Cryptocurrency mining was once a fair, distributed way for all participants in the Bitcoin blockchain to earn BTC over time. However, large corporations have assumed control of most mining profits through the use of high-power mining machines and “crypto farms”. Mining pools provide an affordable and cost-effective alternative for individual or small-time Bitcoin miners.
As an active member of Egypt’s Mining City community, Salah Gomaa has been invested in crypto through pooled mining since 2017. In that time, he’s faced numerous challenges, including the collapse of his business during the Egyptian Revolution.
Through Mining City and the crypto industry, however, Gomaa has risen to become one of crypto’s most important champions. Gomaa loves cryptocurrencies and attending Mining City global summits – in fact, he hopes the next summit will be at his home country, Egypt.
Gomaa sees mining pools like those used by Mining City community as the next major trend in the crypto industry, especially as large mining corps continue to dominate the mining arena. Let’s explore whether mining pools will continue to influence Bitcoin’s future in a positive way with Salah Gomaa.
What is Crypto Mining?
Bitcoin or cryptocurrency mining is one of the foundational pillars for crypto tokens and the cryptocurrency industry as a whole. In a nutshell, crypto mining involves:
- Confirming transactions made using crypto tokens
- Adding the transactions to the blockchain
- Using advanced computational machines to solve cryptographic hash algorithms to confirm said transactions.
Each crypto mining process is comprised of two parts: first by solving a mathematical problem to verify transactions within a block that hasn’t been added to the blockchain, then adding a block to the blockchain to earn a reward.
Difficulties with Modern Mining
While cryptocurrency and Bitcoin mining began as an accessible way to add new Bitcoin to the collective global currency, things quickly evolved in a different direction.
When mining first came out, solo miners (individuals who had one computer dedicated to Bitcoin mining) could still compete and try to solve hash cryptographic problems against others. Over time, however, miners began using GPUs or graphics processing units to mine more efficiently.
In essence, GPUs were able to make more guesses for a hypothetical cryptocurrency block algorithm. In this way, individuals with GPUs were able to solve more equations and get more Bitcoin.
Things became even more tilted in favor of the “BTC rich” when ASIC miners came about. ASIC mining machines (ASIC stands for Application Specific Integrated Circuit) were invented specifically so that computational power could be maximized per watt of electricity used. Naturally, these machines were not and are still not cheap to acquire and run constantly.
Once big groups of Bitcoin miners or other organizations got their hands on enough ASIC machines, successful mining became practically impossible for solo miners or individuals without said machines.
Because of this, solo crypto miners are being driven out of the industry. Instead, large corporations with entire warehouses of mining rigs now dominate the cryptocurrency mining sphere. This stands in sharp contrast to the very idea of decentralized currencies like Bitcoin, which are supposed to be accessible to everyone.
However, small players in the industry and solo miners are taking steps to reclaim their power in the Bitcoin mining arena.
Mining Pools Explained
It’s all thanks to mining pools: groups of individual miners who work together to mine new Bitcoin or other crypto tokens depending on their network. Mining pools are essentially collectives that all try to solve the same equations or algorithms to validate a new block of crypto transactions.
If they’re successful and receive a reward, the rewards are then split or distributed based on how much work each miner in the mining pool contributed. In this way, rewards are truly proportional to the amount of effort put toward the current algorithmic problem. The more a miner in a mining pool works, the greater the potential reward he or she may receive.
In essence, mining pools take power back away from the bigger corporations and restore it to the hands of smaller Bitcoin miners since they band together and combine their computational power. They’re also a way for individuals who may not be embedded in the crypto market to get their start as a crypto miner.
For example, Salah Gomaa started in the cryptocurrency industry in 2017 as a cryptocurrency coach and then became one of the leaders of Mining City.
Mining Pool Models
There are several different mining pool models that have cropped up in recent years. These include:
- Proportional mining pools, which are the most popular. With this model, all Bitcoin or crypto-token rewards are split proportionately based on how much a miner provided to the problem in terms of compositional power. Rewards are only paid out after a Bitcoin block is created.
- Pay-per-share or PPS models, which have one major difference; rewards are paid out no matter whether a new Bitcoin block is created or not.
- Share Maximum Pay-per-Share or SMPPS models, which are similar to PPS models. However, miners don’t pay out more than what the total pool earned, even if they would normally receive a bigger reward of crypto tokens based on their contributed computer power.
Regardless of the model chosen, any miner can join a mining pool – which is one of this mining technique’s biggest strengths. Salah Gomaa says, “What you really need is knowledge”, not necessarily a massively powerful computer.
Mining Pools Pros and Cons
- Each individual miner has a higher chance of contributing to the creation of a new Bitcoin block and receiving a reward
- Mining pools provide a more stable way to get mining rewards
- Mining pools also mean that each miner has fewer compositional demands for their hardware and electrical grid
- All miners have to share rewards with other miners in the pool
- Each miner doesn’t have full independence from the pool
- Miners with more experience or excellent solving tactics may receive higher profits disregarding how much conversational power they contribute
Popular Mining Pools
At the time of this writing, several popular mining pools have launched in recent years. These include:
- Mining City
- Slush Pool
- Binance Pool
Mining City is one of the most popular mining pools available today. According to Salah Gomaa, what Mining City has achieved so far is, “just awesome” and that Mining City is, “changing a lot of lives”.
Will Mining Pools Remain or Become More Popular?
Ultimately, time will tell how mining pools shape the cryptocurrency industry at large or if they will stick around in the long term. It’s likely that mining pools like Mining City will remain important tools to help individual cryptocurrency miners receive their share of remaining Bitcoins and prevent larger corporations from controlling the Bitcoin network.