Posted on: April 27, 2025 By MuhammadFayyaz | Last Updated: April 15, 2026
Pool mining can be confusing for new miners since it involves either group mining or solo mining, where solo miners work independently. This confusion is brought about by the fact that, whether you are working as a solo miner or in a group, you will need to have some means through which you can access the blockchain to mine. Besides facilitating this access, mining pools undertake various activities for the miners, like giving out tasks and distributing the profits earned.
Solo vs. Group Mining Pools
Solo Mining (also called lottery mining) allows an individual miner to win a huge sum of money, although with low chances of success. This form of mining differs from the use of a pool, where the profits are shared between all miners who participate in the activity. Solo miners retain the total reward received after solving the block, but lack the support needed to increase their chances of success.
There is a direct relationship between the likelihood of solving a Bitcoin block and the miner’s hashrate as opposed to the hashrate of the entire blockchain. At present, the hashrate for the Bitcoin blockchain stands at 831.54 EH/s. You are likely to mine a block if your miner’s hashrate contributes significantly to the total network hashrate. Because the hashrate of your lone miner is definitely less than 831 EH/s, there are two possible options for you: to depend on luck or join a mining pool.
Think of solo mining like this: the chances of winning the Powerball Jackpot are 1 in 292 million. If you buy 292 million tickets, you would guarantee yourself a win. However, since most of us do not have enough money to buy close to 300 million lottery tickets, we just buy one or two and hope for the best; this is solo mining. It is precisely for this reason that individual mining is also referred to as “lottery mining.”
On the other hand, mining groups help members work together using their computing power, thereby creating a “super virtual miner” and significantly increasing the chance of success. The mining pools offer a more reliable source of income compared to solo mining because participants get regular payments as opposed to a large payment with uncertainty involved.
Think of group mining pools like the “lottery pool” at a job site, where a group of co-workers combine their funds to purchase multiple entries in a lottery jackpot, and equally distribute any prizes won.
Understanding Payout Models
The block rewards are then shared by all miners based on their amount of computing power. The miners are allocated tiny chunks of work, which are called “shares”. Shares are used as proof of work contribution and help validate mining effort within the pool. Once a new block is mined, the mining pool will share out the total block rewards proportionally based on how many shares each miner in the pool has contributed. This may be done through a variety of payouts such as PPS, FPPS, or PPLNS.
Payment schemes determine when and how much payment you will receive for your effort (shares) sent to the pool. Under PPS and FPPS, you earn a fixed amount per share every day, regardless of whether the pool finds a block. Under PPLNS, you only get paid when the pool finds a block, based on the shares you recently submitted. This means PPS/FPPS gives a very steady income, while PPLNS can be more variable (depending on the pool’s luck).
Pay-Per-Share (PPS)
This is one of the simplest forms of reward schemes in cryptocurrency mining pools. In the Pay-per-share (PPS) reward scheme, miners earn a fixed reward per share that they contribute to the mining pool, irrespective of whether blocks are found or not. This reward scheme gives miners some guaranteed income for their contributions, and this may appeal especially to those miners who would like to have regular income streams.
There are many benefits attached to the PPS reward scheme, such as predictable payment schemes for miners as well as low risks involved for miners, as miners get paid a fixed sum of money for each share they mine. The PPS reward scheme has several disadvantages, too, which include increased risks for pool owners because pool owners may incur losses if they end up paying rewards without mining blocks.
In this case, the pool owner may need to set high fees to cover potential losses.
Pay-Per-Last-N-Shares (PPLNS)
This is another popular payout model used in cryptocurrency mining pools that differs significantly from PPS. In PPLNS, miners are rewarded based on their contributions over a specific number of shares submitted during a defined period leading up to a block being mined. This means that only shares submitted within this window count towards payouts when a block is found.
Under the PPLNS model, there is motivation for miners to stay within the mining pool, as their income is based on their contribution to the N shares before the mining of the next block. The advantage of using such a model is that the miner stands a chance of receiving more payments whenever there are successful mining processes. However, there is the possibility that the miner will receive fewer payments when the mining processes are not successful.
Full Pay-Per-Share (FPPS)
FPPS is an improvement on the Pay-Per-Share approach since it takes into account both block rewards and transaction fees paid to miners. Under the FPPS method, miners earn rewards for each share submitted and are entitled to a share of the transaction fees paid by the transactions within new blocks generated by the pool.
One major benefit of the Full Pay-Per-Share payment structure is that it takes into consideration both the block reward and the transaction fees earned from the mining process. The FPPS approach is especially beneficial during periods of high transaction fees due to network congestion or high demand for block space. Nevertheless, FPPS payments also present some challenges to the pool operators who have to find ways to distribute transaction fees efficiently.
Why Pools Are Necessary: Tasks and Benefits
To understand why mining pools play a crucial role in crypto mining today, it is necessary first to examine their functionality and benefits.
Tasks:
- Work Distribution: Pools assign smaller tasks (“shares”) so miners always have work to do.
- Share Recording: Pools track each miner’s valid shares to calculate rewards accurately.
- Reward Distribution: The pool makes payments regularly in accordance with the selected payout system (PPS, FPPS, PPLNS, et cetera).
Benefits:
- Lower Variance: Smaller payments as opposed to large infrequent payments.
- Reliable Income Stream: It helps pay for electricity and equipment expenses.
- Barriers Lowered: Individual home miners with low hash rates may participate.
Key Pool Parameters Explained
Three key pool metrics determine pool performance and impact mining profitability: share difficulty, pool latency, and pool hashrate.
Share Difficulty
Mining pools use share difficulty (also called “pool difficulty”) to set the target threshold that each submitted “share” must meet to count toward a miner’s contribution. Lower share difficulty means miners submit more shares per unit of time, giving the pool finer-grained data on each miner’s work, but increasing database and bandwidth demands. Conversely, greater difficulty reduces the number of shares sent but risks small or less powerful miners never meeting the threshold.
Impact on Small Miners
When a pool sets the difficulty too low, miners submit too many shares. This increases system load and can slow down the pool. If the difficulty is too great, miners with lower hashrates may rarely send any shares, causing unpredictable or zero payouts and effectively excluding smaller and slower mining devices. Pool operators, therefore, adjust share difficulty to strike a balance between reliable reward tracking and manageable system performance.
Share difficulty directly influences an individual miner’s success or failure by affecting how often valid shares are submitted and paid. Sudden spikes in network difficulty can raise a miner’s operational costs above their revenue threshold, forcing downtime if share difficulty isn’t recalibrated. Maintaining an optimal share difficulty helps small home miners avoid extended reward droughts and maximizes the effective use of their hardware.
Pool Latency
The term “pool latency,” which can also be referred to as “stratum latency” when it comes to mining, basically means the amount of time required by your mining device to get new tasks from the pool and reply to the pool with completed work. It is similar to a conversation where faster responses lead to better results. For instance, if you were in class and your teacher posed a question to the whole class and you took five minutes before giving your response, then chances are high that someone else will have answered before you could even respond. If there’s a lag in that conversation, your miner might be working on a computation that has since become obsolete.
Effects of High Latency
In other words, your device may be trying to hash a block that another mining device has already solved. This is often referred to as a “stale” task, and any shares submitted to the network for an obsolete task are rejected, which is what the performance metric “rejected shares” measures. Rejected shares are a total waste of energy and computational resources. Even if your hardware is powerful and efficient, high latency can seriously eat into your earnings.
Latency can be influenced by several things. The distance from the server of the pool, the quality of the Internet connection, and the processing of information on your computer are among these.
The typical latency time for almost all the mining pools used by the public ranges from 80 ms to 110 ms. But then again, for those who have their own node or when connecting to a server that is much closer to them, they are able to lower their latency time, even to about 10-12 ms.
It is recommended that both miners working alone and miners working in groups maintain a latency of less than 50 ms.
Here are some ways to do this:
Upgrade to Stratum V2: This updated mining protocol reduces communication overhead and speeds up how work is assigned and completed. Stratum V2 also offers better security and reduces the chance of stale shares, making it a solid upgrade for serious miners.
Use Stratum URLs by Region: This is made easy by pools such as Braiins, SoloCK, and Solopool that have some stratum URLs according to region. Linking to the one nearest to you will reduce the ping delay time. You can use this service to check each one of them and get the fastest one, or use the ping latency of the different stratum URLs to determine which mining pool you should link from where you are.
Check Your Network Periodically: On some occasions, you may start experiencing latency and delays without knowing the reason behind them. Always monitor the performance and ping of your miner.
Pool Hashrate
The Hash rate of a pool refers to the sum of computing power of all miners in terms of exahashes per second (EH/s). It can be in smaller units, depending on the size of the pool, such as Terahashes per second (TH/s) or Gigahashes per second (GH/s) for smaller pools. The greater the hash rate, the greater the computing power of the pool, resulting in higher chances of obtaining blocks. Smaller hash rates result in better payoffs since block rewards will be shared among fewer people.
Risks of Centralization
The centralization of power via the establishment of big mining pools may become a serious problem because pooling miners into a single entity means centralization of hash rate, which contradicts the concept of decentralization in blockchain technology. As an illustration, according to the current situation, more than 60% of the newly produced blocks due to mining in Bitcoin belong to three big mining pools, namely, Antpool, F2Pool, and Foundry USA. This shows how a small number of entities can dominate the network’s total hash rate.
Such high levels of concentration have their dangers for blockchain security. It will be hard to maintain the decentralization of the system when the power is in the hands of a few individuals. In case one of the mining pools attains the majority share of the total hash rate, say more than 50%, it can easily launch a “51% attack.”
Examples of Group Mining Pools
To better understand how various mining pools work under practical circumstances, here are some common mining pools used by groups:
Luxor
1. Fee: 2.5% fee for Bitcoin mining, and a 3.0% fee for LTC/Doge, Sia, and Zcash.
2. Pros: FPPS; get paid regardless of whether the pool finds a block.
3. Cons: Risk of loss: Luxor’s terms of service state that they are not responsible for losses due to hacks. Forks: If the cryptocurrency network forks, Luxor is not responsible for providing any cryptocurrency derived from the fork.
Antpool
1. Fee: Varies based on payout method.
2. Pros: Allows a choice between FPPS or PPLNS.
3. Cons: Antpool has a minimum payout threshold of 0.001 BTC.
Examples of Solo Mining Pools
Here are some examples of solo mining pools:
Solo CKPool
1. Fee: 2 % flat fee.
2. Pros: No registration, truly anonymous, no operator wallets.
3. Cons: No pooled payouts; if you don’t find a block, you earn nothing.
Braiins Solo Pool
1. Fee: 1 % service fee.
2. Pros: Backed by the creators of Slush Pool, it integrates with Stratum V2 for efficiency.
3. Cons: Requires slightly more setup and a registered account.
FAQs
What happens if a mining pool goes offline?
In the event that a pool stops working or cannot be reached, your miner will not send any more shares until you establish a connection with a new pool.
How do taxes apply to mining pool rewards?
Taxes generally apply to mining pool revenues in most countries because, by law, they are considered to be a form of earned income. The amount of your reward will be assessed upon receipt and not sale.
What is an orphan block in mining?
Orphan blocks refer to blocks that are considered legitimate but are not included by the network due to another conflicting block having been mined and accepted by the network first. It still depends on the mining pool for miners to receive payouts.
Conclusion
It is not difficult to set up the mining pool, since the structure of fees is transparent, which makes it possible for home miners to start using the service without setting up a complete node, whether using an ASIC rig like Bitaxe or a Raspberry Pi proxy. To maximize profitability, the miner must choose wisely the mining pool that will be most appropriate according to their hardware capacity, risk preferences, and financial expectations, monitoring indicators for stale shares and latencies, and changing pool endpoints whenever necessary.
