As there are many terms to such a large project like Elastos and Cyber Republic, we’ve decided to build a growing glossary of terms that can help the less technically acquainted understand better what the tech means and the impact it could have. This week we’re focusing on Mining Pools.
Term: Mining Pools
“Mining pools are groups of cooperating miners who agree to share block rewards in proportion to their contributed mining hash power.
While mining pools are desirable to the average miner as they smooth out rewards and make them more predictable, they unfortunately concentrate power to the mining pool’s owner.
Miners can, however, choose to redirect their hashing power to a different mining pool at anytime.”
A mining pool is essentially an agreement to join forces with several other miners, and split the rewards no matter who actually mined a block (struck gold). The organizer of the mining pool may have certain rules around the pool, but essentially, by pooling resources together there is a much more predictable and stable chance of earning income, even if the shared rewards significantly decrease each payout.
In theory, the average payout of mining alone versus being with a pool over a length of time would be roughly the same, but this doesn’t account to changes in the mining climate. What if your individual mining rig doesn’t ever mine a block because it’s too small to compete? Sure, it could happen that over ten, fifteen years, you mine a block all to yourself, but if the mining difficulty continues to increase, then your little rig may only have a near-impossible chance of mining a block as technology and mining difficulty continues to grow. Remember, PoW consensus mechanisms are based purely on raw power, and raw power grows with technology.
Plus, isn’t it nice that, if one mining pool isn’t working out for you for any reason, you could quit or join another? Especially with merged mining as with Elastos, where you could potentially earn mining rewards for multiple blockchains, switching to a pool that offers more rewards could be a major motivator.
That being said, since mining pools become so large, they are essentially centralizing their power. If one mining pool, for instance, acquires 51% of the entire hash power of a blockchain, they could decide to change the blockchain all on their own. This is the constant battle between decentralization and centralization, which is another reason that Elastos utilizes a hybrid consensus mechanism where Delegated Supernodes – trusted representatives – are the validators to the blocks mined.