Mining pools have become widely popular for mining among traders. In the mining pool, participants are paid on the basis of processing power they contribute. The more powerful their rig is, the more they are likely to earn. Well, now the question arises is- how is the contribution of miners calculated?
So, each pool has a dedicated payment method. But the majority of pools operate on two popular payment schemes- the PPLNS and PPS.
In this article, we will explore more in detail about these payment methods and will also learn about the differences between them.
Pay Per Last N Shares (PPLNS) is a popular payment method. It involves calculating payments on the basis of a number of shares submitted by the miner during a particular shift (the time is taken to identify one block). The PPLNS payout scheme relies on a shift system, which may be either time based or may include a total number of shares submitted by miners on the pool. Thus, the payment made to the miner is a % of shares they have been able to provide to the total shares (N).
However, the submission of shares during a round is subjected to be variable due to the involvement of luck. In PPLNS, the number of shares is fixed irrespective of the round boundaries. Here N is indicative of a fixed number of shares that are not dependent on luck. Usually, N is fixed to twice the range of difficulty. In this payment method, the more you mine, the more shares you earn. Hence, your shares increase with the increase in your hashes.
You only receive payment on getting your block found. For example, consider a lottery system; suppose you opt to contribute one ticket (share) to a total of 10 (N) tickets in your pool. So, if your pool wins a lottery (finds a block), then you will be paid 10 percent of the amount.
This payment scheme actually benefits loyal pool members with consistency rather than pool hoppers. This is because it does not offer “quick mine” on mining with a low amount on the round. The mining in this payment scheme is liable to differ in joining or leaving the pool by miners.
Pay per share is a direct payment method that provides you a standard flat payout for each share completed. The PPS payout scheme removes the “luck” factor from your payout. However, this method is likely to depreciate your earning per share by approx—5 %. You earn a fixed number of crypto coins per share you solve. Since there is no variable, the payout is fixed.
For example, consider the case of the lottery again. Suppose you are a miner and contribute one lottery to your pool operator for a total of 10 tickets. So, irrespective of your pool operators winning the lottery, you will be accorded with 10 percent of your block reward. Thus, this system works on statistically probable condition rather than on what occurs in reality. Now suppose you contribute a ticket and luckily it turns out to be a winning ticket. Even in this case, you will be paid 10 percent of the block reward.
All in all, what this system does is to eliminate “luck” and variance from the payout a miner earns. Complete risk of the variance involved is passed on to the pool operator. Thus, with this standard payout system, you earn 100 percent of your hash power at the end of the day. Additionally, there no risk for miners to get cheated by the pool operators.
There is no definite answer to this. Both payment schemes have their own share of benefits. PPS is preferable for miners who do not want to take the additional risk of variance or luck. Well, PPLNS is apt for those who desire to earn more than 100 percent and have less unlucky pools.
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