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    The Rise of Mining Pools

    Published on January 18, 2021

    Bitcoin’s record-breaking rally has continued to 2021 and drove the growth of investment in BTC and other cryptocurrencies. However, mining didn’t lose its appeal with the rise of mining pools and farms. It is still one of the main ways of obtaining Bitcoin. If you also want to get BTC through mining, here we explain the advantages and disadvantages of joining a mining pool. 

    What is Bitcoin Mining?

    The blockchain network operates thanks to Bitcoin mining without the help of third entities like financial institutions. Actually, the miners need high-powered computer systems to verify the transactions in the network. With that, they increase the security of the blockchain system. Furthermore, another important outcome of mining is the new BTC.

     More specifically, in addition to the high-quality equipment, they need to solve computational puzzles in order to approve the transactions, and by solving the puzzle, another by-product is the introduction of new BTC in the network. That being said, mining is a necessary process in the blockchain system, and this is why they get block rewards for their work along with transaction fees.

    Unfortunately, mining isn’t as simple as it was in the beginning when everyone that had a great personal computer could join the network and start earning BTC. In fact, the main reason why there was a need for mining pools and farms are two important components of the Bitcoin ecosystem – Bitcoin halving and strong mining competition. 

    First, Bitcoin halving is an event that is set to happen every four years, or whenever 210,000 BTC are mined. The main consequence of the halving is the reward that miners get is cut in half. 

    Initially, the block reward was 50 BTC, and with each halving, it got smaller, so after the halving in 2020, it decreased from 12.5 BTC to 6.25 BTC per block. As we mentioned earlier, the main reward for a miner is the block reward; hence mining became less and less profitable with each subsequent halving. 

    Next, Bitcoin’s bull runs have fueled the interest in cryptocurrencies and also mining. Therefore an increasing number of miners joined the network. It should be noted that the mining difficulty increases as the collective computing power (also known as “hashpower”) rise in the network.

    The Rise of Online Trading

    Consequently, investors are flocking to online exchange sites that offer convenient options to get BTC quickly. In contrast to mining, you can reach your goals faster because you can sign up on a trading site from your mobile device, for example, and start trading. For example, if you sign up with the Bitcoin Profit system, you can potentially earn up to $800 on a daily basis, thanks to their advanced automated trading system.

     In fact, the trading algorithms of the site rely on a subset of AI known as Machine Learning. This makes the trading app more accessible to beginners because the trading is performed automatically. Also, they offer a detailed trading guide. If you want to become a member, make a deposit of $250.

    How Mining Pools Operate

    Otherwise, mining pools are a more popular option for people that want to mine in 2021. Essentially, the mining process stays the same, but miners work as a group or collective, and they join their computing power and effort of finding and verifying blocks of transactions. When the pool gets a reward, it is shared among the participants who contributed to the process. Generally, the rewards are split according to each individual contribution based on the processing power and effort of the individual. 

    This is basically how a mining pool works, but there are some differences between mining pools that use different methods to calculate the rewards of the participants. For instance, in pay-per-share pools, the miners get regular payouts regardless of the final outcome. In other words, whether they succeeded in getting the block reward or not, the participants get a proportional payout.

    On the other hand, in proportional mining pools, miners get shares until a block is of transactions is approved, and then they are awarded based on the shares they own so far. Lastly, peer-to-peer mining pools have a pool structure based on their own blockchain technology to ensure complete transparency and prevent centralization of the pool and issues like theft. It’s worth mentioning that some mining pools charge a fee for working in their pool.

    The Bottom Line

    Mining in mining pools is a good option for anyone that is willing to contribute with its own time and equipment to a specific mining pool and get predictable rewards for its work. However, before you join a pool, make sure you understand fully how they distribute the rewards and, based on your contribution, what your return on investment will be in the long run.