What are the advantages?

The major benefit of a mining pool are the rewards.

Because of the pooling of resources there is a much higher chance of successfully mining a block. Which implies you have a higher chance of being rewarded coins.

When it concerns mining, everything boils down to chance and hash rates.

The higher the hash rate (or the higher the hash power) the better your chance for being rewarded.
When pooling hash power together, these chances further increase.

Another advantage by joining a mining pool is the process of mining becoming more cost-efficient. Due to the higher chances, and probability, of getting coins for the mining effort, the better your return of investment.

Your reward might be lower when joined up in a mining pool due to distribution of the rewards… but you have a better and higher chance to be rewarded in the first place when compared to mining alone.

What are the disadvantages?

There are a few disadvantages when working with a mining pool but these are greatly outweighed by the advantages.

Disadvantages are:

• Lower rewards
• Contribution fees (deduced from the rewards)
• Mining pool admins distributing rewards (less control)

Let us start with “Lower rewards”.

A mining pool drastically raises the chances for getting a reward. As a matter of fact it is advised to mine through a mining pool when it concerns great coins like Bitcoin, Litecoin and Ethereum. Solo-mining yields no rewards due to the amount of hashing power needed to successfully mine these coins. Joining a mining pool solves this at the cost of not reaping all the rewards. The rewards for successfully mining a block are distributed among all contributors, sometimes based on a variety of parameters like:

• Hashing power added to the pool
• Activity (hours active mining)
• ….

Sometimes a combination of such parameters can be implemented.

Second: Contribution fees.

Forming a mining pool brings costs. Upkeep of servers and data exchange. The running of the programs among etc.. From the rewards themselves can a contribution fee be deduced (or payed in advance depending on set-up).

Third: Distribution of rewards:

As can be deduced from the first point, you are reliant on the goodwill of the administrators for fairly distributing the rewards. The administrators also can hold all your mined bitcoin and opt to make changes. By joining a mining pool you have a bit less control about your rewards and need to make sure the pool can be trusted.