Before comparing the two ways of participating to cryptocoins mining, let’s explain what mining is. This article is unrelated to which cryptocoin you are going to mine and actually depends on how Blockchain (that is the communication protocol under Cryptocoins) works.
As referred by Wikipedia (se here to read the complete page), blockchain is “a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data“. It’s a big database distributed between computers participating to the specific blockchain network. This database is composed of data blocks which can be identity records, energy exchange, money tansactions, etc). It bases its success in its intrinsic trust level.
Miners are fundamental for bockchain to work, because each new block needs to be controlled, vilidated and crypted. These operations need high computational power and must be accomplished as fast as possible. So, Blockchain puts miners in competition and rewards only first miner which encrypt (hashes) a specific block validated by network.
For this reason, from Blockchain birth hasing capability has always been the value which measures mining performances. Also for this reason graphic cards, which have hardware specifically produced for video stream hashing, flied off during blockchain outbreak. When BitCoin startet to be exchanged also with phisical money, industries where attracted from this opportunity and started to produce mining specific hardware, currently also available in e-commerce sites (for example you can find in Amazon USB Mining Sticks or more powerful Antminers).
Anyone can participate to mining network with his hardware, but the less your hardware is powerful, the less probably you will be the first miner in blockchain network to hash your assigned block.
How mining pools work
Mining pools were born to aggregate low performance hardware owners in order to have a chance to compete with high performance farms. These pools aggregate hashing capability, dividing blocks assigned by blockchain and related profits.
This results in higher probability to be rewarded but also in lower rewarding for each block mined. Pool earning is in a small percentage “donated” when pooler takes away his profit and transfer it away from the pool (maybe to a personal protfolio or an exchange site).
How Solo mining works
Solo mining means that you are mining blocks directly from blockchain you are joining. This requires to you to have a portfolio before starting, toghether with mining software.
This results in lower probability to be rewarded but also in higher rewarding rate for each block mined.
Pool mining versus Solo mining
At the end, let’s analyse pro and cons for Solo and Pooled mining.
- Pooled mining generates a steadier income.
- Pooled mining can generate a 1-2% higher income (before fees, if any) due to long polling provided by the pools.
- Pooled mining allows to choose between many cryptocoins, so you can switch between different Cryptocoins experiencing what best fit your expectations
- Pool mining can suffer interruptions from outages at the pool provider (Pools are subject to DOS attacks and have other downtimes, too. Backup pools and solo mining can be configured for these cases.)
- Pooled mining tends to generate a smaller income due to fees being charged and transaction fees not being cashed out (There are zero fee pools. Until now, transaction fees are not cashed out by any pool)
- Pools might be part of attack scenarios.
- Solo mining is less prone to outages resulting in higher uptime.
- Solo mining doesn’t incur any fees.
- Solo mining tends to generate more erratic income.
- Solo mining wastes time due to only supporting getwork pull.
The first think to do is choose its CryptoCoin to mine. This must be based on:
- hardware available to mine
- coin mining policy (for example, CPU constricted coins are better suitable for low performance hardware)
- Costs for mining (energy, hardware, etc)
Once identified your Coin, you must decide if proceding with solo mining or pooled mining. In both cases you must have a mining software installed (see my guide How to mine cryptocoins with a Raspberry Pi 3 for Raspberry mining). In solo mining you must also install a portfolio, whose setup software is usually provided in your coin web site. In pooled mining you can accomplish this at a later time.
One of most famous mining pool is Minergate. This allows you to mine many altercoins and has a good availability (at least based on my experience). But you can also choose your mining pool just googling “<<yourcoin>> mining pool” (changing <<yourcoin>> with the name of coin you coosed).
In my next article I will show up some statistics on my mining activities.