Cryptocurrency - Individual Mining or Mining in a Pool?
Once you have set up a crypto mining pool, it's time to choose the type of mining you will adhere to. There are two basic types of cryptocurrency mining: pool mining and solo mining. This blog discusses the differences between the two, and the pros and cons of each, allowing you to choose the best mining for you.
What is Pool Mining?
A mining pool, in simple words, is a collection of individual cryptocurrency miners who work together to make the chances of successful mining higher. The resources of many individual mining rigs are combined together, increasing the chances for successful mining due to the more extensive output. The mined cryptocurrency is then split between the participants of the pool. Moreover, there is a commission on all earnings established by the pool. As a rule, the commission is somewhere between 1 and 5 percent, depending on your pool of choice. Moreover, there are additional transactional fees.
A pool acts as a manager of the individual combined efforts. It manages the hash functions of the individual mining rigs, records the results of each mining rig, combines the processing power of individual units for successful mining, and assigns the rewards as the result of mining.
The mechanisms of mining pools vary greatly. In some pools, the system randomly assigns work units to particular members. In other pools, the individual members get to pick the amount of work assigned to them. There are also different mechanisms behind the distribution of the payments in the mining rig. Most often, the individuals receive payment either per share contributed by each participant or proportionally to the shares made by everyone in the pool.
Smaller pools can be combined into bigger pools to increase the amount of cryptocurrency mined. However, the commission in the pool, if pools are combined, can be higher.
The Benefits and Disadvantages of Pool Mining
Pros:
- The income generated by pool mining is more stable than the income from solo mining, and you will get frequent payments.
- Pooling allows choosing between various cryptocurrencies, including the most popular ones, such as Bitcoin, Litecoin, and Ethereum, which are unavailable for solo miners.
- You can use the free tools that come with your participation in the pool, such as control panels.
Cons:
- Pool mining may be subjected to frequent downtimes and network interruptions.
- Though the income from pool mining is steady, it is usually smaller than individual mining due to fees.
- Pool mining is less protected and reliable and may be subjected to service attacks.
What is Solo Mining?
In solo mining, the miners mine directly from the blockchain without joining a specialized pool. Solo mining is similar to the lottery because it results in a low probability of being rewarded. However, if you manage to mine, the reward will be much higher than in solo mining.
The Benefits and Disadvantages of Solo Mining
Pros:
- Solo mining does not involve fees, so your profits will be much higher if you manage to mine successfully.
- With solo mining, there is a very slight possibility of power outages that lead to a higher network uptime than pool mining, where the uptime happens widely.
Cons:
- You will need to invest in specialized hardware, such as ASIP because basic mining is simply not possible with a GPU.
- Solo mining is not viable for the large mining networks, such as Bitcoin and Litecoin, because these networks are way too complicated to be mined without an established mining pool.
- The income you receive from solo mining is less stable than the income you receive from pool mining.
- Solo mining exclusively supports the getwork pool, which means that mining takes a lot of time.
Should I Choose Pool Mining Or Solo Mining?
As you can see, both pool mining and solo mining have obvious advantages and drawbacks, so choose wisely according to your unique circumstances. As a rule, if your mining rig has enough power to generate one crypto block daily, solo mining is the best choice for you. However, if you don't have that much energy, pool mining is probably best for you.
Choosing between solo and pool mining is not the only choice you have to make for cryptocurrency. Another prominent choice you have to make is between cloud mining and hardware mining. Hardware mining occurs when you set up a mining rig.
What Is Cloud Mining And How Does It Work?
Cloud mining occurs when the cryptocurrency is mined with the help of rented cloud power. This gives people the benefit of not using special kinds of hardware or software for cloud computing. The equipment is handled by the owner of the cloud computing service. With cloud computing, the potential miner opens an account for a basic cloud rent cost. While cloud mining reduces the mining costs for individual miners, it makes them dependent on the cloud farms, with their profits fully susceptible to the demand.
