You will learn (1) what Bitcoin mining is, (2) what a Bitcoin mining pool is, (3) why you should avoid Bitcoin mining pools, and (4) where to join a Bitcoin mining pool as an alternative.
What is Bitcoin Mining?
Bitcoin mining is the process of compiling recent Bitcoin transactions into blocks and trying to solve a computationally difficult puzzle. The first participant who solves the puzzle gets to place the next block on the block chain and claim the rewards. The rewards incentivize mining and include both the transaction fees (paid to the miner in the form of Bitcoin) as well as the newly released Bitcoin.
You can download a free wallet to your computer, or mobile device. A Bitcoin wallet is needed to receive Bitcoins, store them, and then send them to others. A single wallet address can be used for all of your transactions, but using more than one wallet address can help protect your anonymity. All wallets have both public keys which are visible to all on the blockchain, as well as private keys which are only known to you and allow you access to your Bitcoins.
Bitcoin Mining Pools
Bitcoin mining pools are groups of Bitcoin miners working together to solve a block and share in its rewards. Without a Bitcoin mining pool, you might mine bitcoins for over a year and never earn any bitcoins. It’s far more convenient to share the work and split the reward with a much larger group of Bitcoin miners. Here are some options:
Slush’s pool: Slush was the first mining pool and currently mines about 11% of all blocks. In keeping with the philosophy of Bitcoin, the developers have designed it such that no one party can take control of the mining operation. The site is coded in such a way that it distributes payments with complete transparency. Slush pays out based on the score system, which uses scores assigned to each submitted share. The higher your score is, the more shares you will have to submit for you to get a reward. The system also makes provision for smaller hash rates so as not to discourage small scale miners from participating.
BTC Guild: BTC Guild is one of the longest-running and most reliable services out there. It operates on a PPS basis and charges 2% fees (1% goes to them while 1% goes to block finding). It also has an incredibly responsive support team that are ready
Almost every person who has a bitcoin mining rig up and running, always ask “Should I join a Bitcoin Mining Pool?” So, what is a pool? What are the pros and cons?
What are Bitcoin Mining Pools?
A pool is a group of miners that work together to mine bitcoins. A group of miners join forces and work as a team to increase the speed at which blocks of transactions are created. This increases the chances of finding new blocks and, as a result, getting rewards in the form of bitcoins. When this happens, the reward is shared among all the members of the pool depending on what contribution they made – how much hashrate they contributed. For example; if you contribute 10% of the hashrate to find a block, you will receive 10% from that block’s reward.
So does that mean you should always join one? NO!! Why not?
I’ll try to provide reasons for why you shouldn’t join one:
It’s Not Really Profitable
The difficulty level of mining bitcoin is at an all-time high. This means that it’s almost impossible for regular people like me and you to make money out of mining bitcoins unless we buy expensive devices such as ASICs or invest in cloud mining services (which I don
There are many reasons why a mining pool might be a bad idea. It can increase risk due to centralization, lead to big payouts for a small group of users, and potentially cause more problems. Bitcoin mining pools basically just split the rewards equally based on how much work each miner did.
Created in 2010 by a person or group known as Satoshi Nakamoto, the first Bitcoin was designed to be used as an electronic payment system that would use cryptography to prevent counterfeiting and double spending. The currency has evolved since then into something different and there are several ways to acquire them. One of the most popular is Bitcoin mining.
Bitcoin Mining is done by special computers called bitcoin miners that run a bitcoin software that solves mathematical problems. Each time a problem is solved, new bitcoins are created and given to the miner as a reward for solving the problem. This process is called “mining” because it is similar to digging for gold or silver in real life, where only a few people find the precious metals amongst all of the sand and dirt. In Bitcoin’s case, only 21 million bitcoins will ever be created (the number will be reached around 2140).
To encourage people to mine bitcoins, there have been rewards given out for every block mined (a block
A Bitcoin mining pool is a group of Bitcoin miners that have banded together in order to solve blocks together and share the rewards. This cooperative effort, called pooling, allows each individual miner to generate more Bitcoins with less effort. The reward, however, is split between all the miners in the pool.
There are many different ways to mine Bitcoins, and as such there are also many different types of pools. Some are based on luck, some on skill, some simply pay out all members with equal regularity (proportional), and some allow you to prioritize block solving for higher profits (PPLNS). As the difficulty of mining increases and time passes, the number of Bitcoin mining pools will increase as well.
The first step in joining a pool is choosing a “worker” name. This is simply an arbitrary name that identifies your worker on the pool’s statistics page. You can choose any name you like, or preferably one that makes sense to you or others that may be looking at your account later on. For example: I could use my initials or username (such as “btcguild”), my location (for example “ny3”), or whatever else makes sense to me (such as “yoshi”).
Mining pools are groups of cooperating miners who agree to share block rewards in proportion to their contributed mining hash power. While mining pools are desirable to the average miner as they smooth out rewards and make them more predictable, they unfortunately concentrate power to the mining pool’s owner.
Miners can, however, choose to redirect their hashing power to a different mining pool at anytime.
Although it’s tempting to pick the most popular one, it’s better for the health of the network to mine with smaller pools so as to avoid potentially harmful concentration of hashing power. The hash rate distribution is best when split among more Bitcoin mining pools.
Unfortunately, for folks not immersed in the Bitcoin community, there is no easy way to find such small pools with a quick search. I will list some known small P2Pool nodes that you can use for these purposes, but keep in mind that each node has its own set of rules and methods for payouts and rewards. Make sure you read up on your chosen node before starting.
For those looking for a quick answer, here is a short list of some good small BTC pools: p2poolhub and p2poolmining
While Bitcoin mining may be prohibitively expensive for most South Africans, a similar cryptocurrency called Ethereum can be a great option for miners with consumer hardware. Like Bitcoin, Ethereum is a public platform which is regulated by users who collaborate to record and process payments. Ethereum’s currency is called ether.
Ether can currently be mined using consumer-level hardware like a high-end gaming GPU. This is unlike Bitcoin, which requires expensive ASIC hardware to mine efficiently. There are also no ASICs available for Ethereum, so the cost of entry is quite low.
If you’re interested in mining Ethereum (or another altcoin), there are three things you need:
* Hardware (a computer with a fast CPU and enough memory)
* Software (Ethereum miner software)
* A pool account (an account on an Ethereum mining pool)
This article focuses on how to find the best Bitcoin mining pools. For information about how to mine Bitcoins, see our article on Bitcoin mining hardware.