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September 23, 2020
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Remuneration methods used by mining mines Blocksats

Before starting the adventure with digital mining, we choose not only the preferred cryptocurrency excavator, but also the software in which it will be equipped. These are the first decisions. Every day, however, the miner devotes more attention to the mining platform and remuneration methods on which the platform is based. In the remainder of this publication, we will discuss the most common methods and try to bring them closer to the characteristics.

The choice of cryptocurrency mine

As a rule, the miner faces a decision whether he prefers to dig alone or as part of a mining platform. This dilemma is more widely discussed in this article. In practice, the vast majority of miners join mining platforms. One of the basic selection criteria is the amount of commission for platform services (mining pool). The amount of commission is often determined by the method of calculating remuneration. Before proceeding to discuss specific solutions we will present a general diagram. A miner who wants to extract, let’s start with Ethereum should be familiar with the available mining platforms that offer Ethereum mining on their servers.

One of the best prepared sites showing such possibilities is (https://miningpoolstats.stream/) – in a simple way 24/7 we can view a list of mines with data on the number of miners working within a given mine and the amount of computing power. There we will also find information on the amount of commission collected and server geolocation. We should choose the ones closest to us, thanks to which we will get a better connection, and as a consequence we will use our calculation units optimally. After selecting the mining platform, it’s time to join its ranks. Each of the mines usually comprehensively determines how to attach to it. Operators indicate the address of their servers and the types of connections required / supported.

The miner’s side is to follow the instructions – in the vast majority of cases the connection will be successful. Finally, if the previous criteria meet expectations, we proceed to checking the method of remuneration and the amount of fees charged by the operator.

PPS (pay per share)

One of the most popular methods enjoying a good reputation is PPS. The simplest payment model imaginable. In this mode, the miner sells his computing power to the mine. Partial payment is calculated for each correctly sent share to the mine and on this basis it is possible to estimate future revenues. In this system, the mine pays miners “in advance” for each correctly sent share, even if this particular share did not contribute to finding a solution (new block). Mine operators working in PPS mode assume that according to the law of variance, which you will read more about in this article, the variance will strive for 100% and the remuneration paid on a regular basis will be covered in the blocks found in the future.

This is an interesting solution, on the one hand, the operator shows confidence to its miners and rewards their work in advance, on the other hand, the platform should ensure the fastest possible servers, thanks to which it can achieve better performance than the predicted variance standard. For illustration, if the standard is 100 blocks, and thanks to favorable variance, the mine has found 105 blocks, then these 5 extra blocks go only to the account of the mine operator. Miners will always receive remuneration related to the number of shares sent. On the other hand, it should be remembered that the cryptocurrency network is a very dynamic structure and sometimes there are incomplete blocks with a reduced reward (uncle and orphan).

Variance also occasionally makes you wait, sending a series of long blocks to the mines. For this reason, mines working in PPS mode usually charge higher commissions for their services, in the range of 2-8%. These are the highest fees with all pay modes. Working in this mode is a greater risk for the operator, so it is understandable to charge more fees. For a miner, this is primarily a guarantee of receiving a fixed remuneration in real time, however, it is burdened with higher commissions. Miners looking for a safe haven should look for other methods of rewarding with lower commissions, but if they prefer dynamic changes between mines, then PPS mode is highly recommended for them.

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RBPPS (round based pay per share)

Salaries in this mode are calculated in the same way as in the PPS method, but paid only after the block is found by the mine and confirmed by the network. In the classic RBPPS version there are no payments for orphan (empty blocks). Commissions in this mode are lower than PPS, but usually higher than in other modes, 1-5%. A relatively rare solution, a compromise option between PPS and PPLNS.

PPLNS (pay per last N shares)

In the PPLNS method, the miner’s revenues are determined based on the last N number of shares that he sends to the mine and are closely related to the number of blocks found by the mine during this period. If the mine finds more blocks during the day, miners will receive a higher salary than in the PPS system, if the opposite is the case, then the salary will be lower.

The PPLNS method is closely related to variance. Due to the calculation of the payout taking into account the last “N” shares, it awards miners who work at the mine for a long time. The number of N shares is individually selected by the mine operator, the unwritten standard is the period covering the last 24h. Choosing the right length of the round is very important if you eliminate any dishonest attempts to receive remuneration with minimal effort. There are often known cases of “Pool hopper” – jumper miners who switch between mines in order to be added to the payroll list and then disconnect after a short time.

Thanks to their considerable computing power, they are able to generate large shares in the mine in the short term. If the mine does not protect itself with properly calibrated PPLNS – then its other miners will receive less pay at the expense of contingent miners. The right PPLNS takes into account the sum of shares from a longer time window and pool hopping is pointless. This is the most popular model because it provides financial security for the mine and protects miners against unfair practices from other network participants. Commissions are relatively low, the standard is 0-2%.

PPS + (pay per share + pay per last N shares)

Combination of the PPS and PPLNS methods. The block prize is divided according to the PPS method, while all additional transaction fees are compared to the PPLNS method. Thanks to this method, the miner can receive additional payment from transaction fees. Relatively rare remuneration system with moderate commissions: 1-4%.

FPPS (full pay per share)

The method works on the same principle as PPS with the addition that the miner also receives a share of transaction fees occurring in the network over a certain period of time. Due to the fact that transaction fees for most cryptocurrencies constitute a small fraction of remuneration (apart from temporary blockages in the bitcoin network) this method is not very popular. Average commissions 1-3%.

PROP (proportional)

After finding the block, the remuneration is divided among all miners in proportion to the number of shares sent. The biggest drawback is the phenomenon of pool hoppers described earlier, who through their unfair practices are able to underestimate the number of shares held by honest miners. This is a very interesting method of rewarding if we dig in a proven environment with a constant number of miners, for example, within one large server room.

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Author: Marcin Żywica from ŻET Technologies

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