Before we go any further, let’s start with a simple question. What is a mining pool? The concept of a mining pool was first derived from Bitcoin. It is fair to say that without Bitcoin, there would be no such thing as a mining pool. In Bitcoin’s early years, hashrates were too low across the network, and anyone could mine Bitcoin using a home computer.
Later on, however, the enthusiasm for Bitcoin mining continued to rise, and more and more people joined the mining rush. The hashrate of the whole network mounted, as did the mining difficulty. At that point, it was unlikely to obtain stable income through home computer mining. Therefore, some institutions and platforms noticed the niche and began to consider gathering the hashrates of individual miners. Such a system that brings together miners and their hashrates is called a mining pool.
No matter the miners’ hashrates are high or low, as long as they are connected to the mining pool, they can reap benefits when the platform generates blocks. Of course, since the settlement method and transaction fee rate of each mining pool are different, as are the profits received by miners.
At present, the methods of payments for a mining pool mainly include PPS, PPLNS, PPS+, FPPS and SOLO, introduced as below:
Pay Per Share (PPS): The pay-per-share approach will liquidate the mining revenue based on the submitted hashrate, mining difficulty and block reward. After deducting the transaction fee of the mining pool, the settlement shall be made with the miners for their contribution to the block generation probability. This model allows for the least possible variance in payment for miners while also transferring much of the risk to the pool’s operator. Even if the pool does not mine any block for the whole day, the miners still make a constant profit.
Pay Per Last N Shares (PPLNS): The pay-per-last-N-shares method will calculate the miners’ reward based on their contribution to block generation in the past period of time. After deducting the transaction fee of the mining pool, the settlement shall be made with the miners. Under this approach, the miner’s profit is completely related to the actual profit of the pool, and if no block is generated, there will be no profit nor reward for the miners. In contrast to the PPS model, the actual revenue earned by miners under PPLNS is less stable.
Pay Per Share+ (PPS+): The pay-per-share+ approach is a combination of PPS and PPLNS. Under this approach, the block reward is settled according to the PPS model. However, the transaction fees obtained by the mining pool will be distributed to the miners according to their hashrate share.
Full Pay Per Share (FPPS): Like the PPS+ model, the full-pay-per-share approach also returns the transaction fees to the miners as an additional part of mining income. However, under PPS+ approach, the transaction fees are distributed according to the actual sum obtained by the mining pool, whereas the FPPS approach allocates the transaction fees according to the average transaction fee rate of the day. Due to different distribution rules, the two methods will lead to deviations in mining revenue.
SOLO: Under this approach, the miners conduct mining independently and receive the full rewards for the blocks generated, whereas the mining pool charges a certain fee for the operation and maintenance procedure. This method is more suitable for miners with a high hashrate share. If users have a relatively small hashrate share, going solo is not recommended.
Of course, mining revenue will also be related to the total hashrates, the overall operation capability, and the maintenance capabilities of the mining pool. When choosing a mining pool, users would better choose a leading brand that possesses high hashrates.
Then, according to the selected cryptocurrency, the subscribed hashrate share, and the transaction fee of the mining pool, the user’s daily income can be easily calculated. Taking ViaBTC Pool as an example, as of July 26, the BTC price is $39,930, the mining difficulty is 13.67T, and the transaction fee rate under the PPS model is 4%, so the daily income of 1TH/s is approximately $0.357.
The data above are from the official website of ViaBTC Pool. In case of any conflict, please refer to the latest update on https://www.viabtc.com/.