Mining is still a popular way of earning Bitcoin.
However, it’s not as easy today as it was 10 years ago. At that time, all you needed was a powerful computer with a GPU, and you were good to go. But as the Bitcoin price has continued to climb, lots of miners have joined. This has made it very hard to successfully mine a block, and even harder to do it by yourself.
If you have the hardware required to mine Bitcoin, it will make more sense if you join a mining pool. This will help increase your chances of earning, despite the fact that you will need to split the winnings with others. But how can you ensure that you choose the right mining pool?
In this guide, we’ll walk you through the process.
Understanding Bitcoin Mining Pools
Mining Bitcoin usually requires huge amounts of computing power. The effort needed to mine also increases every year due to various factors such as the halving mechanism. This means to compete with other miners and successfully mine a block, you would need immense processing power. This in turn means having many powerful mining rigs and using lots of electricity, both of which are quite expensive (rigs go for thousands of dollars).
Bitcoin mining pools are a clever way of dealing with the costs and the steep competition. They allow different miners to bring their resources together, and this greatly increases their chances of successfully mining a block. Once they do, they then split the rewards.
How to Choose the Right Bitcoin Mining Pool
Mining pools vary greatly, so it’s good to analyse several factors before you choose one.
The Pool Size & Power
One of the first things you should look at is the size of a particular mining pool. This is because the size affects several things, the first one being the mining power. The larger the pool is, the more the chances of it having huge mining power. This is important as the amount of power usually correlates with the chances of earning Bitcoin.
However, everything is not so straightforward. This is because the actual mining power is the combined hashrate of the miners. If a pool has fewer miners but uses more modern ASICs, it will have more mining power than a larger one that uses older equipment. On top of that, the number of miners in a pool will also determine the percentage of earning you’ll get. The trick here is to find the balance depending on the hashrate of your mining rig.
The Payout structure
Different pools have a different system with which they make payments. One of the most popular is the Pay-per-Share (PPS) system, where you get paid for every share of work you contribute. This system doesn’t take into consideration whether the pool is successful in mining a block, which ensures that the payment is consistent.
The other common approach is the Pay-Per-Last-N-Shares (PPLNS) systems. Here, you only get paid for the amount of work you submitted during the last period when a block was successfully mined. This system can result in significantly higher earnings than PPS, but it is also very unpredictable.
The Fees Charged
Pools also have to cover maintenance and make a profit. As such, they have some fees that vary from one to the next. These typically range between 1% and 2% of the rewards, but they can also be higher (or even free) depending on the pool. The fee can also be flat, or it vary depending on how much you get paid. This means that you should pay close attention to what the pool charges. You can then compare this with the advantage it has over other pools.
Reliability and reputation
A mining pool can be unreliable. For example, it can have downtimes that affect your mining ability and profits. It can also be unfair in its reward structure, or even have a false advertised hashrate. You don’t have to do lots of trial and error when many other miners have already done it for you. Simply go online and look for reviews and user experiences with the pool. Weigh these carefully, and you should be able to choose a pool that is reliable and can help you make profit through Bitcoin mining.