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Solo vs. Pool Mining

When it comes to mining for Bitcoins or other crypto currencies, one of the biggest decisions you have to make is whether you are going to be mining them on your own (known as “solo mining”) or with a lot of others (known as “pool mining”). Each of these has their own pros and cons, which we are going to be looking at in this article. Please keep in mind that different coins work in different ways, although what is stated here should be general enough to encompass all of the various crypto currencies. As such, the information should be applicable for all present and future coins that are released.

What is a Pool?

The big question is probably going to be as to what a pool is. We know the term from other things, where it is a large grouping of something. But a grouping of what? When it comes to pool mining, the pool is the total hash rate of all miners. Whether someone has a hash rate of 1 KH/s or 500 MH/s, they are contributing to the pool. This is in comparison to solo mining, where a person with 1 KH/s would be their “pool” size, since their total hash rate would be equal to whatever they have on their own.

What Makes Pools Good?

Pools are good for when you can not solve blocks very often on your own. The easiest way to view the block solving is like a lottery. With increasing speed, you are getting more and more entries in to the lottery. When you are alone, you are getting less entries than if you work with others. In other words, by being in a pool you get more entries, as yours are added to everyone else's. This increases the chances that one of you will end up hitting the block, after which the money goes in to the pool to be split based on each person's hash rate. For example, if a block rewards a single coin and there are a hundred people in a pool with the same speed, it would reward each one with 0.01 coins.

You may look at it as being that you could just as well mine on your own and get less blocks solved but be able to keep the entire block when it is found. While this is true, there is still some risk here. First off, pools are often considered as being a way to just reduce variance, such that you are earning payments on a regular basis, although at a rate that is slower than if you were to do it solo. Often, people will estimate that this means you should earn the same amount over a long period of time as you do over the same period in a pool, but it does go a little bit further than that. For example, what if you are working on Bitcoin but have a slow rate? You could have an estimated time to find a block of many years. Would it be worth it to run a miner for years while hoping to find a block, or just join a pool and know you have at least some income coming in? This is where pools really start to shine.

What Makes Pools Bad?

When you are mining in a pool, you are subject to fees that are charged on all payments given to your account, fees for withdrawing and some pools even keep the transaction fees off each block. On top of this, you also risk the owner of the pool running off with everyone's money, of which there is nothing you can do to stop that. It ends up being a lot like trusting your money in online wallets, where the pool is your wallet. This means you have a real lack of control as to what is going on, and all you can do is hope that everything is working as you want it to.

When to Solo Mine

I am one for always mining in a pool, in some way or another. I personally do not do any solo mining unless I absolutely have to, but that is because I really try to avoid variance as much as possible. For those of you who want to run on your own, though, generally speaking the best times to jump in and solo mine are when new coins are first released. During this period there are often not any pools created yet, and the difficulty of finding blocks is low enough that you can usually plow through some of them on your own. When a pool is then created you can determine from your own profitability calculation what is better for you.

It is important to note that this still has its risks. When you are mining a new coin, you have no idea for sure if it will ever have value. If it does, you win. If it crashes, you lose. It is sort of a gamble in its own way, but it can most definitely pay off in some situations. As such, while I bring up the solo mining on new coins, I am not going to make a suggestion as to whether or not that is a good idea in this article. That is all up to you and what risks you deem worthy.

Picking Pools: Hash Rate

It is very important to pay attention to the current pool hash rate of any mining pool you are considering using. Also, look through their history to see how often they find blocks. The best plan I have found is to look for those with the highest hash rates and the most blocks found, as that will help to minimize the variance you experience while mining. Those that have lower hash rates will find fewer blocks, leading to bigger payments when blocks are found but also leading to higher variance (such as being paid every few days or something). Really, how you handle this is up to you; I just like to be with those that I know are finding a lot of blocks! Not to mention the more people that are using a pool, the better the chances are that they are a legitimate one and are paying out as they should be. While it is not always true, in most cases it is.

Conclusion

Generally, I think mining pools are the way to go. Even if you are able to mine blocks on your own, I do not like the variability experienced with solo mining, so I would go with a pool regardless. The reason for me is pretty simple: I like having a more stable income rather than having the chance to go with nothing or get a big payment. After all, with more people jumping in to the mining game and new hardware constantly being released, you may never be able to catch a block on your own. To me, that is just not a risk I am willing to take. Especially when I am paying for the wear and tear on the hardware I have, plus the electricity (or other energy) costs related to mining. Tack this on with the fact that really both methods should be about equal in the long term (say hundreds of years) and it makes a lot of sense! To see a big player that uses the same principle, look at AsicMiner. At one point they were by far the leader in hash rates, racking up 30%+ of the total Bitcoin network's hashing power. Even so, they had at least half of their hashing over on a mining pool, rather than solo. This is despite the fact that, mathematically, they should get a third of all blocks generated. Using a pool is just so much easier and more stable!

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