In a previous article[1], I wrote about the nature of decentralization versus centralization in Bitcoin mining and how to conceptualize that in a mostly qualitative sense. The article broke down the entire mining stack, from pool coordination all the way down to energy production to give a sense of the relationship between different layers of the mining stack and the potential to maximize decentralization, making the point that the further down the stack you go toward energy production, the more difficult and capital intensive it becomes to bring a meaningful level of decentralization to that layer.
In this article, I intend to go deeper into the topic of mining pools and miner coordination to facilitate independently-owned mining operations cooperating in an effort to mine blocks to append to the blockchain.
The Creation Of Mining Pools
Mining has come a long way since the days when you could simply click a button and reliably mine blocks all by yourself on a laptop CPU. Back then, it was effectively an amateur hobbyist endeavor that required no real capital investment or expertise, but nowadays it is a multi-billion dollar professional market with massive capital investment required at scale. It is a whole different ball game.
One of the natural consequences of this shift in the nature of the mining industry was the creation of mining pools very early on. When mining was effectively leaving a laptop running in the corner, the variance and unpredictability of when you would find a block was not really that big of a deal — eventually, you would and the power cost of keeping a laptop running was not really of economic importance.
Once things shifted to GPUs and ASICs, there was a material investment cost up front and a much more
