Mining pools: how they work and why miners need them

Miners use computing equipment to solve complex mathematical problems required to confirm transactions and create new blocks in decentralized networks operating on the Proof-of-Work (PoW) consensus mechanism. Such networks include Bitcoin, Bitcoin Cash, Dogecoin, Zcash, Litecoin, and others.

Each miner has a certain amount of computing power, while the combined power of all network participants forms the network's total hashrate*. The larger the share of the total hashrate controlled by a particular miner or mining farm, the higher the probability that they will be the first to find a solution and receive the reward for a new block.

* Hashrate is a measure of the total computing power of a miner, mining farm, or an entire blockchain network. It reflects the number of computational operations the equipment can perform per second. It is measured in hashes per second (H/s) and its derivatives: terahashes per second (TH/s), petahashes per second (PH/s), and exahashes per second (EH/s).

This is why miners combine their computing farms into larger mining pools: it makes the probability of mining a new block much higher than mining alone.

Mining pool: what is it?

A mining pool is an infrastructure that combines the computing power (hashrate) of several miners. Each participant in a mining pool can have any number of cryptocurrency mining devices; the pool combines all their computing power.

Mining pools emerged due to the growing hashrate and network difficulty*, which are interconnected.

* Network difficulty is a parameter that determines how difficult it is for miners to find a suitable solution for creating a new block. The network automatically adjusts this parameter depending on the miners' total computing power. If the network hashrate increases and blocks are found faster than the protocol-specified the, the difficulty increases. If computing power decreases, the difficulty may, conversely, decrease. This allows the network to maintain the intended rate of new block creation regardless of how many miners participate and how powerful their equipment is.

In the first years after the launch of the Bitcoin network, a regular computer processor was sufficient for BTC mining. However, as difficulty and hashrate increased, mining cryptocurrency on ordinary PCs became increasingly difficult, and in 2010 the first mining pool, Slush Pool, now known as Braiins, appeared.

As mining difficulty increased, miners began using increasingly powerful equipment: first graphics processing units (GPUs), and later specialized application-specific integrated circuits (ASICs), also commonly referred to as "ASIC miners." These devices are combined into farms, whose computing power is then connected to mining pools.

As of September 2026, the total hashrate of the Bitcoin network exceeds 900 EH/s. This means that to have about a 10% chance of mining a new Bitcoin block, a miner or pool would need to control about 10% of the network's total computing power — approximately 90 EH/s.

The cost of such a farm would amount to several billion US dollars, making it virtually impossible for an individual miner to build one alone. This is why Bitcoin mining farm owners join mining pools.

Mining pools account for a significant share of the cryptocurrency mining market. According to MiningBoard, the three largest mining pools — Foundry USA, AntPool, and F2Pool — account for more than half of Bitcoin's hashrate. Foundry USA alone accounts for more than a quarter of the network's total hashrate.

According to MiningPoolStats, the total number of Bitcoin mining pools exceeds 150. At the same time, each of the top ten mining pools has a hashrate exceeding 30 EH/s.

According to 2025 statistics, mining pools controlled more than 95% of all mined Bitcoin blocks. This means cryptocurrency mining outside a mining pool is becoming a low-profit activity, and solo miners with small farms can successfully mine a block only in rare cases.

Difference between a mining pool and a mining farm

The terms "mining pool" and "mining farm" should not be confused. A mining farm is a collection of cryptocurrency mining devices that, as a rule, belong to a single owner or organization.

Mining pools involve numerous independent participants who may be located in different parts of the world but are united by a common goal — to outperform competitors and receive the coveted block reward.

In other words, a mining farm refers to individual cryptocurrency mining, while a mining pool requires the collective work of its participants.

How do mining pools work?

A mining pool provides a platform through which individual miners connect to a server using a specialized cryptocurrency mining protocol, such as Stratum.

The mining pool platform distributes work among all connected miners, providing individual participants with block templates to process. If one of the participants finds a block, the mining pool receives the reward to its wallet. The reward is then distributed among the mining pool participants in proportion to their contribution to the total computing power.

Advantages and disadvantages of mining pools

One of the main advantages of mining pools is a steady and relatively predictable income, as participants can be confident that they will receive compensation for their computing work even if their own farm was not the one that mined the block.

In addition, a mining pool makes digital asset mining accessible even to owners of farms with low computing power. With solo mining*, there is no guarantee that the owner of a mining farm will ever mine a block and receive a reward for it.

* Solo mining is independent cryptocurrency mining without participating in a mining pool. A miner uses only their own equipment and competes with the rest of the network to create a new block. In the Bitcoin network, solo mining with a small farm effectively becomes a lottery: its hashrate represents a negligible share of the network's total computing power, meaning a miner may operate for years without mining a single block.

However, mining pools also have disadvantages. A mining pool charges fees deducted from miners' rewards that can reach 4%, causing participants to lose part of their income.

Counterparty risk also exists: the mining pool receives all rewards directly into its own wallet and is responsible for distributing them. As a result, mining pool users may encounter fraud or suffer losses if the mining pool goes bankrupt.

Finally, mining pools may experience technical failures that can cause mining equipment downtime and, consequently, a loss of part of the income, affecting all participating miners.

Criteria for choosing a mining pool

Mining pools differ in how they distribute rewards. The following payout formats are among the most common among mining pools:

1. PPS (Pay Per Share) — the most popular format with fixed and guaranteed income, under which rewards for a mined block are distributed among all mining pool participants in proportion to their share of the computing power;
2. FPPS (Full PPS) — a more advanced Pay Per Share model under which participants receive not only the block reward but also a share of the income earned by the mining pool from transaction fees;
3. PPLNS (Pay Per Last & Shares) — a model in which payment is made only when a participant in the mining pool mines a block.

Some mining pools, such as Antpool, ViaBTC, F2Pool, and EMCD, support several payout models and let users switch between them. You can find information about which payout models a mining pool supports on its official website. A complete list of mining pools is available on MiningPoolStats and similar websites.

When choosing a mining pool, the following criteria should also be considered:

• Minimum withdrawal threshold and minimum withdrawal period for crypto assets. Some mining pools set a withdrawal threshold of up to 0.005 BTC, which means miners with a low hashrate may have to wait a considerable amount of time before they can withdraw their funds;
• Server locations. The closer the mining pool's servers are to the miner's equipment, the lower the latency when exchanging data. This helps ensure more stable operation.
• Mining pool reliability. Assess how consistently a mining pool makes payouts and whether the company provides reports.