What is mining pool?

A service that combines many miners' hash rate, submits work as one participant, and splits the reward according to shares of work contributed.

Solo mining at current difficulty means almost never finding a block, so pools convert a rare large payout into small regular ones, minus a fee. Nearly all Bitcoin hash rate runs through pools, and the same arrangement exists on every other proof-of-work chain with meaningful difficulty.

The trade-off is concentration. The pool operator, not the individual miners, usually chooses which transactions go in the block, so a small number of operators decide what gets confirmed. Miners can switch pools, which limits how far an operator can push, but the switching is slower than the pressure it is meant to counter.

How it works

A miner points its machines at the pool's server and receives work. It returns shares, which are hashes meeting a much easier target than the network's. Shares prove the miner is working without requiring it to find a real block.

When any member of the pool finds a valid block, the reward goes to an address the pool controls. The pool then distributes it according to accumulated shares, minus a fee that is typically a small percentage.

Payout schemes differ in who carries the variance. Under pay-per-share, the pool pays a fixed rate per share whatever its own luck, absorbing the risk itself and charging more for it. Under schemes that pay from actual blocks found, miners receive more when the pool runs lucky and less when it does not. A miner choosing between them is choosing between a steady income and a higher expected one.

Because the operator constructs the block template, it also controls transaction selection. Some pools now offer templates chosen by the individual miner, which is a direct response to the censorship concern.

Example

Illustrative arithmetic. A pool holds 5% of network hash rate. Bitcoin produces a block roughly every 10 minutes, so the pool expects about 7.2 blocks a day out of 144.

A miner contributing 0.1% of that pool's hash rate is contributing 0.005% of the network. Solo, it would expect one block roughly every 20,000 blocks, which is about once every 139 days, with enormous variance. In the pool it earns 0.1% of every block the pool finds, minus the pool fee, arriving as small credits many times a day. The expected total is similar. The distribution is entirely different, and for anyone paying an electricity bill monthly, the distribution is the point.

Why it matters when you buy

Pool concentration is a security property of the chains you buy. A network where a few operators control most hash rate has a different censorship and reorganization profile from one where it is spread, and that is a fact about the asset rather than about any exchange. RampAtlas measures per-chain characteristics on the chain rankings. For most buyers this is background rather than a decision input, since none of it changes how or where you purchase.

Related terms

• hash rate — the work a pool aggregates
• mining — the underlying process
• difficulty adjustment — why solo mining fails
• block reward — what gets divided
• coinbase transaction — where the reward is paid
• chain reorganization — the risk concentration raises

Questions

Is joining a pool the same as mining?

You are still mining. The pool aggregates your work and smooths the payout. What you give up is control over transaction selection and a percentage fee.

Why does pool concentration matter?

A pool controlling a large share of hash rate could in principle censor transactions or attempt to reorganize recent blocks. Miners switching away is the check on this, and it has been used in practice when pools grew too large.

Can I mine profitably at home?

On Bitcoin, difficulty and specialized hardware make it impractical for individuals, and electricity cost usually decides the answer before anything else does. Smaller chains vary, and the arithmetic changes constantly.