What are “Mining Pools?”

Can you go Swimming in a Mining Pool? Naaa, not that kind of Pool.

When you were younger and your group of friends wanted to borrow Dad’s car to joy ride for the evening, but you didn’t have gas money, what did you do so that you could accomplish this?

No doubt you did what many other youngsters did and that was to “pool” your money so that you could buy a tank or so of gas for the vehicle. This “pooling” or putting funds together in one “chunk”, enabled everyone in the Pool to raise the funds to have a good time by being able to buy the gas and enjoy the ride!

This “Pooling” results in shared costs so that no one person is footing the whole responsibility making it easier and more enjoyable for all.

This same principal applies to a group of Bitcoin Miners who share their computational resources, Hash power, and costs of mining so that it is profitable for all.

China currently has the largest mining pools in the world and are responsible for about 81% of all new Bitcoin mined.

chart credit goes to https://www.buybitcoinworldwide.com/

Out of a list of ten of the largest mining pools, it is recommended that IF you wish to join a mining pool you join one of these. See complete list of the 10 largest Mining pools at https://www.buybitcoinworldwide.com/

Even though the mining pool may be located in another country, it matters not as they generally have servers in every country. What you WILL need to join a mining pool is a Bitcoin Wallet (so that you have a place to send any Bitcoins you earn), mining software, and of course a computer capable of running it.

Mining Pools vs Cloud Mining

https://www.buybitcoinworldwide.com/ says: “Many people read about mining pools and think it is just a group that pays out free bitcoins. This is not true! Mining pools are for people who have mining hardware to split profits.”

“Many people get mining pools confused with cloud mining. Cloud mining is where you pay a service provider to mine for you and you get the rewards.”

Are you simply interested in purchasing Bitcoin?

Mining may not be for you then and it certainly is not the easiest way to obtain Bitcoin. The quickest way is to buy it from an exchange. Be sure to have a wallet in place for storage of your Bitcoin as leaving it in an exchange is not ideal.

From Investopia:

Key Take-away’s

  • Cryptocurrency mining pools are groups of miners who share their computational resources.
  • Mining pools utilize these combined resources to strengthen the probability of finding a block or otherwise successfully mining for cryptocurrency.
  • If the mining pool is successful and receives a reward, that reward divides among participants in the pool.

https://www.investopedia.com/terms/m/mining-pool.asp

About the author

Gail holds one of the most challenging role in the Compumatrix Leadership: Membership. She ensures that that members and potential members enjoy the benefits of being part of the Compumatrix community.

Comments

  1. Love the explanation of the differences between the Mining Pools and the Cloud Mining. This was one area I personally had a hard time understanding when first being introduced to mining several years ago. Watching, researching. and jumping into the “mining” pool has lead to a full-time learning process. Mining and a secure wallet go hand and hand. To put this all simply, mining is the verification of a transaction that needs to be place in a safe place.

    1. thanks Erline! Absolutely a secure wallet is a must!! If we don’t make sure we have one BEFORE we put something into it then it would be like putting change in our pocket with holes in it and it simply just falls out and it’s gone! Not a good feeling !!

  2. Very interesting Gail. This week I read about “staking”. That is new to me but I understand that it is used in the cryptoworld and that you can earn rewards with it. Can you explain this to the membership Gail? Maybe it is useful for us.

    1. sure Joop, I would be happy to write about Staking..and if it helps others understand more then it’s a win/win for all of us!! it’s always a pleasure to help clear a fog for someone and to spark their minds to thinking in a different way.

  3. I’m so glad that this article was posted because this sheds light on an area that I’m in the dark on. I’ve heard about mining pools and even read a little about a few times over the years, but I never really got it. The comparison to pooling together money to buy gas as a kid rings a bell for me and sets the stage for my soon to come full understanding of mining pools. I will be reading this article again several times in the near future. Thanks Gail for posting it.

    1. that’s awesome Kevin…and you are very welcome!! That analogy came to mind and I started not to share it but thought what the heck, I will. I know there are a few others who were like me and had to find ways to make things work because money sure wasn’t in abundance..lol I am glad you enjoyed this topic!

  4. Most people are bent on learning about and acquiring Bitcoin. They find it more convenient and easy to buy them on Crypto Exchanges.
    Mining pools and cloud mining are important, all the same.
    Miners do all the hard work and their working methods and procedures are not easily understood by everyone. Getting more accquanited with Cloud Mining and Mining Pools – I am able to see the difference now.

  5. Yes Raju, it is a lot more convenient to obtain Bitcoin from and exchange, or trade or even “peer to peer” (another individual) if that is the goal. Mining isn’t an absolute guarantee and if you figure in costs of mining it may work out best to actually obtain the Bitcoin the most convenient way. But each to their own and as usual we all have a choice. Thank Goodness!!

  6. When I first heard about mining bitcoin and how large a Mining farm could hold thousands of machines , Places like China where not only they fabricate these but also have cheap electricity.
    But to my surprise is when some one told me of a mining farm here in Costa Rica and also individual miners too.
    With #Compumatrix , no mining is necesary, but that doesn’t mean that I might join in some pool

      1. While it is true Jorge, that you only earn a percentage, you do keep what you have in the mining pool PLUS you earn extra coins over some time, so I would say this is a right way (if you can afford it) to make additional cryptocurrencies in your wallet!

  7. This is the first time I hear about mining pool. I think I’m in uncharted territory from my part, so much to read and learn!

  8. Wow. I did not know that China has over 80% of the mining hash rate. That is a monopoly for sure. It really does matter what China does in terms of regulations to Bitcoin and their minors. The Czechs are a distant second but nothing compared to China. As long as the minors keep making money by mining, I am OK with them having all the power, but it would be nice if somehow it was more evenly distributed across the globe.

  9. I do not know that much if anything on this part but I do understand that parts of this world even with the internet and such free movement through that — the more control any government has on any item the more apt that it will try and control evry movement to make it put More n More Money in their coffers — and with China that does scare me or bother me as I have seen too much over my years —

  10. Years ago, I thought I would sign up for a cloud mining account. When I looked at the numbers, I thought there were 3 chances I would make money: 1. no chance, 2. slim chance and 3 little chance. The gamble seemed to be stacked and I wasn’t the dealer!

    I decided to stick with the best way to obtain Bitcoin (and other cryptocurrencies). That method is called COMPUMATRIX

  11. My nephew is a or was a miner of Bitcoin along with his brothers. The process is slow but can be rewarding over time. He was earning about $25 use daily and the computer was costing him $5 dollars a day in electricity usage.

    Getting paid in Bitcoin was a decent reward over two years and his nest egg has grown to double digits. Basically, the computer does all the work. I too thought about getting into it, but will keep my coins here at CompU for now along with my assets.

  12. Thanks for the great information.The way it was broken down really cleared things up for me. Honestly I thought all was one in the same before reading this blog.It gives me something to look up on. One thing is for sure, to see China at the top of the list.

  13. Now, this is the language, the explanation, the simple as it is the message gets home, I know many in my area will be much enlightened. Thank you very much for your dedication to this.

  14. Great information on mining thank you. This reminds me that just as soon as you feel you have really learned a lot about bitcoin you really don’t know anything at all!! Learning something new every day is a great goal to have and imagine what new things you know at the end of the year. How will you use all that new information? Maybe someone on here will now want to be in minor who knows?!

  15. that is so true Jennifer — I thought back a few months ago that i was staying up on bitcoin and the crypto world but I have found out Dramatically just how far behind I am lagging in my knowledge of any of this world — I am now in the process of trying to further my intellect but it is a very slow move forward but I have hope —

  16. When I used the WCG program to get as many points that were converted to Euros at the end of each month I used 3 computers that worked 24 hours a day so that soon they started to break down. That’s why I tried to learn how to become a miner. I found that the mining devices plus the electricity used are too expensive so I soon gave up this process.

  17. The “sharing the cost of gas money” to “mining pools” is a great analogy. Now, I understand what “Mining Pools” are. I equate “Mining Pools” to a sports team where everyone “pools together” their skills and either wins (gets a BTC reward) or loses (does not receive a BTC reward) the game. I think the best part about “Mining Pools” is that someone can be part of a “Mining Pool” from anywhere in the world as long as they have the right equipment.

  18. here I am again researching and re-reading and learning more and more and it is just so very much appreciated and i hope as time plays out i can continue to learn and become at least a little bit better of understanding these mining pools and sharing gas pools analogy so simple and understandable and it is starting sto make sense thank you — rj

  19. I like the idea of mining pools because that way people can split the risks and rewards (cost of equipment and payout of bitcoin). I think it is inspiring how anyone can join a mining pool and try to earn bitcoin. I find that bitcoin and cryptocurrencies in general are a little bit intimidating for people, but to know that someone can try and earn bitcoin simply by joining a mining pool makes bitcoin less intimidating.

  20. the explanation of mining pools and the differences from clouds is great stuff and reading replies also so much good — the pool being a sports team who either wins or loses — also truth is Crypto world is very intimidating when you first enter the pool — just have to keep reading and learning and then get your brave on and maybe jump on in —

  21. Mining is beyond my comprehension, and indeed I do not have the means of a powerful computer to do so. It is fascinating to learn how the mining of digital coins works. I am wondering if there is a possibility we all together in Compumatrix are doing some mining? I thank God we can also purchase our bitcoin and other digital currencies. It is good to know we are allowed to buy just bits of a bitcoin and build up to a whole. We can continue to purchase bitcoin and other currencies, transporting them to our digital wallets.

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