On the Functions of Cryptocurrency Mining Pools

Mining pools gather the computing power of miners

The most basic function of a mining pool is to gather the computing power of its user miners to mine together. With the help of the mining pool, the technical threshold requirements for miners are very low.

Mining in a mining pool only requires two simple steps. First, download the mining software (only a few MB); second, double-click to open the configured bat file to start mining. There is no need to download any digital currency wallet or synchronize blocks, or even register in a mining pool, or run a full node wallet.

The emergence of mining pools has greatly reduced the technical threshold for miners. They only need to understand how to connect to the mining pool and submit the shares calculated by effective computing power to the mining pool. Miners do not need to care about what software and technology the mining pool uses, how to choose transaction packaging, how to construct packaging blocks, and how to publish to the Bitcoin network as soon as possible after successful packaging, etc.

Mining pools stabilize miners’ income

In the early days before mining pools, people relied on luck to pack blocks on their own. If they succeeded, they would get 50 BTC plus a small fee, or they would get nothing. With the increase in the computing power of the entire network, it often takes weeks or even months to successfully mine a block. This is unacceptable to many miners. They expect to get 50 BTC in 50 days, and 0.9 BTC every day for 50 days. Although the latter actually gets less, most miners will still choose the latter. Mining pools have the function of stabilizing miners' income.

When miners interact with the mining pool, the mining pool gives miners new jobs with low difficulty, and then submits a share to the mining pool after each successful calculation. When the mining pool verifies that there is no problem with these shares, it receives and counts the number. When the block is successfully mined, the new coins are distributed according to the number of shares submitted by each miner and the proportion of the shares. When the mining pool mines coins, it will have coin income, thereby achieving a stable mining income for miners.

All inventions are not the kind of sudden burst of whimsy. It is a very long process of accumulation. The prototype and creativity have long existed until the last inventor integrated these conditions and completed a qualitative change.

Mining pools represent the rights of miners

Miners are a very scattered group. Without a leader, they do not have much influence. Therefore, after gathering the computing power of miners and stabilizing their income, another basic function of mining pools is to speak on behalf of miners. Because miners and mining pools both belong to the mining industry, their interests are closely linked most of the time (there may be some small disputes over whether transaction fees should go to miners or mining pools). If the mining industry develops well, miners and mining pools will naturally profit. Therefore, mining pools are a bit like members of parliament elected by miners, who can speak on behalf of voters who support them.

Some people complain that mining pools hinder miners from speaking directly. For example, in the Hong Kong Roundtable Consensus, the top mining pools signed a consensus to not run other versions other than Core, which suppressed Classic, XT and other versions. In fact, don't worry too much, miners can switch mining pools. If you support Classic, F2Pool provides a sub-pool that runs Core but is marked as Classic. If you support BU, you can go to V Pool. If you support SW, go to BTCC.com Mining Pool. If you support 8MB, go to BW.com Mining Pool. Even if you support the Bitpay version of Bitcoin, you can go to Slush Mining Pool to vote by computing power.

Miners can express their stance by switching mining pools. For example, the computing power of the V pool supporting BU has dropped from more than 10% to the current 6.7%. If there is no PPS+, the fee rate may be even lower. This shows the miners' support for BU. Interestingly, the proportion of computing power of BTCC.com supporting SW has also decreased compared to before. Therefore, the real intention of miners at present is to wait and see, and not support BU or SW at first, to maintain the status quo. Smart mining pools will cater to the mentality of miners and not formally express their support for BU or SW. Therefore, the essence is still the miners voting.

The difficulty of innovation does not lie in doing the right thing, but in two points.

First , in the process of innovation, at many specific moments of decision-making, there must be differences from the mainstream practices at the time. Such differences were considered incredible and unorthodox by people at the time.

Second , it is not enough to be unorthodox, but you must also make enough efforts in other aspects that people at that time did not pay attention to. The combination of these two will make you a sufficiently innovative new species.

Based solely on the intricate network of interests in the mining industry chain, the author boldly infers that BTC will never die.