What are mining pools and how do they work?

Satoshi Nakamoto dreamed of a world in which everyone could act as a miner to secure the Bitcoin network and can get freshly mined bitcoins as a reward. In reality, things played out a bit differently. As the Bitcoin network grew, individuals had to invest more and more into their computing power to be able to actually get meaningful rewards from the process. 

Simultaneously, the type of hardware needed to mine became more and more complicated and, consequently, hardware costs continued to rise for Bitcoin miners. 

As the Bitcoin network grew, individuals had to invest more and more into their computing power to be able to actually get meaningful rewards from the process. 

Slush, a user in the BitcoinTalk forum who was watching this trend, realised that it would be a good idea to join forces with other miners and form a ‘pool’ to increase the chances of receiving block rewards. So he founded “Slush Pool,” also known as ‘Bitcoin.cz Mining,” out of the Czech Republic on November 27, 2010.

Since the early days and the foundation of Slush Pool, Bitcoin mining has actually turned into an own industry of its own. Today, it is no longer possible to solve a Bitcoin block with a regular computer as the process requires special ASIC units specifically designed for the sole purpose of mining bitcoin and events such as Bitcoin halving highly affect miner revenue and increase the significance of transaction fees.

In a nutshell, ASICs stands for “application-specific integrated circuits” that have been designed for one particular use, such as mining of bitcoins.