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# System prepended metadata

title: 5.4 Mining Pools
tags: [Blockchain]

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# 5.4 Mining Pools
###### tags: `Blockchain`
The following notes are taken from [Coursera](https://www.coursera.org/learn/cryptocurrency/home/week/2)

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### Economics of Being a Small Miner
- Cost = $6,000
- Expected time to find a block = 14 months
- Expected revenue: $1,000/month
![](https://i.imgur.com/DgwykXe.png)

### Mining Pools
- **Goal:** pool participants all attempt to mine a block with the same coinbase recipient
    - send money to key owned by pool manager
- Distribute revenues to members based on how much work they have performed
    - minus a cut for pool manager

### Mining Pool Variations
- **Pay per share:** flat reward per share 
    - typically minus a significant fee
    - what if miiners never send in valid blocks?
- **Proportional:** typically siince last block 
    - Lower risk for pool manager 
    - More work to verify 
- **"Luke-jr" approach:** no management fee 
    - Miners can only get paid out in whole BTC 
    - Pool owner keeps spread

### Mining Pool Protocols
- API for fetching blocks, submitting shares
    - Stratum 
    - Getwork
    - Getblcoktemplate
- Proposed for standardization with a BIP
- Increasingly important; some hardware support

### Mining Pool History
- First pools appear in late 2010
    - Back in the GPU era
- By 2014: around 90% of mining pool-nased 
- June 2014: GHash.io exceeds 50%

### Are mining pools a good thing?
- Pros
    - make mining more predictable 
    - allow small miners to participate
    - more miners using updated validation software
- Cons
    - lead to centralization
    - discourage miners from running full nodes
Can we prevent pools?

