How Ethereum Block Rewards Work with a Mining Pool
As part of its Proof-of-Work consensus algorithm, Ethereum requires miners to solve complex mathematical puzzles in order to verify transactions and create new blocks. One key aspect of this process is the distribution of block rewards.
In traditional mining pools, each member contributes their own computing power to help find the reward. However, to win the first block, a miner doesn’t have to do any actual work on the Ethereum code—they just have to solve some complex mathematical problems in parallel with other miners using different codes. This makes it difficult for them to ensure that each candidate solution is unique.
The Unique Solutions Problem
For each solution to be unique and unshared across all nodes, the block hash must be computationally impossible for anyone else to duplicate. However, when multiple miners use different hash functions (often referred to as “hashes”), it becomes more difficult to guarantee that each solution is truly unique.
The Role of Mining Pools
Mining pools are organizations or individuals that pool their computing resources to solve complex mathematical problems in parallel with other pools and nodes on the Ethereum network. This allows them to increase their chances of solving a block, which in turn increases their chances of receiving a reward for it.
When multiple miners use different hash functions (e.g. SHA-256, Keccak-256), they can calculate the same solution to a particular puzzle. However, if multiple groups are competing for the same block reward, each group can attempt to solve the puzzle independently and simultaneously, increasing their chances of receiving a reward.
How Block Rewards Are Distributed
When a new block is created, it goes through several steps:
- Validation: The list of transactions in the block is verified by nodes in the network.
- Mining: The miner tries to find a valid solution to the puzzle (e.g., “what is the hash of this block?”).
- Block Creation: If the miner finds a unique solution, it creates a new block and broadcasts it to the network.
- Reward Distribution: The reward for creating a new block is distributed among all members of the mining pool.
In short, Ethereum block rewards are distributed among members of the mining pool using parallel computing and various hash functions. By pooling their computing resources, miners increase their chances of solving the puzzle, which in turn increases their chances of receiving the reward for creating a new block.