How to choose a bitcoin mining pool
As part of a range of articles focused on earning crypto here we look at the potential rewards from bitcoin mining with everything you need to know about choosing a bitcoin mining pool.
Choosing a bitcoin mining pool is a bit like choosing a gym: different establishments cater to different needs, and each comes with its own ethos and entry criteria. Just as some fitness centres are catered towards beginners and others for more experienced users, the same holds true of mining pools. Instead of joining the first pool you discover, take the time to examine what it has to offer and whether its culture and technical requirements will suit your needs.
While the hashrate regularly shifts between the dominant bitcoin mining pools, a glance at the current hashrate distribution will give you an idea of the major players. Pools like BTC.TOP, SlushPool, ViaBTC, and AntPool are well known within the industry. The dozen or so pools that dominate BTC mining are complemented by scores of smaller pools, each competing to discover the next bitcoin block and share the spoils. The block reward (currently 12.5 BTC, though scheduled to be halved in May 2020) is shared equally among the pool based on hashrate, so you’ll be rewarded in accord with the computing power you provide.
Pick Your Pool Wisely
As the adage goes, a problem shared is a problem halved, and maths problems don’t get much harder than trying to find the nonce that will grant the right to publish the next bitcoin block. Like a lottery syndicate, a mining pool increases the odds of participants winning a block reward. Large pools have a greater probabilistic chance of winning, but the payout per miner will be smaller than if you were in a smaller pool. However, if you’re a member of a small bitcoin mining pool, be prepared to endure lengthy spells without finding a block.
Be aware that not all pools are open to new miners; some have already reached their desired capacity while others, such as BitFury, operate privately. Additionally, because bitcoin mining is dominated by Chinese pools, there is a language barrier to consider. Some Chinese mining pools provide zero or low-quality English translation of their software, which can complicate matters. If you’re unsure, pick a pool whose operators use your native language.
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The first thing you’ll want to consider when scrutinizing available pools is the pool fee that is charged, the payment type and the payment threshold. Pool fees typically vary from 1-4%, while there are numerous payout methods available. The most common, which we’ll consider in this guide, are pay per share (PPS) and double geometric method (DGM).
With PPS, you’re guaranteed a payout for each share of the mining puzzle that you solve through contributing computation. Payments can be withdrawn almost instantly, whereas DGM has a slower release rate. One benefit to DGM, however, is that it can provide a steady stream of revenue during periods when no blocks are found by your pool. With PPS, on the other hand, you’re more likely to experience spates of receiving payouts, followed by spells where you receive nothing. Ultimately, though, the payout you receive from either method should work out the same.
As for payment threshold, pools usually mandate reaching a minimum earnings amount before they will disburse the BTC you’re owed. If you’re a low hashrate miner, avoid pools with a high threshold, or you’ll be waiting a long time to receive payment.
For efficient mining, you ideally want to connect to a server that’s located in your region. There’s nothing to stop you from mining on a Chinese server, but the latency may place you at a disadvantage, as there’s a risk of submitting outdated shares. Mining is a race, remember, where a speedy response can be the difference between finding a block and being pipped to the post by a rival pool.
Another matter to consider is whether the prospective pool has variable difficulty (vardiff). Pools that utilise vardiff are suitable for miners of both high and low hashrate, as the difficulty will adjust, assigning you shares to match your hashrate. If a pool doesn’t offer vardiff, you can still mine, but you’ll be prompted to connect to a specific port to match your hashrate.
All mining pools provide software that includes a user dashboard displaying data pertaining to the network difficulty, hashrate, and the performance of your equipment. Some pools provide a slick and data-rich interface that will enable you to optimise your mining and maximise your profits. Others are more rough and ready, or require command line interaction, which may deter less technical users. It’s also worth checking that the mining client used by your desired pool is compatible with your OS.
While many of the characteristics of mining pools are quantitative, and can be compared on a like-by-like basis, not everything is black and white. For one thing, there’s the reputation of the pool to weigh up. Most pools operate ethically as de facto mining cooperatives, but some have been known to engage in shady behaviour. Security is also another concern. While mining pool hacks are uncommon, they have been known. Should your pool be hacked, will its operator reimburse the miners, or will losses be socialised?
Generally speaking, the longer a pool has been running, the greater its reputation. However, the fact that a pool has ‘survived’ for years doesn’t automatically confer legitimacy.