Crypto Gloss

Bitcoin Mining Pools

Solo Bitcoin mining in 2024 is essentially a lottery: with global hashrate at 600+ exahashes per second, a single ASIC miner running at 100 terahashes would expect to find a block once every 480,000+ years. Mining pools solve this by aggregating thousands of machines under a single cooperative entity — splitting block rewards proportionally among all participants based on the “shares” (partial proof-of-work solutions) they contribute. The result is predictable, steady income for small miners at the cost of slightly lower average rewards (pool fees) and increased centralization risk at the pool level.

Why Mining Pools Exist

The Variance Problem

Bitcoin’s mining difficulty adjusts every 2,016 blocks (approximately 2 weeks) to maintain an average 10-minute block time. At current network hashrate, the probability of any single miner finding the next block is:

p = (miner hashrate) / (total network hashrate)

For a miner with 1 PH/s (petahash) in a 600 EH/s network:

p = 1 PH / 600,000,000 PH = 0.00000000167 per block attempt

Expected time to solo mine a block: approximately 3,400 years

Even industrial mining operations with 100-1,000 PH/s face years between solo block finds. The variance makes solo mining financially impractical for all but the largest operators.

Pools solve variance: By pooling hashrate, a 1% pool with 6,000 PH/s finds a block approximately every 16 minutes on average. Individual miners within the pool receive small, frequent payments proportional to their contributed work.

Pool Reward Structures

Pay-Per-Share (PPS)

Mechanism: The pool pays miners a fixed amount for each valid “share” submitted, regardless of whether the pool has found a block. The pool operator takes on all variance risk.

Formula: Payment per share = (Block Reward × Miner Share Difficulty) / Network Difficulty

Pool fee: PPS pools typically charge 2–4% fees to compensate for taking on variance risk.

Best for: Miners who want completely predictable, per-share income. Cash flow is smooth regardless of the pool’s block-finding luck.

Variants: PPS+ includes transaction fees in the calculation; FPPS (Full Pay-Per-Share) ensures miners also receive proportional transaction fee revenue.

PPLNS (Pay-Per-Last-N-Shares)

Mechanism: When the pool finds a block, it distributes the reward among miners who submitted shares in the last N shares (a sliding window of recent work). Miners who submitted shares but weren’t in the window receive nothing for those shares.

Pool fee: Typically lower (1–2%) since the miner bears some variance.

Best for: Dedicated miners who run consistently. Miners who join a pool temporarily (“pool hoppers”) are penalized in PPLNS.

Example: If N = 1,000,000 and a miner submitted 10,000 of the last shares, they receive 1% of the block reward.

SOLO (Mining)

Some pools offer “solo mining mode” where individual miners use the pool’s infrastructure (stratum servers, monitoring) but keep 100% of any block they personally find (minus a small infrastructure fee).

Best for: Miners with very large operations (100+ PH/s) where individual block finding probability makes solo viable.

Major Mining Pools (2024)

Foundry USA

Overview: Foundry USA is the largest Bitcoin mining pool by hashrate as of 2024, consistently controlling 27–33% of global Bitcoin hashrate.

Parent company: Foundry (a subsidiary of Digital Currency Group / DCG, Barry Silbert’s holding company).

  • Founded: 2019
  • Headquarters: Rochester, New York
  • Model: FPPS (Full Pay Per Share); 0% pool fee (subsidized as a service to attract US institutional mining customers)
  • Unique features: Also provides equipment financing, hosting services, and hash power advisory for institutional miners
  • Bitcoin mining significance: Foundry’s dominance made the US the world’s largest Bitcoin mining jurisdiction by 2022 (following China’s 2021 mining ban)

Hashrate concentration risk: At 30%+, Foundry approaches the theoretical threshold where pool operators could theoretically attempt a 51% reorganization attack (selfish mining) — though the economic incentives strongly disfavor actual attacks. The concentration has been flagged by Bitcoiners as a decentralization concern.

AntPool

Overview: Operated by Bitmain (the world’s largest ASIC miner manufacturer), AntPool is consistently the second-largest pool and often competes with Foundry for the #1 position.

  • Parent: Bitmain Technologies
  • Founded: 2013
  • Headquarters: Beijing, China (operations global)
  • Fee: PPS+, 4% fee

Bitmain’s vertical integration: Bitmain manufactures ASICs (Antminer series), operates AntPool, and runs industrial mining farms — giving it influence at every level of the Bitcoin mining supply chain. Critics note this creates conflicts of interest and centralization risk.

China transition: AntPool operated majority of its hashrate in China until the 2021 mining ban. It has since diversified to Kazakhstan, US, and UAE-hosted operations.

F2Pool (Fish Pool)

  • One of the oldest continuously operating pools (founded 2013)
  • Consistent 10–15% global hashrate
  • Large presence in China (continued via VPN/relocated operations post-ban)
  • Known for mining the final pre-halving block; F2Pool CEO Mao Shixing is a prominent mining industry figure

ViaBTC

  • Founded 2016; affiliated with Bitmain but independent operations
  • ~8–12% global hashrate
  • Notable: ViaBTC was the mining pool that mined the first Bitcoin Cash block in 2017 during the BCH hard fork, reflecting its alignment with the large-block camp

Binance Pool

  • Launched 2020 by Binance exchange
  • ~5–10% global hashrate
  • PPS+ model
  • Strategically important as part of Binance’s vertical integration of crypto infrastructure

MARA Pool (Marathon Digital Holdings)

  • Strategic pool operated by MARA (Marathon Digital Holdings, NASDAQ: MARA)
  • Industrial-scale public company miner; one of the largest publicly-traded pure-play Bitcoin miners
  • Mines primarily for Marathon’s own corporate Bitcoin holdings

Braiins Pool (formerly Slush Pool)

  • The oldest continuously operating Bitcoin mining pool (founded 2010 by Slushpool)
  • Now operated by Braiins, which also developed Stratum V2 (the next-generation mining communication protocol)
  • ~3–5% hashrate; smaller but historically significant

Pool Concentration and Centralization Risk

The 51% Attack Concern

Theory: If a single entity controls >50% of Bitcoin’s hashrate, they can theoretically:

  1. Double-spend: Spend Bitcoin in a transaction, then mine a private chain that doesn’t include that transaction, and release it when it’s longer than the public chain — reversing the spend
  2. Block specific transactions: Refuse to include transactions from targeted addresses
  3. Selfish mining: Gain outsized block rewards by withholding blocks at strategic times

Reality check: The economic cost of a 51% attack at current hashrate (600 EH/s) would require purchasing and powering approximately 300 EH/s of ASIC compute — a capital cost of $10+ billion — while destroying the most valuable asset (Bitcoin’s security/credibility) that would make the attack worthwhile. Pool operators attack at their own coins’ expense.

The pool vs. miner distinction: Mining pools don’t own the hashrate — individual miners do. Individual miners choose which pool to contribute to, and this choice is made for economic reasons (fee, payout reliability). If a pool began acting maliciously, miners would switch pools within hours.

Geographic Concentration History

Pre-2021: China dominated global Bitcoin hashrate (60–65% of global hash). The Sichuan hydropower regions were especially valuable — cheap electricity from seasonal hydroelectric generation. Mining “bans” in Sichuan in summer 2021 (preceding the full national ban) caused Bitcoin’s hashrate to drop ~50% within weeks.

The 2021 China Mining Ban: In May-June 2021, China issued nationwide regulations effectively banning Bitcoin mining. This triggered the “Great Mining Migration” — one of the most significant events in Bitcoin mining history:

  • 50% of global hashrate went offline within 2 months
  • Bitcoin’s difficulty adjusted down by 28% (largest downward difficulty adjustment since 2012)
  • Mining operations physically shipped tens of thousands of ASICs out of China to Kazakhstan, US, Russia, and Canada
  • By December 2021, US hashrate had grown from ~10% to ~35% of global total
  • Kazakhstan briefly became the second-largest Bitcoin mining country

Stratum V2: The Protocol Upgrade for Decentralization

The standard mining communication protocol (Stratum V1) has a critical centralization flaw: miners receive pre-constructed block templates from pool operators. Pool operators decide which transactions go in blocks — not miners.

Stratum V2 (developed by Braiins) addresses this:

  • Miners can select their own transaction set (reducing pool operator censorship ability)
  • Encrypted communications (preventing ISP surveillance of mining activity)
  • Reduces latency
  • Allows miners to signal pool preference while constructing their own blocks

Adoption: Still limited in 2024 but growing. Stratum V2 adoption would meaningfully decentralize mining at the transaction selection level even if pool hashrate remains concentrated.

Transaction Fee Revenue and Ordinals Impact

Historically, miner revenue = block subsidy (currently 3.125 BTC post-April 2024 halving) + transaction fees (typically 5–15% of total revenue).

Bitcoin Ordinals and Blob inscriptions (2023–2024): The emergence of Bitcoin Ordinals (arbitrary data inscribed onto satoshis) created unprecedented fee markets:

  • April 2023: Ordinals-related transactions temporarily push average fees to $31/transaction
  • April 2024 (halving block): The halving block included a Runes protocol genesis transaction; miners earned approximately $2.6M in fees for that single block — more fee revenue than any Bitcoin block in history
  • Mara Pool specifically mined a record fee block following the 2024 halving

Implications for mining economics: If Ordinals/Runes inscription activity and Layer 2 demand sustain high fee environments, mining becomes economically viable post-subsidy-dilution — the long-term Bitcoin security model that the community has hoped would emerge.

Research

Rosenfeld, M. (2011). Analysis of Bitcoin Pooled Mining Reward Systems. arXiv:1112.4980, December 2011.

Cambridge Centre for Alternative Finance (CCAF). (2024). Cambridge Bitcoin Electricity Consumption Index (CBECI) — Mining Pool Distribution. University of Cambridge Judge Business School, live data platform cbeci.org.

Gencer, A.E., Basu, S., Eyal, I., van Renesse, R., & Sirer, E.G. (2018). Decentralization in Bitcoin and Ethereum Networks. Proceedings of the 22nd International Conference on Financial Cryptography and Data Security.

Bendiksen, C., & Gibbons, S. (2019). The Bitcoin Mining Network: Trends, Average Creation Cost, Electricity Consumption. CoinShares Research, June 2019.

Bitcoin Wiki Contributors. (2023). Stratum Mining Protocol and Stratum V2 Specification. Bitcoin Wiki, stratum.work documentation.