The security of Proof of Work blockchains depends on mining. Participants can protect cryptocurrency networks without a central authority by computing hashes with specific features. Anyone with a standard PC could compete with other miners to estimate a valid hash for the next block when Bitcoin originally launched in 2009. This is as a result of the low mining difficulty. The network's hash rate was rather low. As such, adding new blocks to the blockchain didn't require specific hardware.

After experimenting with various hardware types such as CPUs, GPUs, and FPGAs, Bitcoin miners ultimately adopted ASICs (Application-Specific Integrated Circuits). Unlike other mining equipment, these specialized devices are designed solely for mining Bitcoin and do not support regular activities.

What is a Mining Pool?

Quality hardware can only get you so far. Even if you operate multiple high-powered ASICs, you'd still be a mere fraction of the vast Bitcoin mining network. Despite investing heavily in hardware and the associated electricity costs, the likelihood of mining a block remains slim.

There's no assurance of when or if you'll receive a block reward. For a more reliable income stream, participating in a mining pool offers far better prospects.

How Mining Pools Work

The coordinator of a mining pool is usually in charge of setting up the miners. In order to prevent miners from squandering hash power by attempting to produce identical blocks, they will ensure that they are utilizing distinct nonce values. The task of dividing up the prizes and distributing them to the participants will also fall to these organizers. To determine each miner's effort and award them appropriately, a variety of techniques are employed.

Different Techniques to Reward Miners

1). Pay-Per-Share (PPS) is a common payout scheme where you earn a consistent amount for each "share" you submit.

2). The Full Pay-Per-Share (FPPS) model incorporates the PPS system while also offering pool participants a portion of transaction fees. FPPS determines this by averaging the standard network transaction fee over a recent period and distributing it based on submitted shares.

3). Another widely used scheme is Pay-Per-Last-N-Shares (PPLNS). Unlike PPS, PPLNS rewards miners only when the pool successfully mines a block. Upon block discovery, the pool examines the last N shares submitted (where N varies by pool).