What is Pooled Mining?

Pooled Mining – What is it and why should I do it?

When discussing Cryptocurrencies and the intricacies of the network, a common term used is “Mining Pool”. Often desktop miners mine by themselves without realizing that Mining Pools exist, bringing some benefits the user may not know about. Basically, these pools are a collectivization of resources (ASIC, GPU, CPU, etc) or hashing power to mine a block. Many users after hearing this may be incredulous due to the fact that profits will be split. However, payouts are rewarded equally as they are based on the shares that they contributed to each block mined. With power combined together, blocks are mined much quicker and rewards are received very consistently. With the rise in difficulty, it is always extremely recommended for miners to join a pool as it would take years for miners to generate a block. However, the most popular pools are not always the best to be apart of. Hashing power should be spread evenly and not heavily concentrated in a single area. So, as a benefit to the network as a whole it is better to chose smaller pools.

Pie chart showing the distribution of hash rates on the network
Pie chart showing the distribution of hash rates on the network

There are several mining pool methods including:

  • Pay-per-share – Users will receive a guarenteed payout for the relative shares solved by a miner. This is the most consistent in payment for miners. The expected value of each hash attempt can be calculated with the formula B•p where B is the net block reward, and P is the probability of find a block on a share attempt. P is the inverse of the current block’s difficulty.
  • Proportional – User gains shares until the mining for a block is complete. The user then gets rewarded B • n/N with n being the user’s shares and N the total shares of the mining round.
  • Pay-per-last-N-shares – Based on the same ideals of the Proportional method, but where the user’s reward is now calculated on N last shares instead of the total shares for the last round.

Cons of mining in a pool:

Mining pools can offer some disadvantages, however. A user’s rewards and time spent mining is dependent on the pool provider. If the provider suffers interruptions from outages then users can lose potential money. However, many miners can be configured to switch to backup pools or solo mine in the case of an event like this. This is paired with the fees of mining in a pool. These systems have to stay up so the pools take cuts of rewards as fees, which varies from pool to pool. These miners do not receive their full payout as they would in solo mining.


One of best systems for mining in pools is with a Multipool. This type of pool switches between various coins depending on the profitability of each coin. This is based on the block-time and the price on the exchanges. For the majority of these pools, the rewards are converted into Bitcoin. Multipool mining increases demand on coins, which stabilizes the value of the mined coin making it extremely beneficial for the user, the coin, and the overall network.

Overall, pool mining is an extremely useful process for cryptocurrency miners. Its benefits strongly outweigh the cons of using them. It, not only, provides a more consistent payout, but also has the benefits of potentially stabilizing the network of Cryptocurrencies. Be sure, when considering to mine in pools, to do adequate research on the pool you mine in. It is important to see the method of distribution, fees, and average up-time.

Helpful Mining Pool Resources:

Mining Pool Wiki

Pool vs. Solo

BlockGen Pool Reviews and Rankings

Justin Poiroux

View posts by Justin Poiroux
Computer Engineer at Auburn University with passions in technology such as CryptoCurrencies, 3D Printing, Smartwatches, and Computers.

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