Everything You Need to Know About Bitcoin Mining Pools
The crypto mining industry has grown in leaps and bounds in previous years, evolving from the ease of personal computers tucked in the comfort of one’s home into more sophisticated machines, and transforming from a hobby to a job, and to a massive industry worth millions of dollars.
What Is Bitcoin Mining?
Bitcoin mining, in simple terms, is the process by which new Bitcoins are created and generated into circulation.
Bitcoin miners use sophisticated machines to solve extremely complex computational math problems, in order to add block(s) of verified transactions to the Bitcoin’s blockchain. The mining process is also a “competition” of sorts. Miners who are successful in adding a block are rewarded with 6.25 BTC per block, a figure that has halved every four years from its original figure of 50 BTCs in 2009.
What are Bitcoin Mining Pools?
Mining pools are groups of users cooperating with each other who share the reward for the found block in proportion to their contribution of hashpower during mining. For the regular user, mining in a pool is an absolute no-brainer. Despite being shared, profits are more predictable and stable when mining pools are involved.
Why Do People Join Bitcoin Mining Pools?
Miners join mining pools for almost the same reason people join lottery pools: to increase their likelihood of winning. In this case, this means finding a Bitcoin block.
Before a block can be verified and added to the blockchain, a mining computer has to cycle through trillions of hash combinations. (12 years ago, it was much easier to mine Bitcoin without needing a pool. All that was required to verify a block was to cycle through two or three hashes. More than ten years after Bitcoin’s launch, however, it would take calculation of tens of trillions of hashes before a block is finally verified.)
How then do you cycle through a trillion hash combinations as fast as possible? The answer is simple: you pool resources together and you can go as fast as possible, increasing your chances of finding your hunt.
Below, ChangeNOW has highlighted the major mining pools, their payout systems, their hash rates, and important factors to consider before mining Bitcoin.
Top Payment Systems for Crypto Mining Pools
If you plan to mine Bitcoin, then you must not only be aware of the hashrates and reputation of the mining pool you wish to join, but also take factors like remuneration and payout mechanisms into consideration.
1. Pay-Per-Share (PPS)
PPS Pools pay instant money for valid shares as soon as they’ve been contributed. This means miners receive payments whether the pool finds a block or not.
2. Pay-Per-Last-N-Shares (PPLNS)
This method calculates payment based on the number of shares you submitted during a shift. Unlike PPS, payment is not guaranteed unless a block is found. However, PPLNS might yield greater profit for the miner in the long run. Miners are often torn between the choice of a potentially bigger profit (PPLNS), or the safer choice of a consistent one (PPS).
3. Pay-Per-Share + (PPS+)
PPS+ is a hybrid of PPS and PPLNS. This means the block reward is shared by a system similar to PPS while the transaction fees are doled out on a PPLNS system.
4. FPPS (Full Pay Per Share)
The FPPS is a variant of the PPS system, but an often preferred variant by miners because it reduces or removes the element of luck altogether. FPPS does not only offer guaranteed payouts, it also calculates a standard transaction fee within a certain period of time before distributing it to miners.
5. Score Based System (SCORE):
SCORE pays you according to the hashrate provided, but gives more weight to more recent hashrate shares than earlier ones in the mining round. Score is often preferred by miners because it eliminates cheating and also rightly favors bigger miners.
There are more than twelve payment systems available to miners, but the five above remain the most popular among Bitcoin mining pools. There is no outright winner of these methods, but most miners prefer FPPS because of its almost guaranteed profitability. The scarce SCORE system follows closely as well because of its low-risk factor.
Top Mining Pools by Hashrate
The chart below provides a ranking of the best pools by hash rate for July 2021:
- AntPool (~15%)
Antpool began operation four years after the first ever mining pool was launched, making it one of the earlier pools to be introduced into the industry. The pool is the largest one operated by Bitmain, the world’s largest Bitcoin mining hardware manufacturer.
Antpool has maintained a significant hashrate over the years despite the stench of controversies surrounding it. While being easy to use and offering you a choice between choosing PPLNS and PPS payout systems, Antpool is notorious for its lack of transparency.
As of July 2021, Antpool currently has a hashrate of ~20EH/s and a hashrate share of 15%.
2. ViaBTC.com (~12%)
ViaBTC is a relatively young mining pool, and is also one of the pools with the fastest growth rate. Founded in 2016, its BTC cloud mining pool was founded in the latter part of 2020 and has expanded in power and user base in such a short time.
ViaBTC currently supports users in more than fifty countries and has a hashrate share of about 12%. It has a user-friendly interface, formidably high security, and provides the most transparent information about the results of miners’ work.
3. Poolin (~12%)
Poolin is a Chinese pool that was started by the founders of BTC.com. The pool was acquired by Bitmain in 2013 and has since gone on to become the second largest Bitcoin pool in the world, with a hashrate of about ~16EH/s.
Poolin’s interface is available in a variety of languages as well, and also provides detailed mining statistics for all supported cryptocurrencies through its mobile application and otherwise.
Poolin currently has a hashrate market share of about 12%, and has a FPPS (Full Pay-Per-Share) payout system.
4. F2Pool. (~11%)
Having held the highest number of shares for months, F2Pool has slipped a little down the ranks following China’s crackdown on Bitcoin mining pools.
F2Pool was founded in 2013. The pool has a hashrate of about ~15EH/s and controls a share of ~11% of the total Bitcoin hashrate, a figure that has slightly dropped after commanding more than 21% of Bitcoin’s hashrate in 2015 and 2016.
F2Pool is known to be beginner friendly and has an easy interface with a few varieties of languages to choose from. The leading pool operates on a PPS system, which means it rewards people who mine the most on its network. The service is distinguished by a high level of transparency and security and is actively introducing new technologies.
5. BTC.com (~10%)
Launched in 2016, BTC.com was started by the same founders who founded Poolin.
This Chinese mining pool has a hashrate share of 10% and a hashpower of about 13 EH/s and employs the PPS payout system for Bitcoin miners.
6. Binance Pool (~10%)
Binance Pool, as you might have guessed, belongs to the largest cryptocurrency exchange in the world, and was founded in 2020. Binance Pool is also coincidentally the largest non-Chinese mining pool.
The Malta-based pool is open to miners across the globe and uses a FPPS payment mechanism similar to Poolin’s. Binance has a hashrate of 13 EH/s and a BTC hashrate share of ~10%.
7. Foundry (~4%)
Founded in October, 2020, Foundry is the only US-based Bitcoin mining pool on this list. It is owned by German blockchain company Foundry Digital, and currently accounts for about 4% of all hashing power, forcing itself into the top ten within six months of its launch. The pool uses the FPPS payout system, and is quickly becoming a favorite for many miners who are particular about geographical location, or ones who seek to reduce the seeming “centralization” of Bitcoin’s hashpower in China.
8. Slush Pool (~4%)
Slushpool is the oldest mining pool in existence and is still considered the best by many despite its small size.
Launched in 2010, a year after Bitcoin was launched, the Czech-based pool has mined more than a million Bitcoins since its launch. Slushpool is suitable for beginners due to its relative ease of setup, and also has one of the most profitable reward systems, having created its own payment mechanism: SCORE.
Slushpool’s scoring system ensures rewards are distributed fairly without cheating.
The oldest pool currently contributes about 5% to Bitcoin’s total hash power and has an hashrate of ~5 EH/s.
9. Huobi.pool (~3%)
The pool was founded by one of the largest cryptocurrency exchanges – Huobi – in 2017. Thanks to its existing user base, it very quickly shot into the top ten. Huobi pool has a hashrate share of about 3 percent.
How to choose a mining pool
Other than the already discussed options, there are more than a dozen major pools not listed, making the choice of the right mining pool for a miner a little more challenging. Here are eight points you should consider before selecting a pool to mine:
- Reputation. Read reviews about your choice of mining pools on platforms like Reddit and Twitter. Research about the transparency of the pool and the experience of past miners.
- Transparency of operations. There should be no doubt about the integrity of the pool and its equal treatment of all participants.
- Compatibility. You may need to download a mining program that the pool supports, as well as have a specific operating system or network connection speed.
- Support for certain coins. You might be interested in mining coins other than BTC. You can always choose pools that provide options for the crypto tokens you’d like to mine.
- The geographic location of the servers determines a miner’s ping (network latency). The closer your mining machine is to the pool server, the better.
- Reliability and stable performance. The pool should be equipped with protection against hacker attacks. Pool must also have an encrypted connection.
- Payout frequency and limits. If you have small capacities, and the threshold for payments on the pool is set high, then you will receive earned funds less often.
- Size. Larger pools provide a greater chance of finding a block, so that income is usually more frequent. In a small pool, income will be less frequent, but higher.
- Commissions. There are pools that charge a certain percentage of the members’ income, while others do not. Commissions allow the pool to grow and also incentivizes developers working on the network.
Environmental Issues Regarding Mining
There are arguments that Bitcoin contributes more harm to the environment than the value it provides. Bitcoin’s annual carbon footprints alone, generated mainly by the mining industry in 2020, is estimated to be greater than Argentina’s annual carbon footprint.
When Tesla first announced its decision to accept Bitcoin payments in February 2021, objecting fingers pointed to nothing else than the huge amounts of energy consumed by Bitcoin annually, stressing that it was only more likely Bitcoin’s energy consumption was going to increase. When only three months later Tesla rescinded their decision, the crypto community was shocked, but it wasn’t entirely a surprise to detractors.
As of June 2021, Bitcoin mining processes now consume three times more electricity than it did at the start of 2019. A whopping increase within such a short timeframe.
If Bitcoin mining continues to remain profitable (which is very likely), there would only be more consumption of power in the coming years. With every Bitcoin halving, and every increase in Bitcoin price, the difficulty of mining new coins might become more difficult. And would hence require more energy.
Regardless, the world is becoming greener, and with the increasing Chinese government’s crackdown on mining pools, there are hopes for cleaner mining processes as the industry goes through an evolutionary change.
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