What Are Bitcoin Mining Pools?

In this guide you will learn how to start creating new virtual money through bitcoin mining pools.

Photo: Bitcoinopp/Flickr

Photo: Bitcoinopp/Flickr

The bitcoin mining is a process that allows miners creating new digital currency. In order to start mining bitcoins, it’s necessary to create a bitcoin wallet first, which can be stored either locally or online. Although it is a personal choice, storing bitcoins locally is probably more secure than having an online wallet.

One of the simplest ones is the wallet on Coinbase, which is quite easy to install. Then you need to download a blockchain file, which can be up to 6 GB or more. It is also important to ensure you have a copy of the wallet file on a thumb drive, what allows not losing all the money in case of a computer crash.

After the installment, you will receive your wallet address, which looks like a long sequence of letters and numbers (1YEkUGADFbrEPhAb9Xr4pKPtM8fAyiNWsJ).

Then it is necessary to join the pool. In general, the pool is a group of miners who combine their computing power to create digital currency.

Among the most popular pools are Discus Fish, Ghash.IO, AntPool, Slush’s Pool and others. The main difference among the pools is the amount of users and the fees charges per block. With the larger number of users in the pool, the fees are getting smaller. Meantime, the fewer users result in slower discovery time.

At first, you have to create a login and include the sub-accounts, or workers, with each having its own password. Then enter the wallet address to your account.

Notably, you shouldn’t mine bitcoins alone. All bitcoins are given in blocks and the chance of finding a block is too low and it can take a few years to create any bitcoins.

The pooled mining appears to be more lucrative and will enable you to generate more bitcoins, given the smaller and simpler algorithms to be solved. The combined work will make you solve the bigger algorithms.

The next step is to select a miner among a wide range of options available. CGMiner is a perfect option for Linux platform, while for the Windows users it will be better to use GUIMiner. The other popular miner is 50Miner.

OS X users can use DiabloMiner and RPC Miner. The second one is easier to use, as it’s just necessary to click an icon and enter some information. Each of them has very simple interface.

There are currently two calculation schemes that have been developed for calculating the share of coins mined, Double Geometric Method (DGM) and Pay-per-Share (PPS). Today, PPS payment scheme is not utilized by the majority of pools due to the large amount of bitcoins (10,000 BTC) required being reserved. DGM is the widely used system as it provides a balance between a short round and longer round in order to normalize payments.

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