How do mining pools work?

Question

I understand the following

Pooled mining is a mining approach where multiple generating clients contribute to the generation of a block, and then split the block reward according the contributed processing power. Pooled mining effectively reduces the granularity of the block generation reward, spreading it out more smoothly over time.

How does it work under the hood? What does the mining pool server do in terms of computation?

What do the mining workers do differently then if they would be mining solo?

Answer 1

The mining pool coordinates the workers. Think of it like a lottery. If you and your friends all buy tickets in the lottery the group has a better chance of winning. To be fair in the lottery example everyone should be rewarded proportional to the amount of money spent on tickets. So if there are 20 tickets for the pool one person purchased 10 and two people purchased 5 each - if one of the 20 tickets win the person who purchased 10 gets 50% and the other two get 25% each.

What a mining pool does is function as a coordinator for all the pool participants doing:

1. Taking the pool members hashes
2. Looking for block rewards
3. Recording how much work all the participants are doing
4. Assigning block rewards proportionally to participants

Miners mine differently by running pool software instead of the bitcoin client and just performing hashes for the pool.

Source: https://captainaltcoin.com/what-is-pool-mining/

Answer 2

What do the mining workers do differently then if they would be mining solo?

A miner that is mining within a third-party pool doesn't need the entire block chain. In fact it doesn't need to be connected to any peers of the Bitcoin network. These miners work entirely outside of the network and could technically just need to communicate to the administrator of the pool in order to mine.

The admin of the pool, on the other hand, needs to be exposed to the Bitcoin network and needs to listen for new blocks and validate transactions. The admin of a pool is a full Bitcoin node as described in Satoshi's paper.

How does it work under the hood? What does the mining pool server do in terms of computation?

What happens behind the hood is that the pool admin uses the combination of the miners computation, within her pool, as sort of an extension to her computational power. To do this there's specific software installed on the admin's server that takes care of making sure each miner is doing the work requested.

During a 10 minute block cycle, since most miners within a pool won't actually solve the block (only 1 miner on average will), the admin needs to make sure that miners are actually working on the problem.

To do this the miners solve a reduced difficulty hash, but one that could have also solved the actual hash, so it proves to the administrator they're actually working on the problem.

Answer 3

Mining Pools are close to SoloMining under the hood. Most computers and hardware would take years to generate a block because they come in groups of 25 Bitcoins.

However with a mining pool the bitcoin share goes to the server its self and then it calculates the ammount of work that your hardware personally did. They will then send you that ammount of bitcoins.

All that the pooled mining servers do is record your amount of work. The mining server is basically Solo Mining.