For a long time we’ve not updated our Wiki page so here is our second entry to knowledge base. The purpose of this post is to explain about Solo Mining. Along with that this post will also address the pros and cons of solo mining. We hope a brief article like this will serve as a reference for beginners.
To understand solo mining you must first know what mining in cryptocurrency is and to understand that we hope you know how Blockchain works. To put it in simple words: Cryptocurrencies rely on blockchain. A Blockchain is simply a set of blocks with each containing information about transaction data. Each and every block contains a puzzle and is being solved by miners. To solve this puzzle a miner needs to dedicate a lot of computing power (Graphic Cards or ASIC). If the hash power which a miner posses is sufficient enough they mine solo or else they join a mining pool and get a share for what they contribute. Hope it helps. Now let’s see the definition to solo mining and how it works.
Solo Mining: How does solo mining works?
Solo Mining: As the name suggest it simply means mining solo which means the miner performs the mining tasks independently. In solo mining a users mines cryptocurrency without relying on a third party systems such as mining pools. That is instead of connecting to a pool a solo miners points out their mining hardware to their local Bitcoin wallet client (Bitcoin QT wallet) and starts finding blocks.
Solo miners are individuals who own a large mining equipment’s and they don’t require help from other miners to solve a block. To solo mine users connect to their own software (wallet) that talks to the coin network to request work. This work is a ongoing process and upon completing the work successfully a newly found block will be published to other nodes. For completing this task the miner will be rewarded. This type of mining is beneficial and is more reliable than pool mining because the block rewards are completely credited to the miner. Great! But how effective is solo mining compared to pool mining?
Also read: PPS and PPLNS mining pools
Is solo mining profitable?
The answer to the question “Is solo mining possible or profitable?” mainly depends on two factors such as network difficulty and the hardware power. Also it is very much like winning a lottery. You’ll either find a solution to the block in a short period of time or it will take years. The probability of finding blocks is lower when you are solo mining. However solo mining has the highest returns in the long run compared to pool mining. But as we said it depends on several factors and you must have patience. It is also demoralizing when you don’t find a block for a long duration. This is one reason why users who are new to Bitcoin or Altcoin mining scene will be advised to join a mining pool. While difficulty is one factor; inconsistency in payments is another factor.
Do not consider solo mining until unless you have a lot of computing power (hash power). Also note that CPU was replaced by GPUs and now GPUs are slowly being replaced by FPGAs and ASICs. So research the coin thoroughly and decide for yourself whether mining solo is profitable or not.
Here are some of the pros and cons of Solo Mining.
Pros and cons of solo mining:
There are some advantages and disadvantages to solo mining but in the end it comes to the type of coin you choose and the hardware power you posses.
Pros: In long run the rewards are slightly higher as there is no pool fee or transaction fee involved. Another advantage of solo mining is that you are not prone to pool downtimes which in such case you can always setup a backup pool to your miner.
Cons: In pool mining you can predict the payouts but that is not the case when you are mining solo. As it based on luck and since the network is dynamic you can’t really predict your mining rewards. You are paid inconsistently. Also there are chances in which a wrong decision can lead you to a lot of waste in time and resources.
The thumb rule is to not mine solo if your hardware is not capable of finding atleast one block in a day. If that is possible with your hashpower then you better mine solo. Since most of the Altcoins are basically similar to Bitcoin the procedure to mining solo is same and applies to all the coins out there. If you are curious then we have a comprehensive guide on how to solo mine Altcoins.