The Bitcoin (BTC) boom in 2017 revealed to the world the new ‘gold rush’ and made thousands of people understand that cryptocurrency would be the next significant step in the field of finance. Mining farms have suddenly created value while a miner profession became trendy.
Back in 2020, cryptocurrency mining is still profitable. Knowing your ‘mining rights’ might bring even more profit than expected. We are going to explain the most popular types of mining rewards.
Mining Pool Basics
Before we get deeper into differences between mining pools payout schemes, here are some essential definitions.
A mining pool is a united group of miners who share their computational resources (hashing power) over the network in order to find the next block and get a reward. Mining might be costly in terms of electricity and equipment costs. With combined hashing power, miners manage to find new blocks efficiently.
Miners are an important part of the blockchain industry as they maintain the proper work of a certain network, process transactions, and so on. When discovering a new block, miners get paid or rewarded by the network. Each mining pool provides miners with payouts according to a certain payment scheme.
Ethereum Stack Exchange provides a comprehensive explanation of a share:
‘In almost all mining pools, a share is a block “solution” not quite good enough to be published as an actual block, but still good enough that it’s really hard to find them. This means that shares can be used to measure how much work you’re doing, but just with much finer and more consistent granularity than actual block solutions, which are far too rare for small miners.’
A round is a time between the first provided share and the share that solves (discover) a new block.
Many pools show a luck percentage when reflecting mining essentials of a particular crypto. The luck score displays how lucky a pool was at finding a block.
- If it less than 100%, the pool is lucky. This means it takes less time than expected to find a block;
- 100 % of luck is a normal score;
- If the luck is over 100%, it is a bit of bad luck for the pool today. It’s taken more time to discover a block than expected.
Hashing power (also referred to as hashrate) is a speed at which a computer can solve difficult mathematical computations to find the next block. The higher is the hashrate, the faster you will discover the next block and get a mining reward.
PPS – Pay Per Share
Pay Per Share (PPS) payment scheme is pretty obvious – a miner recieves a reward for each share contributed. Each share is worth some amount of cryptocurrency. If a mining pool is unlucky and the block is not discovered, miners still get paid. For this reason, the PPS payment method is not always profitable for mining pools. However, to compensate expenses, mining pools charge pretty high mining pool fees.
Mining Pools: AntPool, F2Pool, ViaBTC
FPPS – Full Pay Per Share
Just like PPS, a Full Pay Per Share (FPPS) pays mining rewards for each solved share. However, unlike Pay Per Share, FPPS covers transaction fees as well. A mining pool has to process a transaction to send a mining reward to your wallet. Each network charges different transaction fees but once you find a mining pool that uses the FPPS payment scheme you don’t need to pay any.
Mining Pools: Poolin, BTC.com
A proportional payment method distributes a mining reward according to a number of valid shares provided during the round.
PPLNS – Pay Per Last (N)umber of Shares
The number of shares contributed is different each round due to the luck factor. It might take over 1,000 (or less) shares to discover a block. Miners get paid once the block is discovered. The PPLNS system doesn’t take into account all shares you’ve provided during the round. In this case, PPLNS looks at the last number of valid shares before the block was found regardless of the block boundaries. This is called a time window. When the block is discovered, the system checks for the last N of valid shares provided during a time window. Those miners who provided a valid number of shares during a time window, get a reward.
Mining Pools: AntPool
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Once you decide to join a mining pool, don’t forget to do your research on a pool’s essentials. Perhaps, the conditions provided by a pool don’t suit your needs or a mining pool charges high transaction fees. Find the one that works best for you and start your profitable miner career.
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