Individual Mining and Mining Pools

What happens if the mining process turns out to be a little much for an individual miner? Coin Pursuit explains the concept of currency mining pools.

Let's be honest here—and a quick trip to any alternative currency forum will bear this out—the biggest incentive for data block mining is the potential rewards a miner can earn. Once a block has been successfully mined, the miner gets coins, a cut of the transaction fees contained within the block, or a combination of both. It's a good system; the miners get a little something, and transactions are verified and secured quickly. Best of all, the currency remains robust.

The good thing about being an individual miner is you get to keep 100% of the block rewards that are awarded when it's done. The bad thing is it can wind up being expensive, in terms of machine use, energy and time devoted to the process. When you use a slower mining algorithm, you may have to set aside a PC or laptop solely for the purpose of mining, or you'll have to purchase an application-specific integrated circuit (ASIC), which will be allocated for mining purposes alone. For many would-be individual miners, the aggregated potential expense can be intimidating.

That's why many digital currency investors join what are known as mining pools. These are formed when a group of miners get together and pool their resources in order to mine. The upside here is more mining can be completed in a shorter period of time, with the expense spread out over several people instead of just one individual. The downside is—just like the box of crayons in kindergarten—you have to learn to share. Any coin and/or transaction fees that are rewarded as a result of mined data blocks must be split equally among the mining pool's members. With faster processing and the higher number of blocks being validated, however, this can work out to be an enjoyable and modestly profitable venture.

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