Mining Pools – All You Need To Know | Is Mining Still Profitable?

In today’s post, I will be walking you through a very interesting concept with regards to the cryptocurrency ecosystem- Mining Pools

A mining pool is a collation of resources by miners, thereby sharing their processing or mining power across a network.

This simply means that miners share their mining power and split the profit.

After reading this post, you’ll understand everything there is to know about mining pools and I’ll also answer the question; is mining still profitable? Stick around.

Ready for the interesting stuff? Let’s dive in.

Post Summary 

Here are the subheadings under which I have grouped this post for better navigation and understanding.

  1. Important Terms
  2. Mining Pool Explained
  3. Types Of Mining Pools
  4. Pool Reward Systems
  5. How To Start/Join A Mining Pool
  6. Tips For Joining A Good Mining Pool
  7. Is Mining Still Profitable?
  8. FAQs
  9. Conclusion

I know you’re no stranger to our table of contents above; a click on any of the subheadings above will lead you to its contents.

Let’s get this show on the road.

1. Important Terms

To help you gain a full understanding and probably paint a mental picture of what mining pools are and how they function, here are some terms which I will use in the course of explaining.


Blockchain is a digital decentralized ledger, which holds the records of transactions carried on a specified network. Secured by being encrypted making it impossible to alter or counterfeit its transaction details.


This is the process of obtaining new cryptocurrencies by solving computational puzzles. Mining is a process through which transactions for various forms of cryptocurrencies are verified.


A miner is one who verifies transactions and adds a new block to a cryptocurrency blockchain. They receive a reward of a certain amount of coins for doing this.

Miners can also be referred to as the device used for mining.


A Block is the permanent store of records relating to a transaction on the blockchain which once written cannot be altered. Think of a block as a page in the blockchain which holds records of transactions that are not in an already existing block.

Block Reward:

This is the number of coins awarded to a miner for successfully completing a block i.e. verifying a transaction on the blockchain.

For Bitcoin, the block reward halves after every 210,000 blocks are mined which takes roughly 4 years. This will result in the reduction of the number of Bitcoins being awarded as block rewards.

A Share:

This is a certain amount of coins awarded to members of a mining pool who present partial proof of work, which is a cryptographic zero-knowledge protocol that proves that some amount of computational power has been expended in mining.

There are basically two kinds of shares – Accepted and Rejected.

Accepted shares– These are shares that show work done by a pool member is actually contributing towards discovering new coins, and these get rewarded.

Rejected shares– These shares are somewhat the negate of the accepted shares. This means they represent work that does not contribute to a block’s discovery and hence have no reward attached.

Even if a member’s computer performs work successfully but submits it late for a particular block, it becomes invalid.

Pool Reward:

A pool reward is the amount awarded to members of a mining pools based on the number of their accepted shares used to find/add a new block. This is dependent on the pool reward system.


Application Specific Integrated Circuit (ASIC) is a device or type of computer that has been designed solely for mining digital currency. It can also be referred to as a miner.

Hash rate:

A hash rate can be said to be the speed at which a given mining machine operates.

Hash rate could be measured in Megahashes per second (MH/S), Gigahashes per second (GH/s), or Terahashes per second (TH/s).

Target hash:

A target hash is a number that a hashed or encoded block header must be less than or equal to in order for a new block to be awarded.


A node is any computer connected to a network e.g the Bitcoin network or Ethereum network. It validates transactions before they are confirmed by miners.

It could be a full node, short node, super node or mining node.

Full nodes contain the entire copy of the blockchain, while the short has only a partial copy and the super connects two full nodes together making sure they correspond.

The mining node confirms the block to be added to the blockchain by mining.

Mining difficulty:

Just as the name implies this is the measure of how difficult it is to solve the complex cryptographic puzzle to be able to add a new block to a blockchain. The difficulty level tends to increase as the coin gains popularity and value

The difficulty of mining in Bitcoin increases or decreases after every 2016 blocks. So after 2016 blocks, the difficulty adjusts depending on how hard or easy it is to find the 2016 blocks.

Those are some of the terms related to pool mining and cryptocurrency mining in general.

Lets learn exactly how mining pools work.

Tag along!

2. Mining Pool Explained

Mining Pool Explained

A Mining Pool is a group of miners, who combine their computational power and resources to increase the probability of finding a block.

Just like a lottery pool, where you make a team with people to increase the odds of winning and then spilt the reward.

Yeah, in the last subheading I said the miner with the most computing power usually gets the reward.

The computing power is the ability of a miner to solve hashes with great speed or hash rate.

Now, this is basically what a mining pool aims to get.

The mining difficulty of a cryptocurrency tends to increase alongside its increment in popularity and value.

The higher the mining difficulty, the fewer chances there are of solving a hash and adding a block, which makes it quite an expensive and fruitless venture to embark on.

In short, it’s a total waste of time.

Mining alone is fruitless if you’re mining a coin with a high mining difficulty like Bitcoin.

To by pass this difficulty a bit, a mining pool is important, all you have to do is connect to the mining pool’s software.

  • For A Solo Miner: The mining software will connect your miner to the blockchain.
  • Mining With A Pool: The software will connect you to your mining pool.
  • If You Are Into Cloud Mining: You do not need mining software.

That’s basically how a mining pool works, cool aye?

Now, what are the types of mining pools?

See them right below.

3. Types Of Mining Pools:

Basically there are two types of mining pools the single and the multiple

Just as their names imply, the Single mining pool is a mining pool dedicated to mining one cryptocurrency like bitcoin or other altcoins. E.g Poolin, f2pool,, antpool, Slush pool, etc. They all mine BTC alone

The Multiple is dedicated to mining bitcoin as well as various altcoins or just multiple altcoins.

The multiple system is quite unpopular as most pools focus on mining just one crypto coin.

Now let’s see how the reward system are grouped.

How do you actually earn in a mining pool?

4. Pool Reward:

Mining Pool Reward

Successfully solving a block hash leads to a reward for the pool which is then shared by the pool shares payment mechanism.

Remember a share is a miner’s computational effort expended by mining.

Pool members are rewarded based on their accepted shares.

Types Of Pool Shares Payment Mechanism include:

i. Proportional Mining Pools

These are one of the most common.

In this type of pool, members give shares until the point at which the pool succeeds in finding a block.

After that, miners receive rewards proportional to the number of shares they hold.

ii. Pay-per-Share

All pools tend to function similarly meaning that each miner receives payment for their shares.

However, these pools provide instant payouts regardless of when the block is found. this type of pool can exchange shares for a proportional payout at any time.

iii. Peer-to-Peer (P2Pool)

This decentralizes the responsibilities of a pool server, removing any chances of the pool moderator cheating or the server failing. 

Miners mine on another blockchain called a share chain, mining at a lower difficulty at a rate of one share block per 30 seconds.

Steps on how to start your own mining pool or join one is right below.

5. How To Join/Start A Mining:


Joining a mining pool is quite basic all you have to do is choose the mining pool you wish to join.

Make a request to join the mining pool, purchase a miner if you haven’t already purchased one.

Then download the appropriate mining software.

Some pools are free to join while some are not.

Fees and payment methods may differ but usually have a 2% charge as a standard.


To start a mining pool you will need mining pool software for the particular cryptocurrency you wish to mine.

You will also need to know how to read and write programs as it requires a programmer to set them up. Or you can just go ahead and hire one.

You would need to install required packages for the pool based on the crypto you wish to start mining.

You would also need to set up a node mining portal for the specific coin you wish to mine.

Check out this post for more info

Below are a few things you need to know before joining a pool.

Let’s check them out.

6. What To Look Out For Before Joining A Mining Pool

  1. Transparency: The pool moderator or company must be transparent and honest. The moderator or platform must be reputable and trustworthy, in order to avoid being scammed.
  2. Task Assignment Mechanism: The Pool’s algorithm should be able to distribute tasks effectively, the weaker the miner the lesser the mining tasks are given, and vice versa
  3. Payout Frequency: How frequently will you get paid per share. Depending on the payment mechanism used you may earn a whole lot on one pool and less on another pool so check which suit’s you.
  4. Pool Security: Is the pool vulnerable to DDoS attacks, which have become common with increased pooling activity? The pool should be secure and not prone to such attacks which could prove detrimental.


  • The bigger the mining pool the smaller the payouts, but the higher the chances of finding a block and vice versa.
  • The traditional method of task assignment in a mining pool involves assigning members a work unit comprised of a particular range of nonce, the number that blockchain miners are computing for.
  • Once the pool member completes the work on the assigned range, they place a request for a new work unit to be assigned.

Is mining really still profitable? Let’s find out in the next section.

7. Is Mining Still Profitable?

The simple answer is yes!

Sure mining bitcoin may have increased significantly in difficulty but it is still profitable and will remain profitable even if all the 21 million bitcoins are mined.

Think of it this way, miners are not just needed to bring new coins into circulation.

They are also needed to confirm transactions and add a block to the blockchain making them significant in the continuity of transaction confirmation and block additions.

The network fees also go to miners, meaning that the miners do not just earn from the coins they mine.

Thus would still earn even if they are no coins left to be mined. Just as the bankers get paid for accounting, so do the miners.

The mining difficulty of bitcoin might be quite high, but they are other coins that can still be mined like Ethereum and Litecoin which have relatively lower difficulties.

Below I’ve answered some frequently asked questions about mining pools

You may find them helpful.

8. Frequently Asked Questions

What do I stand to gain from pool mining?

Here are some benefits of a mining pool or pool mining.
-Increases the probability of finding a block
-Reduces the cost of mining
-Increases the chances of finding a block
-Cuts down the average hash rate

What are the risks involved in pool mining?

Here are some potential risks/drawbacks of pool mining
-Decreases the profit as the reward is split amongst other members
-Most pools take fees, which could pose a problem if you’re on a tight budget.
-Trust, some pool moderators may swindle your earnings or funds.

Are mining farms the same as mining pools?

Mining farms are a collection of mining equipment dedicated to mining crypto and is usually owned by an organization.
But a mining pool is an online body of miners (Individuals) who come together under a moderator or platform to mine crypto contributing their mining power and splitting the reward as determined by the moderator or platform.

9. Conclusion:

That’s about it on our discussion about mining pools.

So far, we’ve established the fact that mining pools are a group of people who collate their mining resources in order to have a better chance of finding a block.

But I still want to know your thoughts on mining pool.

Have you joined a mining pool before? How did it work out?

Is pool mining worth it or do you prefer solo mining? Any particular reason for your answer?

Leave me your thoughts down in the comment section below.

Don’t forget to like and share



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