A Bitcoin Mining Guide to Choosing a Profitable Mining Pool

August 17, 2014 13:40 UTC

Many people don’t know about the different types of mining pools out there. Multi-pools allow for mining multiple currencies based on profitability, some only focus on promising new coins, and some only focus on one particular coin as their whole purpose. Not only are there different mining pool types to choose from, but the payout methods are different, with PPLNS, PROP, and PPS being the most popular.

This mining guide will clue you in on what pools are available to you, and what payout methods they use.

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A Guide to Different Cryptocurrency Mining Pools

Single Coin Mining Pools

Single coin mining pools are just what they sound like they are. This type of mining pool allows you to focus on mining a particular coin. People usually mine Litecoin or Bitcoin directly using a single coin mining pool. If you want to avoid conversion rates on exchanges and you have the right mining equipment to mine the particular coin, you can gather quite a number of coins this way. However, the trouble comes in when many people are mining on the same coin’s network that you are. The difficulty goes up to compensate for the added hashing power. This next pool type will show you how to get around that issue.

Multi-Pools

Multi-pools are a type of mining pool that allow you to switch automatically from coin to coin based on which coin is the most profitable to mine. They usually factor in a variety of things, such as the exchange rate, and difficulty for each coin. Once another coin becomes more profitable to mine, the pool starts mining a new coin. If you’re only interested in one coin in particular, some multi-pools allow you to mine on a separate port exclusively for that coin. CleverMining.com and MultiPool.us are a couple of the most-popular pools in this category.

IPOMiner

When you’re looking to invest in “pump and dump” coins or promising new coins, IPOMiner.com allows you to mine those coins based on their profitability. If you’re willing to work a bit to make more bitcoins from mining, most coins follow the same curve. If you look at exchange rate charts on CoinWarz.com, (click “All” on the “Zoom” area) you’ll see that most coins start with the value of the coin being in the middle of the chart. The price then jumps shortly after, and then it has a downward arc in value the rest of the coin’s life.

Mining with IPOMiner allows you to get in on mining the new coins right before that peak in price, so you can try to sell it for the maximum bitcoins. The difficulty of the coin is often low as it’s a new coin, and you can maximize your profits from selling at the right moment. Most coins will never sell for a value higher than that peak price. The only catch is that you need to keep watching the coin’s value and sell when you think it’s at it’s highest. You could still make a decent profit even if you sell a little after that peak.

Payout Types

In the mining world, there are many types of methods pools use to calculate your earnings. BitcoinMining.com lists 13 different payout methods a mining pool can use to pay its miners. Of these 13, PPS, PROP, and PPLNS are among the most popular. PPS pays you for each share you submit to the pool, and gives some payout stability, but transfers a lot of the risk to the pool operator. PROP pays all of the miners proportionately based on how many shares they’ve submitted to the pool, and PPLNS (Pay Per last N Shares) pays miners for the last number of shares they submitted.

Be sure you know how you get paid when you’re doing business with a mining pool, or you might miscalculate your potential profits from mining. It’s critical that you choose the right mining pool for the task you’re trying to accomplish. If you’re an ASIC miner, be sure your pool is set up with VARDIFF (Variable Difficulty) so you can get a more difficult target and not waste time submitting pointlessly low shares. If you have to set your difficulty manually, set it appropriate to your hash rate. Sometimes pool operators will allow you to request a certain difficulty for your miner for this reason.

Are you working on choosing a pool? Did this guide help you? Leave a comment below or join the discussion in the CCN forum.

Disclosure: I have two KNC Titans on pre-order, and I plan on using them on IPOMiner.com and multipool.us.

Featured image by Shutterstock.

Last modified: August 17, 2014 18:11 UTC

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