Types of crypto mining pools with comparing table

Types of Cryptocurrency Mining Pools

The competitive nature of cryptocurrency mining, particularly for proof-of-work (PoW) based cryptocurrencies, often makes it challenging for individual miners to consistently earn rewards. Mining pools have emerged as a solution, allowing miners to combine their computational resources and increase their chances of finding blocks and receiving payouts. However, not all pools are created equal. They differ in their structure, payout methods, fee structures, and governance. This article explores the major types of mining pools, highlighting their advantages and disadvantages, and provides a comparative overview to help you make an informed choice.

The Need for Mining Pools

Before exploring specific pool types, it’s essential to understand why they exist in the first place. In PoW systems, mining involves solving complex mathematical puzzles. The probability of finding a block is directly proportional to your computational power, known as hashrate. The more hashing power you have, the higher your chances of winning a block reward.

For individual miners with limited resources, the odds of finding a block on their own are incredibly low, potentially resulting in long periods without any earnings. Mining pools solve this problem by aggregating the hashrate of numerous miners. When the pool successfully mines a block, the reward is distributed among the participants based on their contribution to the pool’s hashrate. This model provides more consistent, albeit smaller, payouts than attempting to mine solo.

Types of Mining Pools

Mining pools vary based on several factors. Let’s examine some of the most common types:

1. Proportional Pools

• How it Works: Proportional pools reward miners based on the number of shares they contribute during a mining round. A mining round is a period where the pool is working to find the next block. When a block is found, the pool distributes the reward proportionally to each miner’s submitted shares.
• Share Mechanism: Shares represent partial work completed. Each miner receives shares based on how much hashing power they provided during the mining round. These shares are not actual “coins”, but rather a measure of contribution within the pool.
• Payout Timing: Payouts occur after the pool finds a valid block.
• Pros:
  • Relatively straightforward payout structure.
  • Easier to understand for beginners.
  • Miners know exactly how much they will be rewarded for each submitted share.
• Cons:
  • Payouts are directly tied to the pool’s luck. If the pool has a period of bad luck and finds fewer blocks, miners might wait longer for payouts.
  • Miners may not get paid if the pool does not find a valid block.

2. Pay-Per-Share (PPS) Pools

• How it Works: PPS pools provide a guaranteed payout for every share submitted, regardless of whether the pool actually finds a block. The pool essentially takes the risk of finding a block.
• Fixed Rate: Each share has a fixed value (often calculated based on the average block reward), and miners are paid accordingly. The pool pays from its own reserves if no block is found.
• Payout Timing: Regular payouts based on shares, regardless of successful block discovery.
• Pros:
  • Predictable payouts.
  • Consistent income for miners, regardless of pool luck.
  • Reduces risk for individual miners.
• Cons:
  • Usually have higher fees compared to other pool types, as the pool assumes all the risk of block finding.
  • Miners may potentially earn less compared to more volatile reward structures when the pool is very lucky.
  • Sometimes, PPS pools may not cover all expenses during periods with low block success, thus these

are less common.

3. Pay-Per-Last-N-Shares (PPLNS) Pools

• How it Works: PPLNS pools reward miners based on their contribution within the last ‘N’ number of shares submitted to the pool, regardless of the round boundaries, or if a block has been found at all. Unlike proportional pools that reset after each block is found, PPLNS pools give weight to your submitted share over time
• Rolling Window: Instead of calculating over a mining round, PPLNS uses a rolling window of ‘N’ shares. Your reward is calculated based on your share submission within that window.
• Payout Timing: Payouts after a block is found and distributed based on your weighted contribution.
• Pros:
  • Less susceptible to pool hopping (miners switching to another pool once a block is found in another).
  • More consistent payouts than proportional pools over the long term.
  • Rewards long-term loyalty.
• Cons:
  • Can still be volatile, although less so than proportional. Payouts depend on block discovery.
  • Less predictable than PPS pools.
  • Requires a good understanding of how the N parameter and rolling window impact payouts.

4. Score-Based Pools

• How it Works: Score-based pools assign a score to each submitted share, with higher scores given to older shares or to shares that have more time since the last block was found. When a block is found, rewards are distributed based on the total score of each miner.
• Dynamic Scoring: The scoring system can change over time, often aiming to reward consistent participation.
• Payout Timing: Payouts when a valid block is found.
• Pros:
  • Encourages consistent participation.
  • Minimizes pool hopping.
• Cons:
  • More complicated to understand.
  • Can be difficult to predict payouts due to dynamic scoring.
  • Less common than other options.

5. Full Pay-Per-Share (FPPS) Pools

• How it Works: A variation of PPS, FPPS pools also pay for shares regardless of whether a block has been mined. However, unlike a regular PPS, FPPS pools include the transaction fees from the block into the reward payout for each share.
• Transaction Fees: Instead of just the block reward, miners also get their share of transaction fees, potentially giving a higher profit than PPS pools.
• Payout Timing: Consistent and predictable.
• Pros:
  • Very good for beginners since its easy to understand.
  • Predictable payments, like PPS.
  • Higher payout than PPS since it includes transaction fees.
• Cons:
  • Higher fee than PPS to account for transaction fee volatility.
  • May have high fluctuation in payout during periods of high and low transaction volume.

6. Solo Mining Pools

• How it Works: These pools, usually run by the miner themselves, mimic solo mining but allow for more control and flexibility in the process. Miners don’t share rewards with others; instead, they receive any block rewards that are generated as a consequence of using their hashpower on the pool
• Individual Mining: The individual miner does everything themselves.
• Payout Timing: Payouts only when the miner finds a block.
• Pros:
  • Complete control over mining.
  • 100% reward payout if blocks are found
• Cons:
  • Difficult to find blocks, as the miner is completely on their own.
  • Often not worth the effort for small miners

Comparative Table

To help you visualize the differences between these pool types, here’s a comparative table:

Choosing the Right Pool

Selecting the right mining pool depends on your specific needs and risk tolerance.

• For beginners: Proportional pools or PPS pools may be the most straightforward starting point.
• For miners seeking stability: PPS and FPPS pools offer consistent income at the expense of higher fees.
• For long-term mining: PPLNS pools are good for consistent miners who are less likely to pool-hop.
• For those who are willing to take the chance: Score-based pools reward loyalty over time.
• For seasoned miners: Solo mining pools can be the way to go.

Additional Factors to Consider

• Pool Size: Larger pools tend to find blocks more frequently but might result in smaller individual payouts.
• Pool Fees: Fees vary between pools and can significantly impact your overall profits.
• Server Location: Choose a pool with servers located geographically close to you for lower latency.
• Reputation: Research the pool’s history and read user reviews to ensure its reliability and trustworthiness.
• Payment Thresholds: Check the minimum payout thresholds to avoid accumulating small balances.
• Community: An active and helpful community can be a great resource for new miners.

Conclusion

Mining pools are essential for most cryptocurrency miners to receive regular payouts and minimize the unpredictability of solo mining. Understanding the nuances of each pool type can help you make an informed decision aligned with your mining goals and risk tolerance. By carefully considering the options and researching the pools, you can optimize your mining experience and increase your earning potential. Always remember to thoroughly research before joining any pool and make sure it is compatible with your setup. Happy mining!