Mining Pools

When mining Bitcoins, especially after the first year, the chance of solving a block and receiving the Bitcoin reward is very unlikely when mining alone unless you have millions of dollars of mining hardware. The solution is to join a mining pool. A mining pool is a collaborative system where all the miners in the pool work together to solve blocks. When a block is solved by the pool, the rewarded Bitcoins are divided amongst the miners based on how much mining power they contributed to the block. Instead of having to wait as long as a year or potentially forever to mine a block (based on probability), a miner gets regular payouts when using pooled mining. Almost all miners use pooled mining.

The most prominent mining pools are:

Slush's Pool

As of 8/5/13, BTCguild contributes 29% of all network hashing power, followed by 50BTC at 18%, Slush's Pool at 7%, and Deepbit at 7%.

One concern with pooled mining is the threat of a pool achieving over 50% of the entire network's hashrate. If a pool controlled over half of the network's mining power, the pool operator would be able to damage the blockchain by 'double-spending' transactions. BTCguild almost reached 50% in early 2013, but the pool operators increased the pool fee to incentive miners to go elsewhere.

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