Solo Mining Versus Pool Mining Considerations
Mining is based on block rewards or coins that are given to the person or group of people that find the correct solution to the cryptographic hashing algorithm. As the difficulty in solving this mathematical calculation increases over time so does the computational power required to do so. The first person to solve the calculation gains the block reward, the rest receive nothing. This level of randomness creates issues and lumpy timing payoffs for the miners.
Thus some solo miners facing the uncertainty of payoffs become unable to cover the higher energy costs or the big capital investments needed for high-performance hardware. Thus miners form groups or pools in order to increase their chance of receiving the block rewards and lower the cost of doing so. There are various types of mining pools. Single Mining pools only mine for a specific cryptocurrency. Multi-mining pools allow the members to freely switch which cryptocurrency to mine depending on the profitability at that moment.
Advantages Vs. Disadvantages of Entering Mining Pools
Each mining pools has its own set of characteristics, leading to their own advantages and disadvantages.
Advantages of entering a mining pool:
-Lower costs of mining, due to economies of scale
-Smoother income distribution
-Generating a higher income potentially
Disadvantages of entering a mining pool:
-Block rewards have to be shared across the contributors
-Mining pools may suffer interruptions
-Pool reward structure may be unfavorable or be changed over time