a way for the pool to receive its reward. The reward can be shared in various mechanisms. The share describes the amount of work done by a particular member and such member is given his reward based on his contribution to the mining pool.
There are two kinds of shares which are accepted shares and the rejected shares. The accepted shares indicate that the work done by a pool member contributes substantially to the growth of the pool towards discovering new crypto coins, and such members get the rewards for their efforts.
Rejected shares represent the work that does not contribute to a blockchain discovery, and this type of members are not paid for their activity because they didn’t contribute to the growth of the team even though they have been working.
Even if a member in the pool performs the work successfully but submits it late for that particular block, it would be regarded as a failed or rejected work.
A member ideally wants all his shares to get accepted so that he can be rewarded. However, rejected shares are inevitable because it cannot be guaranteed that all the computations made on a member’s computer will be helpful in coin discovery, or that it will always be delivered on time.
Before joining a cryptocurrency mining pool, miners should get the knowledge of how the pool shares its payment among the members and know the fees that are charged on the members (if any). On normal circumstances, most pools charges between 1% and 3% as its pool fees.
Zara is a business consultant, life coach, content creator and a media entrepreneur. On this blog, I share various tips as I inspire my readers and provide business ideas that would generate revenue for them. Feel free to read and share my posts with your friends.