Gigantic cryptocurrency mining pools serve the purpose of an economical mining venture so that people devoid of the rich resources required for mining can also contribute. Buying the subscription of a cryptocurrency mining pool can increase the yielded reward of mining for solo miners. However, as per reports, cryptocurrency mining pools operating at an immense scale do not benefit this market space.
But in actuality, some people favour this mining pool, whereas some are against them. In short, gigantic mining pools are not completely bad. In this article you will learn why some cryptocurrencies fail to gain traction even after a period of fast expansion. Let’s look at the negative impacts of large mining pools in the marketplace.
Gigantic machines and mining farms dominate the modernized mining industry. Undeniably, anyone is free to invest any amount of resources in the mining process. Still, such actions of popular companies have made cryptocurrency mining not appropriate for solo and small miners.
If you are a solo miner or an individual with very little money to invest in mining machines, these pools can act as a gold mine for you. But large companies see this mining pool as their competition as it has damaged the profitability of gigantic mining farms.
Some cryptocurrency experts have favoured the rise of mining pools and farms as these companies have improved the marketplace by an exceeding. Many mining pools even went public after the market value of bitcoin surged. As a result, stocks of this mining pool listed in the market have surged by 500% over the past year.
Developers suggest different consensus technologies diminish the dominance of cryptocurrency mining farms and mining pools. In addition, some technologies might limit the usage of application-specific integrated circuits in the future as it is one of the primary reasons large mining plants dominate the marketplace.
Why do these mining pools come into the market?
Theory conveys, any individual with a computing resource and internet can involve the equipment in mining. Making money with cryptocurrency mining is only viable on the proof of work consensus mechanism and not on proof of stakes.
With ethereum also projected on the proof of work consensus mechanism, the gas fees of the ethereum network are skyrocketing. So to reduce the gas fees, ethereum developers have decided to imply POS on the ethereum network.
The demand and incentives of bitcoin have experienced uncontrolled growth; the governance has turned to parties with more budget and computing power. As a result, cryptocurrencies underlying the POW consensus mechanism are majorly generated at a gigantic scale. Furthermore, the mining plants eliminate the existence and profitability of other miners and centralize the mining market.
With cryptocurrency mining becoming more centralized, small miners have no other option than to join a mining pool. The parent company of the majority of a cryptocurrency mining pool is a large organization contributing to the marketplace. For example, Bitmain is a giant in the cryptocurrency market, and its subsidiaries are ant pool and BTC top pool. Both of these mining pools are leading when it comes to hash rate.
Advantages and disadvantages of the mining pool
The advantages of buying a subscription to a cryptocurrency mining pool include rapid computing power processing and cost-efficiency. On the contrary, the disadvantage of cryptocurrency mining pools includes a third party governing the entire process, monthly and annual fees, threshold payout and transaction fees.
The proof of work consensus mechanism has turned cryptocurrency mining into a race. And faster processing is essential in the mining process. But, on the other hand, if a bunch of miners try to solve the puzzle with a collective effort, it will be elementary to decode the hashes.
There are no other solo miner options than a mining pool when it comes to cost-efficient mining ventures. With large cryptocurrency mining farms making it difficult for solo miners to perform mining, mining pools increase the cost efficiency of the mining venture. Moreover, the prospects of availing reward in mining with the pool are much higher than a solo miner mining without a dedicated mining machine.
But cryptocurrency mining pools have accounted for making mining more centralized, just like other large companies in the industry.