The cryptocurrency mining sector has become an integral part of the cryptocurrency ecosystem. As the popularity of digital currencies increases each day, the number of miners is also growing. Although you can mine cryptocurrencies through several methods; solo mining, mining with multiple wallets, and mining pools, mining via mining pools remains the most cost-effective method. This is especially true when considering the factors that influence cryptocurrency mining profitability. Various computer software and hardware are engaged in the mining pool method to mine cryptocurrencies. Are you thinking of how to start a mining pool? You need some essential knowledge to create mining pools with more chances of success.
What is a Mining Pool?
A mining pool is a mini-network of miners on a blockchain that pools their computing power to verify blocks of transactions and get rewarded; the contributing miners share the verification work. Blockchains that operate the proof-of-work (PoW) mining protocol require computing power for calculating the complex mathematical equations for verifying blocks of cryptocurrency transactions.
How do mining pools work?
The PoW protocol randomly selects miners who provide the most computing power to show their proof-of-work. Therefore, the minimum computing power needed increases as the volume of transactions increases. That creates a challenge for miners with minor computing power; they may stay for long periods before getting blocks to mine. That is where mining pools come in.
When solo miners become disadvantaged, they can create a mining pool to increase their chances of finding blocks of transactions for verification. The mining pool uses the pooled computing power of miners from different locations to provide a sort of "united" PoW for the blockchain, which the blockchain algorithm can now select for verifying transactions.
Advantages of Mining Pools
- The chances of mining profitability increases
- Individual miners need less hardware
- The barrier to profitable mining is lowered.
- Consensus decisions to mine different cryptocurrencies
- There is fair task distribution which allows miners with lower hash rates to be profitable
- Lower maintenance and overhead
Thinking of how to create a mining pool? Here is how to go about it.
How to Create Your Own Mining Pool?
There are six short steps to creating a mining pool. Blockchain networks typically provide additional assistance for creating mining pools.
Create a user ID
To create your mining pool, you must first create a user ID. Open the pool portal of the blockchain and click the button for a new user ID. You'll be asked for personal information such as username, password, etc. For safety, ensure that your password differs from the password you use on the blockchain and for your wallet. Confirm the details and submit them to create your user ID.
Create a pool server
The next step is to create a mining pool server. First, you'll need some cryptocurrency. Then, open the server and select the one, e.g., Putty. Next, follow the on-screen guides/prompts to boot up and configure the server. Configuration is typically fast and easy. Once the configuration is done, the server will create an ID for you. Next, you can choose from any available server addresses and click submit to save. After saving the changes, you'll get a configuration message and a log-in button. You can now log in using your details (username and password). If you know how to set up a mining pool, you can guide other miners to join your pool.
Create a file with the desired name
You also need to create a server configuration file to start a mining pool. Server configuration files typically end with the "Conf" extension in that format: name.Conf. While you can choose any name for the file, it is best to use the name of the cryptocurrency to be mined. For example, you could use Monero.Conf, Litecoin.Conf, Bitcoin.Conf, etc. Next, save the file by clicking the save button or the floppy disk icon.
Set up payouts and other features
You'll also need payouts to set up a mining pool. Payout is an important feature that provides miners with their rewards. Next, you need to select a server system that provides the features you want in the mining pool. These features are payouts, webpage, stratum server, IRC channels, notifications, etc. The system you choose is essential as it will guide the mining pool. We recommend using the latest versions of the server and systems to get the best and latest features.
Set up your mining pool
It is easy to know how to set up your mining pool. Remember the WinSCP server? It is time to configure the config.json file with it. Simply open the WinSCP and locate the config.json file. Open it and complete the configuration using your details (username, password, site host, title, etc.). Follow the prompts to complete the configuration and save your new settings. After holding, the file is submitted to the host blockchain, and you can proceed to the last step.
Accept the pool configuration
The last step is to configure the settings for the mining pool. You can access that setting from WinSCP. Open WinSCP, choose the coin to be mined, then click enable. You'll have other open fields such as user password, payment protocol, etc. Once you are done, save and exit the configuration. You are now ready to start pool mining.
If you have set up your mining pool, you should be able to test the mining process. You should try the features and set up others as you want.
What Are The Requirements For Starting A Mining Pool?
As mentioned earlier, mining pools are some kind of mini-network on a blockchain. There are specific minimum hardware and software requirements for a mining pool to be run hitch-free. Thinking of how to set up a mining pool? You'll need these:
- 20 GB harddisk space
- Windows 10
- Computer processor hardware (CPU, GPU, or ASIC)
- Servers such as Putty, Ubuntu, VPS, WinSCP, etc.
- Installation packages from the blockchain
The processor is an essential requirement that is worthy of a special mention. Recall what we said about the processor being the hardware that supplies the computing power and, therefore, the hash rate?
It is a fact that processors with higher performance can deliver more hash rates for mining cryptocurrencies. As the minimum hash rate needed to mine a cryptocurrency increases, the types of processors used will also change. Bitcoin mining, for example, is only now possible with ASICs. But for Monero, ZenCash, Bytecoin, and some other cryptocurrencies.
Now you know how mining pools work. However, you need one other knowledge, perhaps the most important. How are rewards shared in a mining pool? How do miners get their tips?
How do Mining Pools Share Rewards?
Miners in a pool are responsible for locating blocks of transactions and bringing them to the pool for verification. Most times, the action leads to successfully validating a block, and sometimes, it doesn't because the pool has already left that block for another. That information is vital to our understanding of how mining rewards are distributed.
When a miner solves a block, proof of work is sent to the pool, and the miner receives a share. The share counts towards getting the next block. The more shares a miner receives, the more rewards the miner will get. Mine pool rewards are distributed in Shares, and there are two types of shares; accepted shares and rejected shares.
Accepted shares are given to miners when their proof-of-work is valid and counts towards discovering a new block. There are two conditions for a share to be accepted; the block must be verified successfully, and the proof must be submitted on time. There are four payment models based on accepted shares.
- Pay-per-share (PPS): The mining pool pays miners for every share they earn. Each time miners submit proof of work and receive a share, they get paid instantly.
- Proportional (PROP): In PROP, miners get paid based on the proportion of their shares to the total pool shares.
- Total Maximum Pay Per Share (SMPPS): In SMPPS, miners are paid based on the PPS model, but their payouts are limited to the total shares earned in the pool.
- Equalized Total Maximum Pay Per Share (ESMPPS): In ESMPPS, miners are rewarded based on the SMPPS model, but miners get equal rewards.
Rejected shares are mining shares that are rejected. There are four reasons why a share may be rejected:
- Invalid share: A share is deemed invalid if it is above the target. That is typically caused by software issues or incomplete configuration.
- Duplicate share: Duplicate shares are shares submitted more than once, leading to software glitches.
- Stale share: A share is stale if it was submitted late. That could happen due to slow internet speed or connectivity issues.
- Software glitches: There are countless reasons why a software glitch may occur. Glitches may result in rejected shares.
Mining Pool Fees
Fee distribution is an essential consideration in an open-source mining pool. To know how to make a mining pool, you must consider the pool fees. Fees are typically from 1% to 3% and are charged by mining pools to compensate for the service.
Best Cryptocurrency Mining Pools In 2021
There are hundreds of mining pools on a blockchain, and they are typically focused on mining the native coin of that blockchain. Are you thinking of joining the mining pool? Here are five of the best pools:
- Slush Pool: The Slush pool was created in 2010 and has mined over 930,000 BTC. Zcash and Bitcoin pool mines have over 760 and 15,000 miners, respectively. The mining fees are 0% when using Brains OS+; and 2% вЂ“ 2.5% for other OS.
- BTC.com: Thinking of how to join the bitcoin mining pool. Established in 2016, BTC.com mines Bitcoin, Bitcoin Cash, Ethereum Classic, Litecoin, Decred, and CKB.
- Binance Pool: Binance pool is owned by Binance, the Malta-based cryptocurrency exchange company. It was established in 2020 and mines coins such as BNB, XRP, ADA, BUSD, BTC, BCH, ETH, SOL, DOT, etc. The mining fees are 2.5%.
- KanoPool: Established in 2017, KanoPool primarily mines BTC. The fees are low at 0.9%. KanoPool is reportedly best for low-cost mining.
- AntPool: Antpool was created in 2014 and supports mining for BTC, BCH, ETH, GRIN, XMR, KMD, RVN, and LTC. AntPol charges a 2.5% fee.
Summary of Creating Mining Pools
Mining pools share the burden of cryptocurrency mining among pool members and give the members more chances of earning rewards. There is available information on how to create a mining pool, and anyone can join a mining pool at any time. Mining pools have the advantage of remote access, more effective hash rates, and hardware requirements for members.
Mining pools help to validate transitions and add new coins to the blockchains. They also secure networks and reward the miners who contribute their computing power. The direct relationship between mining power and rewards makes it essential for mining pools to attract miners with higher computing resources.
Mining rewards are shared with members in different ways; while many mining pools prefer the pay-per-share method, others may go for the proportional method. But share rewards also depend on if they are accepted or rejected. If you are thinking of starting a bitcoin mining pool, you start by making a checklist of the required hardware, software, and blockchain.
You can also choose any of the top mining pools currently mining. The coins they mine, the reward sharing, their mining fees, and the hardware requirements are some factors you should consider before choosing a mining pool. Mining pools offer a way to become profitable in mining cryptocurrency. It is better than solo mining!
In any case, whether solo mining or joining mining pools, using a hosting platform like Minery.io is a better approach to increase your revenues from crypto mining. With a bitcoin mining hosting service, you can mine cryptocurrencies with the best equipment without paying huge fees. Kickstart your profitable mining journey today!