The term ‘pool mining’ may be perplexing for novice miners, as it encompasses both group and solo mining, even though solo miners operate independently. This confusion arises because both solo and group miners require a method to connect to the blockchain for mining purposes; the pool serves as the intermediary that enables this connection. Mining pools perform other tasks for miners as well, such as assigning work, collecting shares, and distributing rewards. Additionally, mining pools often provide access to advanced infrastructure and support services that individual miners may lack, such as monitoring tools and technical assistance.
Solo vs. Group Mining Pools
Solo Bitcoin mining, also known as lottery mining, gives home miners a small chance at winning a massive reward. Unlike group pools, which distribute winnings among pool members, solo miners get to keep the full block reward. The trade-off is that, without help from others, the odds of finding a valid hash are lower.
The chance of discovering a Bitcoin block is directly proportional to a miner’s hashrate, versus the hashrate of the blockchain network. As of writing, the hashrate of the Bitcoin network is 831.54 exahashes per second (EH/s). If the hashrate of your solo miner is higher than that, you will solve the block. Since the hashrate of your solitary device is most certainly lower than 831 EH/s, you must either rely on luck, or join a group mining pool.
Think of solo mining like this; the odds of winning the Powerball Jackpot are 1 in 292,000,000. If you purchased 292,000,000 tickets you’d be guaranteed to win. Since most of us don’t have the funds to purchase almost 300 million lottery entries, we instead purchase 1 or 2 tickets and cross our fingers; that’s what solo mining is. In fact, for this very reason, the term solo mining is used interchangeably with the term “lottery mining.”
In contrast, group mining pools let participants combine their computational power to form a “virtual super-miner,” greatly improving the odds of winning. These pools provide a more stable income stream than solo mining, as participants receive smaller, but more frequent payouts, rather than waiting for an uncertain, but potentially huge reward.
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
In group mining pools, block prizes are distributed among all participants based on their contributed hashing power. Pools assign each miner small work units called “shares,” and then aggregate these shares to discover blocks more consistently. When the pool finds a block, the total reward is split among members based on their contributed shares, according to various reward systems such as Pay Per Share (PPS), Full Pay Per Share (FPPS), or Pay Per Last N Shares (PPLNS).
These payout methods decide when, and how much, you get paid for the work (shares) you send 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) is one of the most straightforward reward systems used in cryptocurrency mining pools. Under this model, miners receive a fixed payout for each share they submit to the pool, regardless of whether or not a block is successfully mined. This system provides miners with immediate compensation for their contributions, which can be particularly appealing for those who prefer consistent earnings over long-term uncertainty.
The PPS model offers several advantages, including predictable payouts and reduced risk for miners. Since each share submitted earns a fixed reward, miners can calculate their expected earnings based on their hashing power and the pool’s payout rate. However, this model also has its drawbacks; pool operators must manage risks associated with paying out rewards even when blocks are not mined.
To mitigate this risk, pools using PPS often charge higher fees compared to other payout models, which can affect overall profitability for miners.
Pay-Per-Last-N-Shares (PPLNS) 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.
The PPLNS model encourages miners to remain active within the pool over time since their earnings are tied to their contributions during the last N shares before a block is mined. This system can lead to higher payouts during periods of successful mining but may also result in lower earnings during less productive times. Miners who prefer this model often appreciate its potential for higher rewards when blocks are mined frequently, but they must also be prepared for variability in payouts based on mining success.
Full Pay-Per-Share (FPPS) is an evolution of the traditional Pay-Per-Share model that incorporates not only block rewards but also transaction fees into the payout structure. In FPPS pools, miners receive compensation for each share they submit as well as a portion of any transaction fees associated with transactions included in newly mined blocks. This model aims to provide miners with more comprehensive earnings by accounting for both aspects of mining rewards.
The FPPS model can be particularly advantageous during periods when transaction fees are high due to network congestion or increased demand for block space. By including transaction fees in payouts, FPPS pools can offer more competitive compensation compared to standard PPS or PPLNS models. However, like other payout structures, FPPS also comes with its own set of challenges; pool operators must effectively manage transaction fee distributions and ensure that payouts remain fair and transparent for all participants.
Why Pools Are Necessary: Tasks and Benefits
Tasks:
1. Work Distribution: Pools assign smaller “shares” of the overall hashing problem so your miner always has work to do.
2. Share Recording: Pools track each miner’s valid shares to calculate rewards accurately.
3. Reward Distribution: Pools pay out regularly according to the chosen payout model (PPS, FPPS, PPLNS, etc.).
Benefits:
1. Reduced Variance: Frequent small payouts instead of rare large ones.
2. Predictable Income: Helps cover electricity and hardware costs consistently.
3. Lower Barrier to Entry: Small-scale home miners can participate without the need for massive hash power.
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, higher difficulty reduces the number of shares sent but risks small or less powerful miners never meeting the threshold.
When a pool sets difficulty too low, miners send a flood of shares, smoothing payouts because reward calculations have more data points, but this can overload pool servers and increase latency. If the difficulty is too high, 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 individuals 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 re-calibrated. Maintaining an optimal share difficulty helps small home miners avoid extended reward droughts and maximizes the effective use of their hardware.
Pool Latency
Pool latency, also called stratum latency, in mining simply refers to the time it takes for your mining device to receive new work from the pool, and send back completed shares. Think of it like a conversation — the faster you respond, the better the flow. Let’s say you’re in school and the teacher asks the class a question; if you waited five minutes to provide an answer, it wouldn’t count because another student would have already answered the question by then. In this case, your miner is “talking” to the pool. If there’s a lag in that conversation, your miner might be working on a computation that has since become obsolete.
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” is measuring. 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. The speed of your mining device is irrelevant if it’s working on an obsolete task.
Several factors can affect latency. These include how far away you are from the pool’s server, the quality of your internet connection, and the time your system takes to process and transmit data. Most public mining pool connections typically experience latency in the range of 80 to 110 milliseconds (ms). But if you’re running your own node or connecting to a server nearby, that delay can shrink dramatically — even as low as 10–12 ms. Lower latency, therefore, results in fewer rejected shares.
As a best practice, both group and solo miners should aim to keep latency below 50 ms. Here are some tips to minimize latency and make your mining operation more efficient:
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 Region-Specific Stratum URLs: Pools like Braiins, SoloCK, and Solopool make this easy by offering a selection of stratum URLs based on geographic location. Connecting to the one closest to you can significantly reduce the time it takes for your data to travel back and forth. You can test each endpoint and choose the one that gives you the lowest ping time —or you can use this tool to find the best mining pool to use from your specific location, based on stratum latency.
Monitor Your Connection Regularly: Sometimes, slowdowns happen without warning. Keep an eye on your miner’s performance metrics and ping times. If you notice a spike in latency, try switching to another server or checking your internet setup.
Pool Hashrate
A pool’s hashrate is the sum total of all miners’ computational power combined, typically measured in exahashes per second (EH/s) for large pools, but smaller pools may use a lower numeric prefix, such as TH/s, or GH/s for a tiny pool. Pools with a higher hashrate have more computational power, and therefore find blocks more frequently. Pools with a lower hashrate tend to offer higher payouts, since block prizes are distributed among a smaller number of participants, but the lower hashrate infers smaller odds of winning.
One drawback of group mining pools, is the potential centralization of power within large pools; as more miners join a single pool, it can lead to a concentration of hashing power that undermines the decentralized nature of blockchain networks. For example, as of this writing, more than 60% of newly mined Bitcoin blocks are generated by only three leading mining pools: Antpool, F2Pool, and Foundry USA.
This concentration of power also raises network security concerns, as a few entities gain disproportionate influence over the entire blockchain. For example, If a single mining pool controls a significant portion of the network’s hashrate, it could potentially launch what’s known as a “51% attack”, which would allow them to control the entire blockchain.
Miners with smaller devices may prefer mid-sized pools that balance frequent payouts with moderate risk. Alternatively, solo mining pools allow individual miners to contribute shares without splitting rewards—ideal for those seeking the full block reward with the trade-off of lower odds. Solo pools function as a bridge between pure solo mining and full-service group pools. They assign work and collect shares just like a group pool, but they only forward blocks to the network when you find one, so you keep the entire reward minus a small fee.
Most solo and group pools charge a fee to cover operational expenses, a small trade-off for the stability and ease of use they provide. While some mining pools may charge a monthly or flat fee for use, most pools simply take a small cut of the block reward, typically between 1% and 3%. One could avoid pool fees altogether by mining on a personal node, which is self-hosted, but the setup and maintenance of such an endeavor would cost more than the pool fees.
Examples of Group Mining Pools
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 if 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
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 (Braiins also offers group mining)
1. Fee: 1 % service fee.
2. Pros: Backed by the creators of Slush Pool, integrates with Stratum V2 for efficiency.
3. Cons: Requires slightly more setup and a registered account.
Conclusion
Most mining pools provide straightforward configuration and transparent fee structures, enabling home miners—from bitaxe ASIC rigs to Raspberry Pi proxies—to participate without running a full node. To maximize profitability, miners should carefully select a pool that aligns with their hardware capabilities, risk tolerance, and income goals, regularly monitor metrics for stale shares and latency, and adjust their pool endpoints to maintain optimal performance. By balancing the predictability of group payouts with the thrill of full block rewards, hobbyist miners can sustainably operate in today’s competitive landscape while contributing to the network’s decentralization.