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Thursday, September 28, 2017

Complete Explanation of Pool Mining

Mining Pool

Starting from the many difficulties faced by small miners, as well as the various risks encountered, then many of them who then work together and form an insurance company to alleviate the risk.

Initially a mining pool is formed because of the pattern of cooperation. So a group of miners join together and form a pool that serves to be able to do Bitcoin mining together. By specifying a designated coinbase receiver. The receiver, called the Pool Manager.

Thus, with this mutual mining, no matter who finds a block, that pool manager will eventually receive reward rewards. Furthermore, from the results received by the pool manager on the reward block found, will be distributed to each participant. And the pool, probably cut some of that amount as a fee for the pool service that each miner uses.

The assumption is that when a miner joins the pool mining, the miner also trusts the pool mining manager. So with the pattern of pool mining, small miners also have the opportunity to keep doing Bitcoin mining.

The question is, how does the pool manager know exactly the amount of computing power of each miner, and how much has each miner produced? Then how can the pool manager share the revenue equally in each miner?

Mining Stock
To answer some questions above, there is a solution that can answer it. Miners, can prove how many roles have been contributed to the pool during mining by calculating the output of the stock, or the nearest valid block. Let's be clear about this.

Suppose the target is a number beginning with 67 zeros. Hash a block must be below the target number to block it into a valid block. In search of a block, miners will look for block hash with many zeros in front, but not to number 67, because the target should be below it. Miners can start to search for the nearest valid block to prove that they have indeed been working on the search. A stock may require about 40 or 50 zeros. It also depends on the miners in the pool.

Meanwhile, miners will continue to search for new blocks with hash blocks that are below target. In the search process, maybe they will find another block whose hash block contains fewer zeros. Yet it is still quite difficult to be able to prove that they have actually worked.

The pool manager runs the bitcoin node on behalf of the participant. Then collect the transactions and assemble them into blocks. The pool manager also includes their address in the coinbase transaction and sends it to all participants who are members of the pool. To prove that all participants have worked, they send out shares. When members in the pool find a valid block, the participant sends it to the pool manager.

In this case, participants who have found the new block are not given any special bonuses. So if other miners do more work from other miners in the pool, then the miners will be paid more. Although the miner was not the one who invented the new and valid block.

Mining Reward

Suppose that in pool mining there are three participants who are equally working on the same block. All three are given rewards that are commensurate with the amount of work that has been done each of the three participants. Although one of the participants found a valid block. One of the miners was paid for doing a lot of work. And usually there is no special bonus for who managed to find a valid block.

There are few options that can be done by the pool manager in calculating how much rewards are given to participants based on the shares they send. In general, we will have two simple choices.

Pay Per Share

In this model, the pool manager will pay the participants flat at each time sending shares on certain difficulties that have been worked on a block. So the miners can send their shares to the pool manager and get paid directly without waiting for the pool to find a block.

In some ways, this pay per share model is the best model for miners as participants in pool mining. So the miners will be guaranteed the money to be earned every time the participants find the shares of the work. While the pool manager will absorb all the risks that exist to pay the benefits, even if the block is not found.

Therefore, as a result of these risks, on the pay-to-share model, pool mining will charge a higher cost when compared to other models. While problems may arise on this model, miners do not fully have the incentive to send valid blocks.

That is, participants in the pool can remove the valid blocks found, but still have to pay the same rewards, and this could be detrimental to pool mining. Potentially, unreliable pool managers may attack pools to compete, and try to drive participants out of the pool business.


In the proportional model, do not pay participants on a flat per share. The amount of payments a participant receives depends on whether the pool has found a valid block. If the pool finds a valid block, then the results will only be distributed to the members, in proportion to how much work has actually been done.

In the proportional model, the miners sometimes still bear the risk that pool mining in general. But if the pool is large enough and many of its miners, then some variants often pool can find the block will be low enough, so the risk also becomes low for the manager pool. Because they only pay when they find a valid block.

Proportional models will also experience problems as well as in pay per share patterns. A miner's incentive to send a valid block is found, will trigger its earnings. So in this model, the pool manager will work more to verify, calculate, and distribute its wages. In addition to the two common models that exist in the pool there is another pattern, namely pool hopping.

Pool Hopping

Miners may be able to move between pools at different times. Let's say that a proportional pool can be effective for paying per share if a block is found within a short period of time. Then it will pay the result of the block reward, no matter how long the next block will be found.

Meanwhile, a smart miner, might try this proportional pool of mining early in the cycle before the block can be found. While the stock return is relatively high to switch (hop) to pool pay per share in the next cycle. When the expected benefits from the proportional pool mining are relatively lower.

Finally, a pool that runs a proportional pattern is not entirely practical. In more complex schemes such as pools with pay per share, a number of new shares are delivered. This is quite common, but in this case, in this pool the participants will also move frequently. This makes pool schemes vulnerable to different types of manipulation.

Start there Standardization

Mining pools first appeared in the GPU mining era in 2010. Then it became quite popular for obvious reasons. Lower the variants of the miners in order to participate. But nowadays it has become quite sophisticated. There are many pool mining protocols run. Even suggesting this pool protocol can be standardized to be part of Bitcoin. Similarly, the Bitcoin protocol for running peer-to-peer networks.

The pool mining protocol provides an API to communicate between the pool manager and the participants. The pool manager can send a message to all participants regarding the details of the block being worked on. Then the miners sent back messages related to the stocks they found.

Getblcoktemplate (GBT) has been formally standardized as a Bitcoin Improvement Proposal (BIP). Then there is another competing protocol, called Stratum. This protocol, has now become more popular in its implementation. And it has been proposed also in the BIP, but unlike the Bitcoin protocol itself. Especially associated with a slight discomfort in some pools. Every poool mining can only choose which protocol they like, and the market itself that defines.

While in some mining hardware, even also have supported this protocol. So that will limit its flexibility. But with this it will also make it even simpler for a miner, when starting to buy the hardware, and can easily join in pool mining. Just connect the device, start to connect to the pool and can directly start mining.

51% Mining Pool

In early 2015 most of all miners began to do lots of mining in pool mining. So the miners who do solo mining getting fewer. In June 2014, one of the largest pool mining,, has nearly 50% capacity in the Bitcoin network. Because Ghash tried to offer a lucrative offer to the miners who wanted to join in it,

This then creates fear, because it will potentially mastery the network, and began to arise any reaction to Ghash. Then in August 2014, the Ghash stock market immediately stopped accepting new entrants. Still, the two quarries control about half of the power inside the network.

Continues in April 2015, the situation begins to look slightly different, and dominance begins to fade slightly. When pool mining can acquire 51 percent in the network will be of special concern. While publicity over the issue of Ghash becomes pool mining trying to avoid problems. So nothing similar happens.

Today, miners and pools have successfully entered the Bitcoin exchanges and the pool protocol has also increased the ease of participants to more easily switch between the other pools. So pool mining has become dynamic. But it will still have to get attention in its long-term development.

Advantages and Disadvantages of Pool Mining

Keep in mind pool mining may be hiding over the actual mining power they have. A number of large mining organs may participate in some mining pools to hide their true size. And in Bitcoin this is called mining laundering hashes.

Up here, is pool mining a good thing? The advantage with pool mining is that mining will be easier to run. Including opening up opportunities for small miners to participate and engage in Bitcoin mining.

Without pool mining, small miners will be more difficult to do mining. Another advantage of pool mining is that there is one central pool manager in the pool network. Managers are tasked with block assembly and also make it easy to upgrade their network. Like upgrading its pool mining software. That way, all the participants in it can update the software used.

While the main disadvantage of pool mining, of course, could potentially be a form of centralization. And this becomes a big question, related to how much computing power that big pool mining operators have. Just like what happened in Although miners can be free to leave the pool and switch to another pool, it is unclear and can be calculated how often miners do it.

Another disadvantage, with the existence of this pool mining, will decrease the miner population that actually runs full node. Because before, all miners, whether miners big or small, they run their own node nodes to validate. And they also have to store the entire block chain, and validate each transaction.

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