Imagine, for a moment, you have been hired to destroy a shed and haul off the debris. You could strike out on your own with a sledgehammer and a crowbar, drag all that wood into the back of a truck, and drive it to the dump. Wouldn’t it be more efficient to call a few friends who have tools of their own or who have a truck to help you haul away the debris, and then divide up what you were paid based on the work? Instead of taking a whole weekend or longer to get the job done, you could do it in a day or even, with enough help and willingness to split the pot, an hour.
This is, in essence, how bitcoin mining pools work. Bitcoin miners team up to do the complex computational work of creating bitcoin. Remember, bitcoin are bundles of cryptographic code, which makes them impossible to forge. That also makes them computationally intensive to create. Your smartphone is not going to mine a bitcoin while you check your email. Bitcoin mining is a vast, expensive enterprise, and a lot of people simply do not have the resources to go it alone.
By joining a mining pool, you are rewarded with a share of bitcoin commensurate with the work you do to find it. This is potentially lucrative, but unless you plan to commit extensive computational resources, you should not expect to get the biggest share of the pool.
Want to learn more about all things bitcoin? Subscribe to the Bitcoin Market Journal newsletter today!