The Bitcoin universe has its own jargon, and learning it can make navigating the brave new world of cryptocurrency both easier and safer. One term you may have come across is “mining pool.” You can easily infer that it means a pool of miners, but exactly what miners and what’s in the pool.
Bitcoins are earned by solving increasingly complex algorithms, and the people who work to solve those problems are known as “Bitcoin miners.” In the early days of the currency, the algorithms were relatively simple so an individual with a reasonably fast computer could earn coins on their own.
As the algorithms became more complex, dedicated computers were developed strictly for earning Bitcoins.
But now, even those Bitcoin mining machines are becoming overwhelmed by the complexity of the algorithms, making the cost of equipment and the energy to run them impractical for most miners. The solution? Pool your resources with other Bitcoin miners for a share of the profits.
Joining a mining pool is like joining an office pool to buy lottery tickets. The more tickets your pool buys, the better the odds of picking a winner. Similarly, a mining pool has a better chance at solving algorithms and earning Bitcoins.
When you join a mining pool, you agree to do a certain amount of work to contribute to solving the algorithm block in exchange for a share of the profits. There are a number of pools that calculate their payouts using different formulas. These include simple pay-per-share methods, proportional payouts, and geometric methods that weigh payouts based on sets of variables such as how recent the shareholder has participated and when shares are awarded. The various formulas can get quite complex, so be sure you understand both the principles of mining and the payout methodology of the pool you join. You can check this Wikipedia article for a detailed look at how the various mining pools calculate their payouts.
Dozens of Bitcoin mining pools have been created since the currency was introduced. One of the largest is GHash.IO, a pool that also interfaces with the CEX.IO Bitcoin Crypto Exchange. Others include Eligius, BTCGuild, Discus Fish, Slush, Polmine, KnCMiner. Shop around for the one that meets your needs.
Amagi Metals encourages you to explore the exciting world of Bitcoin and other cryptocurrencies whether you mine them for yourself or buy them on the open market. They are not only a great way to isolate your assets from the vagaries of fiat currencies and the politics behind them, but are a practical way to safely transact business electronically with the thousands of businesses that accept them—a number that’s growing every day. You can even convert your government-issued money to Bitcoin at an increasing number of Bitcoin ATMs, including one right here on our premises.
Amagi Metals is one of the world’s largest traders in bitcoin with transactions exceeding $11 million. We’re also a world leader in global e-commerce among precious metals dealers and members of the American Numismatic Association, the Industry Council for Tangible Assets, and an affiliate of the American Open Currency Standard. Our web site, AmagiMetals.com, is available for information and orders 24/7, and expert advisors are here to help you in person at 800.882.8496, 8am-5pm Mountain Time.