What Is a Mining Pool?

A mining pool is a group of miners who work together to solve the cryptographic problems required by certain blockchains which reward the miners with cryptocurrency. Pools were created when cryptocurrency mining reached a difficulty level that only miners with enormous capacity could accomplish. This crowded small miners out of the competitive mining process, forcing them to work together to compete with the large mining firms.

Understanding the Mining Process

Cryptocurrency mining involves two functions—releasing new cryptocurrency into the system and verifying and adding transactions to the blockchain. It is performed using internet-connected devices and software programs which perform the mining process.

Functions of a Mining Pool

A mining pool essentially works as a coordinator for the pool members. The functions involve assigning work, looking for rewards through pooled efforts of available processing power, recording work performed by each pool member, and assigning reward shares to each pool member in proportion to the work performed after suitable verification.

The pool may also charge a fee from each member miner.

Work to each pool member can be assigned in two ways. The traditional method involves assigning members a work unit comprised of a particular range of nonce. This is a number that blockchain miners use to add to the block's hash to generate a hexadecimal number to compare to the network target. Once the pool member completes the work on the assigned range, they place a request for a new work unit to be assigned.