- 1 Basic Introduction to Cryptocurrency Mining
- 2 The Difficulty of Mining by Oneself
- 3 What is a Mining Pool?
- 4 How Mining Pools Work: The Short Technical Summary
- 5 Should I Join a Mining Pool?
- 6 10 Best Bitcoin Mining Pools of 2018
- 7 Conclusion
Bitcoin mining is just another way that one can get involved in the Bitcoin ecosystem. While for most, simply buying and holding Bitcoin is likely to result in higher profits than by mining Bitcoin, with the right setup and amount of capital, Bitcoin mining can still be a lucrative venture.
While there are some that choose to do it solo and mine by themselves, many Bitcoin miners opt to join what are known as mining pools.
Basic Introduction to Cryptocurrency Mining
To understand what mining pools are, let’s start with a basic definition of what Bitcoin mining is. If you’re already familiar with the concept of Bitcoin mining, feel free to skip ahead to the next section.
As you can probably imagine, Bitcoin mining doesn’t actually involve going into some underground mine and somehow extracting a coin that only exists in cyberspace.
Mining is done with computers or specialized mining devices known as application specific integrated circuits (ASICs), which run mining software and solve complex mathematical problems. This process of solving difficult math problems has the effect of validating Bitcoin transactions and adding them to the Bitcoin blockchain, or record of all Bitcoin transactions.
The math problems that miners are trying to solve with their mining hardware involve what’s known as a “nonce”. Every Bitcoin block, which contains multiple Bitcoin transactions, requires a certain “nonce”, or string of random numbers, in order to be confirmed and added to the blockchain.
Miners try to be the first to guess the correct nonce using their mining device(s) because who ever finds the right nonce for a given Bitcoin block, is awarded with Bitcoin.
The term “mining” is used because miners perform this difficult “Proof-of-Work” (hard math problems) in the hopes that they receive Bitcoin, which like minerals, such as gold or silver, can be worth a lot of money ($10,492.20 per Bitcoin as of February 28, 2018 – Coinmarketcap).
The thing with Bitcoin mining is that it has grown tremendously difficult since Bitcoin’s inception in 2009. Indeed, mining Bitcoin was once possible using one’s personal computer or laptop.
However, these days, that is completely infeasible, as the computational work needed to solve the mining math has shot through the roof to the point where ASICs or other specialized mining hardware is necessary to turn any sort of profit.
The Difficulty of Mining by Oneself
As mentioned, it has become increasingly difficult to mine Bitcoin.
However, not only is it impossible to mine Bitcoin without a Bitcoin ASIC miner or other similar device, but it is also very hard (basically impossible) to mine Bitcoin by oneself, especially if one only has a single miner to his or her name.
Given Bitcoin’s high price, Bitcoin mining is no longer a hobby. When lots of money is involved, people get serious. There are very large Bitcoin mining companies with significant amounts of capital invested in humongous mining operations.
Indeed, in places like China, where electricity is cheap (mining is very energy-intensive), there are even entire “mining farms”, where hundreds, if not thousands, of Bitcoin mining devices are lined up next to each other to mine the world’s foremost cryptocurrency.
A small number of these huge mining operations effectively control the majority of Bitcoin mining, with China in particular controlling over 80% of Bitcoin’s hash rate (explained below).
This matters because one’s probability of finding the correct nonce and subsequently receiving Bitcoin for one’s mining success is largely based on hash rate.
ASIC mining devices each have a hash rate that is listed in their specifications. This hash rate is the number of times that the ASIC device can guess at the correct nonce of a block per second.
The hash rate of the Bitcoin network, then, is the total hash rate or hashing power of all Bitcoin miners currently trying to mine Bitcoin.
With Bitcoin’s meteoric rise in price and popularity, the Bitcoin network’s hash rate has shot up tremendously, which means that there are more and more people trying to figure out the correct nonce for each block. This has the effect of making it harder and harder to mine Bitcoin for any given individual Bitcoin miner.
For example, the Antminer S9, which is largely considered the premier Bitcoin miner for consumers on the market today (February 28, 2018) has a hash rate of about 14 TH/s.
If you had the only Bitcoin miner on the planet (a single Antminer S9), and the Bitcoin network’s hash rate was subsequently 14 TH/s, you would successfully be finding every block’s nonce and mining all the Bitcoin available for mining.
However, that is not the case. As of February 27, 2018, the Bitcoin network’s hash rate is a staggering 23,172,169 TH/s. To put that in perspective, that is about 1,655,155 Antminer S9s.
At a price of $3,100 (via Amazon), which doesn’t include the power supply (about another $200), it would take about $5.5 billion to control Bitcoin’s hash rate and mine every Bitcoin.
As you can probably imagine, trying to find the correct nonce by yourself, then, is basically impossible unless you invest a very hefty amount of money into mining hardware to increase your chances.
What is a Mining Pool?
Since the difficulty of Bitcoin mining has increased exponentially over the years, miners have started to pool their computing resources together into what are called mining pools, which share both computing power and mining profits in the form of Bitcoin.
Though mining pools are largely good for miners since miners, when combining their hashing power via mining pools, collectively have more opportunities to find the right nonces for blocks and subsequently earn more Bitcoin (though split amongst themselves, resulting in more consistent but smaller individual profits), the formation of mining pools has unfortunately led to a lot of centralization in Bitcoin mining, with a handful of mining pools controlling much of Bitcoin’s hash rate.
This goes against the ethos of Bitcoin and cryptocurrency in general, both of which are supposed to be decentralized.
How Mining Pools Work: The Short Technical Summary
Miners are able to pool their hashing power because of the algorithm that Bitcoin uses for mining, known as SHA-256. With SHA-256, miners are able to combine their computing power and consequently form mining pools. This is made possible by parallel processing, which splits mining program instructions amongst mining devices.
Mining Pools vs. Cloud Mining
Cloud mining is another way to get involved in Bitcoin mining but differs from joining a mining pool or trying to mine solo.
Cloud mining is similar to buying shares of a company. For instance, when you buy a company’s stock, you might not necessarily be doing anything in the company itself, such as working a job there, but by owning part of its stock, you might be entitled to some of the company’s profit in the form of dividends.
Cloud mining is similar in the sense that you “buy the mining power” (in essence, you are renting it) of cloud mining companies’ hardware. While you don’t do anything directly related to mining, such as dealing with installation, maintenance, and so on, you are still entitled to some of the cloud mining company’s profit in the form of Bitcoin.
Cloud mining can be a good way to get exposed to Bitcoin mining because you can benefit from the profits of Bitcoin mining with a lower initial investment (depending on how much you spend), smaller risks (e.g. if you lose a small sum of money vs. a lot for a Bitcoin ASIC miner), less maintenance (hardware maintenance and so on), and little to no expenses (vs. electricity and so on if you were to own physical mining hardware).
Nevertheless, cloud mining isn’t as great as it sounds and has somewhat of a bad reputation due to the various cloud mining scams out there. Furthermore, if you want to rent a lot of hash rate from a cloud mining company, you might have to pay more relative to the same amount you would have paid for the same amount of hash rate via buying mining hardware (after all, the company has to cover electricity, management, and other costs somehow).
Lastly, there is always the risk of the cloud mining company going bankrupt as Bitcoin mining is very competitive and mining companies have folded in the past.
Should I Join a Mining Pool?
As mentioned, it is very difficult to mine Bitcoin by oneself, due to the very high investment needed to purchase a lot of hash rate in the form of significant amounts of specialized Bitcoin mining hardware, which doesn’t come cheap.
While we won’t consider whether or not you should rent a cloud mining contract, if you’re looking to decide between mining by yourself and joining a mining pool, joining a mining pool would make more sense for the vast majority of people.
Mining by oneself is futile in 2018 because the chances of finding the correct nonce for any given block, and being rewarded in Bitcoin, is basically zero (unless you have tons and tons of hash rate).
On the other hand, by joining a mining pool, which has a collectively higher chance of finding the right nonce, you will be rewarded Bitcoin more consistently (though in smaller amounts – which could of course be a higher amount in the long-run than if you were to solo mine).
However, mining pools do have some cons, such as potential pool provider downtimes or outages because of events like DOS attacks or regular maintenance. Also, mining pools can charge fees, which can further eat into mining profits.
Lastly, depending on the mining pool, payouts can be slow, which can be less than ideal if you are looking to cash out your Bitcoin profits to fiat currencies like USD quickly, since Bitcoin prices change quickly.
10 Best Bitcoin Mining Pools of 2018
For those who want to get involved in a mining pool, here are the 10 best Bitcoin mining pools of 2018:
Antpool is the biggest Bitcoin mining pool in terms of hash rate. Based in China, Antpool is run by Bitmain, the world’s largest manufacturer of Bitcoin ASIC mining devices, such as the aforementioned Antminer S9. In fact, much of their mining pool runs on Antminer devices.
Antpool mined its first Bitcoin block in March 2014, which means that it was created more or less four years after the first mining pool, Slush Pool. As of February 28, 2018, Antpool controls about 12% of the Bitcoin network’s hash rate.
Creating an Antpool account is free. However, there can be fees for using Antpool’s services:
PPS, or Pay Per Share, means that you are paid proportional to the amount of hash rate you contribute to the pool. PPS is considered a steady and predictable way of making money in a mining pool (but perhaps with lower profits).
Since miners are paid whether or not the mining pool is mining Bitcoin blocks (the pool pays you even if they aren’t earning new Bitcoin from finding blocks), PPS usually has higher fees. With Antpool, opting to get paid via PPS incurs a 5% fee.
PPLNS, or Pay Per Last N Shares, means that your earnings are based on the “N”, or number, of nonces that the pool finds. With PPLNS, your earnings are tied to the success of the mining pool in finding nonces, adding blocks to the blockchain, and ultimately earning Bitcoin, as you are paid based on your average hash rate contribution to finding the right nonces over a given period of time. PPLNS usually has lower fees than PPS. PPLNS with Antpool incurs zero fees.
PPS+, or Pay Per Share Plus, was introduced around the end of 2016 by mining pools. PPS+, like PPS, pays miners consistently based on how much hashing power they contribute to the pool.
The difference between PPS+ and PPS, then, is that PPS+ also rewards miners with part of any Bitcoin transaction fees for blocks mined by the pool based on the PPLNS calculation method (paid part of block transaction fees based on your average hashing power contribution towards finding the right nonces and mining blocks over a given period of time). Like PPS, fees for PPS+ can be higher. Antpool’s PPS+ fees are 4%.
Stratum is the mining protocol that Antpool supports. Antpool’s mining nodes are spread across the world in locations like China, Germany, and the US and pool members are automatically routed to the closest node location for the best performance.
Antpool makes payments to miners daily as long as their balance is over the minimum payment threshold of 0.001 BTC.
Antpool offers solid security options like two-factor authentication, email alerts, and wallet locks.
Also, Antpool has a relatively sleek interface, which can be easier to use for new miners. The mining pool even offers mobile apps for iOS and Android.
In addition to its Bitcoin mining pool, Antpool also has mining pools for Litecoin, Ethereum, Ethereum Classic, Dash, Bitcoin Cash, Siacoin, and Zcash.
While Antpool is the biggest Bitcoin mining pool and has frequent payments, good security, and a sleek user interface, it does not share Bitcoin transaction fees, which are typically paid to miners who find the right nonce for each Bitcoin block, with members of its mining pool unless they opt for the PPS+ payment method.
Moreover, since the mining pool is so big, individual payouts tend to be smaller (though smaller payments could add up in the long run since Antpool ends up adding a lot of blocks to the blockchain due to its impressive hashing power).
Furthermore, Antpool has recently been surrounded by controversy, because of the pool’s opposition to Bitcoin changes, such as SegWit, or Segregated Witness, a proposal that would increase Bitcoin transaction speeds by splitting Bitcoin transactions into two: the original transaction data and the “witness” data, or the signature part of the transaction, which verifies that the sender has the funds necessary to make a Bitcoin payment.
The witness part of the transaction data accounts for 65% of any given transaction’s size and when it is separated from the original transaction data and moved towards the end of the transaction data, the size of a block increases from 1MB to 4MB, which means more transactions can be processed per block by the Bitcoin network, thus improving the time in which transactions themselves are processed (less of a transaction backlog).
While Antpool’s (and parent company Bitmain’s) reasons for opposing SegWit are not entirely clear, this has become a huge point of contention in the Bitcoin community.
Joining Antpool’s mining pool means that you would have to agree with its direction as well, such as opposing Bitcoin proposals like SegWit, which are miner-activated.
F2Pool is another large Chinese mining pool that was launched in 2013. F2Pool is also known as Discus Fish by many Bitcoin miners. This name comes from when F2Pool did not have an English user interface and was only known for their coinbase signature, which contains “Discus Fish”, the nickname of one of F2Pool’s operators, in Chinese letters.
The pool runs on the stratum mining protocol and offers PPS+ payments at a 4% fee. Payments are made daily as long as withdrawals are equal to at least 0.005 BTC.
Like Antpool, F2Pool’s interface is easy to use and good for beginners.
Along with Bitcoin mining, F2Pool offers mining pool services for Ethereum, Litecoin, Ethereum Classic, Siacoin, Dash, Monero, and Zcash as well.
As of February 28, 2018, F2Pool controls 6.2% of Bitcoin’s hash rate.
While Bitfury is yet another big player in the Bitcoin mining space, Bitfury is different from other mining pools because it is private and not open to the public. Bitfury, like Bitmain, produces Bitcoin mining hardware. However, like their mining pool, Bitfury’s products are not available to the general public.
As of February 28, 2018, Bitfury controls 1.3% of Bitcoin’s hash rate.
Launched in 2014, BTCC is another China-based mining pool.
Along with running a Bitcoin mining pool, BTCC also runs a Bitcoin exchange, wallet, and other Bitcoin-related services.
While BTCC is based in China, it has customers and servers worldwide in locations like the US, Europe, South America, China, and Africa.
The BTCC mining pool runs on stratum and charges a 1% fee based on the FPPS, or Full Pay Per Share, approach. FPPS is similar to PPS but miners also receive a proportion of block transaction fees (a standard proportion is calculated for any given period vs. miners being dependent on the pool finding blocks as with PPLNS or PPS+) proportional to their hash rate relative to the pool’s total hash rate.
Payments are made daily at 10 A.M. China Standard Time (UTC+8) as long as they meet the minimum payment threshold of 0.01 BTC.
In addition to its Bitcoin mining pool, BTCC has mining pools for Bitcoin Cash, Litecoin, and Super Bitcoin.
BTCC also offers mobile apps for iOS and Android so pool members can monitor things like hash rate, profits, and more.
As of February 28, 2018, BTCC controls about 4.1% of Bitcoin’s hash rate.
ViaBTC is a relatively new mining pool that has been around for a little over a year, as it was founded in May 2016.
The ViaBTC Bitcoin mining pool offers payouts in the forms of PPLNS and PPS+.
ViaBTC charges a 4% fee for PPS+ and a 2% fee for PPLNS, since with PPLNS, miners are incentivized to stick around longer in order to benefit from any transaction fees that the pool receives. Transaction fees are paid for both methods.
Convenience is a major feature of ViaBTC: sign-ups for the pool can be done quickly with just an email, username, and password. Data is both detailed and real-time with monitoring available for blocks, hash rates, miners, users, and more, all in clear graphical fashion.
Moreover, ViaBTC payouts are distributed daily; however, ViaBTC automatically cancels accounts that don’t make enough to receive a payment for 10 days in a row. Users are also able to check mining activity via ViaBTC’s iOS and Android mobile apps, which also offer Bitcoin wallets for safeguarding one’s assets.
ViaBTC offers cloud mining and cryptocurrency exchange services on top of its mining pool service. It also has Bitcoin Cash, Litecoin, Ethereum, Ethereum Classic, Zcash, and Dash mining pools as well.
Despite how new it is, ViaBTC controls about 9.8% of the Bitcoin network’s hashing power.
BW Pool, based out of China, was created in August 2014 and co-founded by a major player in miner manufacturing, LK Group, Ltd and by a major player in cryptocurrency exchanges, CHBTC.com.
BW charges 0% for PPS, 4% for PPS+, and 1% for PPLNS. Minimum payouts start at 0.005 BTC and payouts are done daily at 9 A.M. China Standard Time (UTC+8).
Along with a mining pool, BW Pool also offers the following Bitcoin-related services: Bitcoin mining chip development, Bitcoin ASIC miner manufacturing and sale, an interest-bearing Bitcoin wallet, and Bitcoin cloud mining.
As of February 28, 2018, BW Pool’s share of the Bitcoin network hash rate is 1.5%.
BTC.Top is another mining pool based out of China. It was founded by Jiang Zhuoer, who worked at China Mobile in Shanghai, the world’s biggest mobile phone operator, and who led a 13-person Big Data and Data Warehouse team.
BTC.Top has only been around for a little over a year but already is the third largest mining pool by share of Bitcoin network hash rate as of February 28, 2018, with a formidable 11.2% of the total Bitcoin hash rate, putting it in third place behind BTC.com and Antpool.
Despite its size, the Chinese mining pool is private and not open to the general public.
Unfortunately, other details are sparse for non-Chinese speakers as their site is only available in Chinese.
Slush is often recommended to Bitcoin mining beginners. It was the first Bitcoin mining pool to ever be established and has a reputation for being reliable and trustworthy.
Created in 2010, which is quite early in terms of Bitcoin’s history, Slush runs on stratum and was founded by Satoshi Labs and is based out of the Czech Republic. Satoshi Labs also makes the popular TREZOR hardware wallet as well as runs coinmap.org, which shows a map of physical locations that accept Bitcoin as payment.
Slush charges a 2% fee for miners that join its pool. To withdraw Bitcoin profits, miners can set withdrawal thresholds (minimum 0.001 BTC) and payment will only be sent out when one’s threshold is reached.
While some pools may offer daily payments, Slush sends out payments every hour. A 0.0001 BTC fee is levied if users set their payout thresholds below 0.01 BTC.
To discourage “pool hopping”, or switching between mining pools in the hopes of making a quick profit and then leaving the mining pool (leaving the pool with less hash power to find nonces and mine blocks), Slush employs a score-based system that assigns higher weight to miners that stick around longer in each period of time that payment amounts are determined. Moreover, Slush also shares transaction fees with its miners.
Slush Pool offers a lot of great features, such as notifications when mining devices are facing problems or go offline, and a democratic process involving submitting and upvoting ideas that one would like to see implemented in order to improve the pool. Slush Pool also plans to introduce new artificial intelligence (AI) features in the near future.
Slush’s interface is very user-friendly and the team offers regular updates and communication via outlets like social media to keep members of the mining pool in the loop with the latest news and events. Support is also available through their IRC channel and through email.
Along with its Bitcoin mining pool, Slush offers a Zcash mining pool as well.
Slush is the biggest non-Chinese mining pool, with 10.9% of the Bitcoin network hash rate as of February 28, 2018.
Bitclub.Network, based out of Reykjavik, Iceland, was founded in October 2014 and runs in the middle of the pack when it comes to the world’s biggest mining pools, with a 1.6% share of Bitcoin’s hash rate as of February 28, 2018.
Originally a private mining pool, BitClub’s mining pool opened its doors to the public when it reached the milestone of 1% of Bitcoin’s hash power.
BitClub’s mining pool has servers worldwide, allows users to be paid via debit card, has a 0% fee, offers live stats and reporting, and even has prize giveaways for its users. The pool also offers an affiliate program and pays commissions to miners who refer new members.
Staff is available for support by live chat in English and Chinese and by email.
While BitClub does control a significant portion of Bitcoin’s hash rate, reports have surfaced saying that BitClub is a Ponzi scheme.
GBMiners is the first Bitcoin mining pool to be based out of India and founded by Amaze Mining & Blockchain Research Ltd.
GBMiners payments are based on the PPS+ method.
Despite the fact that GBMiners controls a formidable 1.6% of Bitcoin’s hash rate, as with BitClub, there unfortunately has been some news saying that GBMiners is a Ponzi scheme as well.
While it can be tempting to jump right into the world of Bitcoin mining, there is a lot to consider before making the plunge.
First off, mining without an ASIC is a complete waste of time if one wants to make money. Moreover, mining by oneself with just one or a few ASICs is also probably a waste of time since one’s chances of finding nonces, confirming blocks, and gaining Bitcoin will be close to zero. As such, it’s in the interest of the vast majority of people to join mining pools, such as the ones mentioned.