The best methods of payment of Bitcoin mining pools

1 How does a Bitcoin mining pool work?

Mining Pools are groups of miners that unite their computational resources to work together in resolution of the Hash (hash puzzle) resolution of blockchain networks based on work proof (POW). Resolving it allows them to propose the candidate block to add the blockchain in order to obtain the reward and share it among the participants.

The pool combines and directs the computing power (hashrate) of the participants to increase their probabilities of success and share the gain obtained between them. The Pool charges a commission for its coordination and addressing service of the individual effort of the miners.

Hashrate is the amount of hashes that mining hardware sends per second. The nominal hashrate, the one shown in the Mining Equipment Manual, usually differs, for various reasons, from the effective hashrate measured by the pool. Among the factors that affect the effective hashrate is the latency of the network, the rejection rate and the objective-specific difficulty.

The reward obtained by the Pool is distributed among the miners in proportion to their contribution. This contribution is measured by Shares o Valid contributions that each miner sent to the pool server. A Share is a hash generated by a miner inside a pool, an attempt to solve a block Pool uses share as a unit to calculate the work done by a miner.

2 What are the payment methods?

Although there are various methods and payment models that mining pools use to distribute rewards, the most common are PPS, PPS+, FPPS, PPLNS and PROP:

Share payment (PPS)

The Share payment method, known as PPS (Pay Per Share), consists of paying the miner for a fixed amount for each share that sends to the pool, regardless of whether or not the riddle solution is found. This means that the miner receives constant and predictable income, since it does not depend on the collective result of the pool, but only on its own contribution in the form of Shares.

In this model, the pool operator assumes all the risk of not finding the solution. This implies that they must have enough reservations to pay the miners, even in times of low productivity. For this reason, Pools who use PPS usually charge higher commissions To the participants, and in some cases they do not include the transaction commissions within the reward, unless they use variants such as PPS+ or FPPS.

Payment for Share Plus (PPS+)

PPS+, or Pay Per Share Plus, is an improvement of the traditional PPS method. In this scheme, the miner receives two types of separate payments: a fixed payment for each valid share it delivers, as in the PPS scheme, and a proportional part of the transaction commissions included in the blocks that the Pool manages to find.

The key difference with the classic PPS is that the latter does not consider the transaction commissions. This makes PPS+ a hybrid system: It guarantees constant payments for the work of the miner, but it also gives an additional incentive if the pool is successful.

Full payment for Share (FPPS)

The FPPS method, or Full Pay Per Sharegoes one step further. Unlike PPS+ – where the transaction commissions are distributed only when the pool finds a block – on FPPS The commissions are distributed in advance and constant, regardless of whether or not a block is found. The pool operator totally assumes the risk of mining.

How does this work? The Pool calculates an average of the transaction commissions generated on the network for a recent period and adds them to the theoretical reward per block. From that combined figure, a fixed payment for Share is determined. Thus, the miner receives predictable and complete payments, which more precisely reflect the real value of the blocks in the network, without having to wait for the pool to effectively mine.

Proportional payment (prop)

The proportional method, or Pr, is one of the simplest ways to distribute rewards within a pool. In this scheme, every time the Pool obtains a valid block, the reward obtained (either only the base subsidy or also the commissions, as the case may be) is distributed among the miners in a proportion to the number of shares they have sent during that mining round.

That is, the more a miner has worked in that period, the greater its part of the payment. The main difference with the PPS is that in the own method there are no constant or guaranteed payments: If the pool does not find a block for some time, the miners do not receive any reward. This makes it a more volatile method, but also more transparent and easy to understand. It is common among smaller or community pools.

Payment for the last N Shares (PPLNS)

The PPLNS (Payment for the last N Shares) It is one of the most used payment methods in mining pools. In this scheme, the pool does not distribute the reward among all the shares sent since the last block found, but looks back to the last “n” Shares that were received, regardless of when the “round” of mining for that block began.

The reward of the block is distributed proportionally among the miners who contributed with Shares within that set of the last “n” share. The more valid shares a miner has sent within that window, the greater its share of the reward. On the other hand, those who connect just before a block is found and provide very little work, probably do not receive anything.

This method rewards constant participation and penalizes those who jump from one pool to another looking for better momentary payments (Pool Hopping). Although income can be irregular in the short term, in the long term PPLNS favors miners who remain active and stable in the same pool.

3 How do payment methods compare?

We can summarize what each payment method offers in the following comparative table:

4 Factors to consider to choose a payment method

Select the appropriate payment method In a mining pool it is not a trivial decision. It will depend on your profile as a miner, your objectives and your technical conditions.

Risk tolerance

Mining is an activity that can present fluctuating income, especially if you choose methods such as prop or PPLNS, which depend directly on the pool deciphering the riddle for the block. If you prefer regular income and you find it stressful to deal with uncertainty, methods such as PPS or FPPS are more appropriate, since they offer constant payments for each Share, regardless of the fate of the pool.

Income stability

The most stable payment methods, such as FPPS, guarantee fixed payments even in periods of low pool activity. This is ideal if you depend on mining as a frequent source of income. On the contrary, if you can tolerate a certain irregularity in exchange for a greater potential for long -term gain, PPLNS can be more profitable, provided you maintain a constant participation.

Pool size

Longest pools tend to find blocks more frequently, which especially benefits those who use methods such as PPLNS or PROF, which require success in the network to distribute rewards. In small pools, where the blocks are less regularly, these methods can generate more sporadic income. On the other hand, in a large pool, the activity continues to soften that variability.

Mining strategy

If you are a constant miner that remains connected in the same pool for long periods, the PPLNS model can be more profitable, since it rewards sustained participation. However, if you change Pool frequently (a practice known as Pool Hopping), methods such as PPS or FPPS are more appropriate, since they do not penalize changes or require accumulated time to calculate the reward.

Pool rates

The methods that guarantee constant income – like PPS, PPS+ or FPPS – are usually accompanied by higher commissions, since the pool operator assumes greater risk when paying miners even when blocks are not found. If you decide to use these methods, make sure the fixed income compensates for those rates. On the other hand, the simplest and most variable models, such as PROF, tend to have lower commissions, but also less payments.

5 What payment methods do the main pools use?

Next, we show you a table with the main mining pools along with the payment methods they offer. Keep in mind that it is a sector that is in constant development, so that methods and rates may be subject to changes.

6 What is an orphan block?

An orphan block is a valid block, but is not part of a block chain. It is created when two miners find a block valid at approximately at the same time and transmit them to the network.

The orphan block is initially accepted (confirmed) by some nodes (those geographically closer to the miner), but the other block accumulates more work proof: it is accepted by more nodes and becomes the father of the next. The orphan block is then marked as invalid because it does not belong to the longest chain. Miners do not receive any reward for said block.

If you want to learn more about this topic, we recommend you read this article entitled “What is a mining pool and how does it work?” We also invite you to read and share these articles from our cryptopedia: