A mining pool is a collective of cryptocurrency miners who combine their computational resources over a network to increase their chances of finding a block. The rewards are then distributed among pool members proportional to each miner's contributed hash power.
Why Pools Exist
Solo mining on major networks like Bitcoin is extremely unlikely to be profitable for individual miners. The probability of a single miner finding a block is vanishingly small. By pooling resources, miners earn smaller but consistent rewards rather than waiting months or years for a solo block.
How Pools Work
1. Miners connect their hardware to the pool's server.
2. The pool assigns each miner a portion of the work.
3. When the pool finds a block, the reward is split based on each miner's contributed work (shares).
Reward Models
PPS (Pay Per Share): Fixed payment per share submitted, regardless of whether a block is found.
PPLNS (Pay Per Last N Shares): Payment based on shares contributed during a window around block discovery.
FPPS (Full Pay Per Share): PPS plus a share of transaction fees.