Everything you need to know about mining pools

What is a mining pool?

• To fully understand mining pools, we recommend you first read our article on what mining is and how a proof of work system works. If you've already read the article or already know this basic information, we can get into the topic of pools.
• As we already know, cryptocurrency mining is basically just a lottery where your only goal is to guess the nonce number as many times as possible and hope you can be the first to guess it. But the problem is that in the case of Bitcoin, for example, the total network hashrate at the time of writing is about 440 Eh/s, which is equivalent to 4.4 million S19j Pro 100 Th/s Antminers. If we continue with the Bitcoin example, there can only be one miner every ten minutes who guesses the number, so if you were mining as a standalone miner, the chances of you getting any reward are practically zero.
• The pool works on the principle of several thousand/ten thousand miners getting together, pooling their output and all "guessing" together. This way the miners have a multiplied chance of guessing a nonce. The reward is then shared fairly by all miners.
• The world's first mining pool, the Slush Pool, comes from the Czech Republic. Slush Pool, now Braiins Pool, has mined more Bitcoins overall than any other pool.

Types of payout systems

• There are several different redistribution systems for paying out mining rewards:

PPS

• The PPS (Pay-Per-Share) system guarantees you the most stable profits. The pool operator already owns the cryptocurrencies, according to which it pays miners (us) every few hours/days.
• + Stable profit
• - You will not get paid for transaction fees in a given block (the reward for each block consists of a fixed reward of 6.25 BTC + transaction fees - these make up about 1-2% of the total reward)
• High fees (1-4% of the proceeds)

FPPS

• FPPS works just like PPS, but you also get a payout for transaction fees.
• + Stable profit
• + You get a payout for transaction fees
• - High fees (1-4% of proceeds)

PPLNS

• In the case of PPLNS pools, you only receive payouts for how much your pool actually paid for the period. Thus, the profits are less stable (daily fluctuations of ±30% are common). However, with long-term mining, the profits are averaged, so the payout is the same as for PPS or FPPS pools. PPLNS pools have the advantage of very low fees (even 0% for Antpool BTC pool).
• + Low fees (0-1%)
• - Unstable Profit

There are other payout systems like PPS+ (PPS pool, transaction fees are paid as in PPLNS) or PROP.

But PPS, FPPS and PPLNS are the most popular systems and you should make do with them.

Now you know what mining pools are for, how they work, and what payout systems exist. If you want to go further, we recommend our article "How to choose an ASIC miner".