Apart from trading/ investing, one of the most lucrative money-making opportunities with cryptocurrencies is mining. But cryptocurrency mining has become a highly valuable industry since the inception of bitcoin in 2009.
Nonetheless the prospect of earning crypto assets as rewards for contributing hash/computing power may seem far more appealing than buying them from an exchange.
With the dramatic rise in the prices of mineable cryptocurrencies, the costs associated with their mining has also increased. Thus if you lack the competent hardware to profitably score crypto coins yourself, it is better to join a suitable mining pool.
But before moving onto selection of the appropriate mining pools, lets understand them in brief.
What Are Cryptocurrency Mining Pools?
Slush Pool was the first mining pool to introduce the idea in 2010 in a BitcoinTalk forum. Since then BTC and mining for all other crypto assets primarily have moved to this minting model.
This involves the distribution of profits amongst fellow ‘workers’ in the pool based on pre-specified terms, making it the most popular choice for all cryptocurrency miners today.
Mining pools are a group of cryptocurrency miners who collectively combine their resources and jointly attempt to mine digital assets with their cumulative computing power.
Why Are Mining Pools Better Than Solo Mining?
Joining a cryptocurrency mining pool to mint digital currencies is much more beneficial than going solo. And why?
- Mining pools churn out a constant revenue of smaller denominations. Whereas, if you try doing it all alone the process could get irregular and a lot more erratic. Depending on your computing power it could take you a long time to mine blocks
• With mining pools you stand a chance to earn a 1–2% higher income (before fees, if any) due to long polling provided by the pools. With solo mining the venture may not turn out profitable at all
Now lets check out the pointers that you need to look for before joining a cryptocurrency mining pool:
The Cryptocurrency That You Wish to Mine
Considering the hashing power that you can contribute to a mining pool, it is important to first choose the cryptocurrency that you wish to mine. Because some coins are profitable to mine while others may not deliver a decent yield.
Suppose you choose the best mining pool, but if the cryptocurrency that you wish to mine has low profitability, you will not make enough money.
Check out online calculators, such as What to Mine. They can help you decide which crypto assets are worth giving a shot.
Mining Pool Reputation
Similar to sizing up the reputation of all brands/products that you purchase, it is necessary to replicate the same before joining a mining pool.
You should compare all the available options based on up-time, stability and robustness, consistency of service, responsibility for payments, amount of mining flaws, quality of technical support, and feedback.
Choosing a mining pool with a stellar reputation can go a long way in establishing stability regarding your income from mining.
A reputed cryptocurrency mining pool also has a community of loyal users, who are always willing to grow the pool and collaborate on continuous technical improvements.
After reputation, comes size. It is one of the most important aspects to consider while choosing a suitable mining pool. The general rule here is the bigger the better.
The collective pool hashrate and the number of member miners determine the size of the pool. Dont go for small mining pools with less miners and low hash rate.
But before joining a large pool you must keep in mind the mining difficulty. Quite a lot of times, large mining pools have high difficulty, and if your equipment isn’t powerful enough, joining a big pool may remain a distant dream.
Hence you need to strike a balance between the size of the pool and your hashing power.
A cryptocurrency mining pool may not support the use of all mining software packages. In that case, you as a miner may need to install the specific software that is compatible with the pool.
Some pools may also require miners to have a minimum threshold network connection speed to the pool server, and that in turn may need to be verified against the internet speed available to the miner.
Ideally, you should select a mining pool running on a server nearby your place. Why? Because if your computer takes a long time to communicate with the pool’s server you will lose valuable shares.
And shares received after a block change, intended for the previous block, are considered stale and are not counted. Also, always go for pools with an uptime of 99.5% or higher. You should check whether or not the pool is supported by backup servers and can it sustain itself in the case of a power outage.
It is essential to consider these infrastructure compatibility aspects before pooling in to mint crypto coins.
It is quite possible for a cryptocurrency mining pool to inflate statistics and figures to invite more users to pool in their hash power. The indicators and numbers produced by the pool may not have been audited by the public or the community.
Therefore you need to carefully peruse different pool performance pointers like the amount of mined blocks per hour, the performance of workers or the total hash rate of the pool, etc.
Ask for data containing the actual numbers. Or search the internet and relevant forums for reviews and actual statistics rather than the one shown to you by the mining pool.
Before selecting a pool to mine, you should check the fee structure and all the other charges that may you have to incur to join.
Some mining pools may not charge anything initially but could levy a periodic fee (to continue membership) later. Others may charge a fixed or recurring joining cost in the name of “donation.”
The Mechanism Of Assigning Tasks
Mining pools use different strategies to assign work to miners. One of the widely used methods is to assign more difficult tasks to the stronger pool, and comparatively easier tasks to the weaker pool.
This brings in uniformity in average communication frequency for different miners who possess varying degrees of mining capacities across the network.
Before zeroing in on a particular cryptocurrency mining pool, you should verify whether hash tasks get assigned uniformly or not by the pool server irrespective of the mining power of a participant’s device.
Mining Payout Threshold and Frequency
If your hardware is low-end, your computational output will be less. This will in turn lead to lower earnings, and you may need to wait longer to hit the threshold to receive your payments.
In such a scenario you should avoid mining pools that have higher thresholds for payments. The same applies to the payment frequency of the mining pool.
If everything works out and you find a suitable cryptocurrency mining pool, you will need a cryptocurrency exchange to cash out in INR. WazirX provides the best crypto conversion rates in India. Check out https://wazirx.com/ for more details.
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iOS App – WazirXDisclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.