Mining Pools Explained
Everything you need to know about Mining Pools and how they operate as well as how you get paid. Here is Mining Pools Explained
Mining Pools are a way for small miners to join up and have a more consistent payout. The way that works is that once there is more hashrate on a single wallet address, there will be a higher chance of solving a block and then getting the reward, which in this case, it will be the pools’ wallet address.
These mining pools take a cut of the profit from individual miners, which can be anywhere from 1 to 5% as a developer fee. The fees vary based on which mining pool you are using and which coin you are mining, in this guide, we will be talking about all that, as well as which pool we recommend to use.
How Do You Get Paid?
Small miners mine to the pool and then the pool distributes the rewards to the miners based on their share of the hashrate.
Now, most of the time the miners don’t get their rewards paid out to their wallet address right away, some coins do payout instantly such as Ravencoin and some others will need to meet a minimum payment requirement first before you get the payout such as Ethereum.
Each pool has different minimum payouts and you can always change it on the pool itself as well.
Now should you keep your minimum payout requirement high or low?
That depends on the tool you use, most pools will make the miner pay the transaction fee and that can reduce your profits by a lot if you choose a low min payout. Let’s use Ethereum as an example.
If you set your minimum payout to 0.01 ETH that means every time you mine 0.01 ETH, it will be sent directly to the wallet address that you are mining to. When the transaction is sent, there will be a transaction fee applied by the network, that fee is volatile and changes a lot but in this case, let’s say it is 0.002 ETH.
So now in your wallet, all you will get is 0.008 ETH instead of 0.01 ETH, which is a 20% loss in profits.
So we generally recommend keeping your minimum payout high so that you pay less in transaction fees, the downside is that it will take longer to reach the payout, but ultimately, it’s worth it.
After you get paid with whatever cryptocurrency in your wallet, you can use this video to figure out the best way to cash it out.
Shares - Accepted, Stales, Rejected
Shares are what miners submit to the pool based on their hash power so the pool can measure the work that you put into finding and solving blocks. They come in 3 different forms:
Accepted Shares are the ones that your pool received and accepted without any problems. The higher of those the better your payout will generally be.
Stale Shares are when your shares submit after the block is solved, which means they won’t count and you won’t get paid most of the time. This is most commonly due to a bad network connection or choosing a server that is geographically too far from you. More on that later in the choosing a pool section.
Rejected Shares are when your shares are not rejected as the name states. This is usually due to bad overclocks on your GPU VRAM which can result in wrong calculations sent to the mining pool.
Different Payout Structures
Mining pools have a variety of structures that they run by and it is a pretty complex topic and more on to the technical side, so we will not go through them in detail and we will only cover the most common types as well as what we recommend.
PPLNS (pay-per-last-n-shares) is a luck-based structure that depends a lot on the pool-solving blocks. Then the block reward is distributed based on the shares submitted within a certain time period. This method is susceptible to pool hopping which is a way that miners abuse the payout structure to get an unfair share of the profits.
D-PPLNS (dynamic-pay-per-last-n-shares) is just like PPLNS but with more protection towards pool hopping through dynamically adjusting the value of the shares based on difficulty and round variance.
PPS (pay-per-share) is a system where you get paid from the pool instead of the block rewards a fixed amount based only on the shares you submit. So if the pool solves a block with a good amount of transaction fees, you will not be getting any of that. This method is more predictable and stable for your income, but you will receive less than PPLNS methods if the network is volatile with high transaction fees.
PPS+ (pay-per-share + last-n-share) is just like PPS but also the block rewards in mind. So you get paid a stable amount for the shares you submit by the pool as well as a cut from the transaction fees of the block reward.
There are other structures such as FPPS, PROPS, and SOLO. You can feel free to look more into them, however, if you do not wish to waste more of your time, the best choice to go with is D-PPLNS, PPLNS, or PPS+.
Choosing A Pool
Choosing a pool can be very confusing and a path of never-ending indecisiveness, so now hopefully this guide will help you decide.
Pools are all very similar, in terms of profitability luck plays a huge role in solving blocks with good rewards, which makes it hard to compare them all but generally, the difference will be 1 to 5% at most between the pools based only on how their structure runs and how good their servers are.
Here are some things to consider.
Making sure to connect to a server that is closest to your mining rigs is recommended. That will reduce the stale shares and in return, you will be getting more profits.
If you have a large sum of hashrate (2GH and up), then joining a smaller pool can be better for you so you can first help decentralize the network more, and second, you’ll get a good chunk of the profits for the blocks that the pool will find.
As of now, I recommend CrazyPool.
CrazyPool is a reliable choice and performs very well in terms of low stale shares, clean UI, and other cool things that they do with their dev fee. We at Mining Chamber are also partnered with them.
Generally, as a small miner, picking any mining pool and getting started will be completely fine, big miners on the other hand with hashrate of 2 GH/s and up will have to be a bit pickier since that 1 to 5% profitability difference can be a couple of hundreds or thousands more a month.
Using A Pool
To use a Mining Pool you will need to connect to it through your mining script or application. It is a very simple process but it does differ based on what platform or operating system you are trying to use.
This guide will contain the basic instructions to connect to a Mining Pool through a mining .bat file and through HiveOS.
So if you go to any mining pool, you will find a list of servers and port numbers:
There is Stratum Port and SSL Port. Try to always use the SSL when you can for the sake of security and encryption.
Most of the mining pools will give you a tool to automatically generate the script you need for your miner just like the picture above. You can also view the instructions below for more information.
Windows .bat File
In Windows, there is a variety of mining software that you can use. Frankly, we have a list of guides on different mining software that can be found in our Blog, and we also have our own miner, Aquilex Miner. So let’s use that as an example.
In the settings.cmd file you will find the “set Pool” line and there you want to paste the proper url:port to the server that is closest to your mining rigs.
HiveOS is a Linux-based mining operating system. It is fairly easy to get started there and if you need a full guide for it, you can find one on our YouTube Channel.
To select a pool, all you need to do is go to the pool drop-down and then toggle the SSL and toggle the servers that are close to you, 2 options will be ideal.
After at least 30 minutes have passed since your miner has started running, you will notice it pop up in the mining pool, which leaves the last part to cover and that is your Dashboard.
To access your dashboard, all you need to do is insert your wallet address in the search bar of the pool you are mining to.
After that, you will get live data about all the miners that are mining to your wallet address. This is the best place to find out exactly what is going on with your mining rigs.
There are a couple of things that might be intimidating at first, such as your hashrate and how to work around the settings so let’s get into that.
Hashrate - Average, Current & Reported
Your hashrate will show in 3 ways:
The current hashrate is the fluctuation of your hashrate based on the shares you submit. Every hour you submit a different amount of shares so your hashrate will go up and down which is completely normal, so don’t pay too much attention to this hashrate.
Reported hashrate is what your mining software is reporting to the pool. So this will need to align with whatever hashrate you see on the mining software you are using.
Average hashrate is what you get the estimation for rewards based on. This is an important value to check on, generally, it can be 10% less or more than the reported hashrate and it will need some time to average out.
Settings - Min Payout, Gas Fees
Your settings are where you can access your payout options. Here you can change your minimum payout and your gas prices so that you can choose to only send the transaction when you reach a certain amount of mined coins, and when the transaction fee is at a certain cost.
To change these settings you will usually need to input an IP address of your most active miner, so you can just look up the public IP address for that miner and then input it for authentication.
That is it for Mining Pools Explained. Now you should be all set on this side of your mining journey. If you have any questions feel free to get in touch with us through our socials on the menu.