Solo Mining Vs. Pool Mining May 25 2018
As discussed previously, the way miners make cryptocurrency is that they are rewarded for the amount of computational power they supply to the network. The more physical pieces of hardware a person has, the more power they supply to the network, the more reward they receive. While this is how most people mine, it is only really true if they pool mining. In reality what happens with mining is this, each block only has one reward and on each block chain only one block at a time is released and every miners trying to mine that currency is on that chain trying to solve that block. It is not very likely that one person with one miner is going to be that lucky person out of hundreds of thousands to solve that block. That’s what solo mining is, it is a person just letting their hardware run and hoping they hit the lottery, hoping that their hardware solves the block, because then they’ve hit big and they receive the entire reward of the block. While a lot of miners find the idea of solo mining appealing because of the large payouts they opt of it because they could never have a return on investment, they might not get lucky, they might never solve a block. The alternative to solo mining is pool mining, and it’s what the majority of miners, especially miners who are mining more well known coins, do. The miner signs up for a pool and adds their computational power to the group and then the group tries to solve the block. The returns on pool mining are much smaller but are consistent. Thousands of people work together to solve the block; they can solve many a day but that reward must be split between all. The reward a person received in pool mining is proportionate to the amount of power they add to the pool, like stated earlier. While with pool mining there is no chance of you ever hitting the lottery and keeping the entire reward for a block, pool mining ends up being more profitable because of the stability.
When looking into what pools you’d like to join, remember a few things, there may be pools with lower fees but how safe are they? Typically high fees mean that they are safer and less likely to be hacked. Also, look at the total computational power of the pool, the higher the computational power, the more power they have to solve blocks but also the more ways the reward is split. Lastly, try to disperse the power, if everyone who was mining joined the same pool the power would no longer be decentralized. Without decentralized power, the block chain is susceptible to the 51% attack.
Read more about the 51% attack next Friday.
Here are a few articles and a video about solo mining vs. pool mining: