ViaBTC | Mining Farms and Mining Pools: Concepts that Could Even Confuse Seasoned Miners
During the recent period, the crypto market has remained sluggish. Facing the uncertain trends of crypto investment, many investors have turned their attention to an upstream crypto segment — mining. Compared with the volatile crypto market, mining has become a more prudent choice of investment against the weak market performance.
However, here at ViaBTC, we have noticed that the concepts of mining pools and mining farms confuse not only beginners but also veterans. It is true that many concepts relating to the mining industry are more difficult to understand than those about the crypto market. Therefore, today, we will guide you through these basic notions and help you learn more about mining.
Q1: What is mining?
Since many investors are still confused by the term “mining” and only regard it as a way of producing cryptos, we will first define what mining is.
Let’s illustrate the act of mining in the specific example of BTC mining. Bitcoin, a typical PoW-based cryptocurrency, releases a “mathematical problem” on the network in real time. Whoever solves the problem first will receive the corresponding BTC reward. Moreover, this problem cannot be solved via backward inference. Instead, it can only be solved through hash operations and random collisions. What this means is that miners have to keep running hash operations on the relevant device until they get the reward when the answer is found.
This problem-solving and reward-getting process is called mining. Essentially, such a computation process that involves massive collisions aims to prove that the miner has completed a certain amount of work, which earns him the corresponding block reward. This is the basic principle of mining under the PoW consensus mechanism.
Q2: What is hashing power?
During mining, one frequent term is called hashing power, also known as hashrate. As mentioned before, mining is essentially a process where miners keep running hash operations, while hashing power refers to the number of hash operations that can be performed per second (hash/s or H/S). What we call network hashrate indicates the number of hash operations performed per second by all miners in a network. The higher the ratio of individual hashrate to network hashrate is, the more likely you are to get block rewards.
Q3: What is a mining farm?
Running mining machines is energy-intensive and requires maintenance, while a professional miner may need to manage a large number of mining rigs. Therefore, such miners often choose to manage and maintain their mining rigs in an easy-to-manage area where electricity is cheap. The places built for the centralized storage and management of mining machines are called “mining farms”.
Q4:What is a mining pool?
As the network hashrate and the mining difficulty become greater, it has become difficult for individual miners with a small hashrate share to get block rewards. It is a luxury for them to receive steady returns under such circumstances. Therefore, some miners decided to combine their hashing power, which led to the creation of mining pools. A mining pool combines the hashing power of miners through the Internet, and miners could choose to connect their mining machine with the pool to provide hashing power.
At last, the pool will proceed with the reasonable distribution of profits based on the hashrate share of miners. This approach promises relatively stable rewards for individual miners. Compared with mining farms, a mining pool is a platform that combines miners’ hashing power through virtual programs. Thus, there is no physical venue where mining machines are managed and maintained in a mining pool.
For beginners, mining solo is far from cost-effective. Therefore, it is vital to choose an appropriate mining pool for steady returns. Dedicated to crypto mining for six years, ViaBTC offers a wide range of settlement models and has rolled out products & services such as Hedging Service and Crypto Loans to help miners profit.
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