What is Mining Pool?
Once the whole network's hashrate has increased to a certain extent, the probability of a single miner mining out a block becomes very low. This phenomenon has prompted some geeks on "bitcointalk" to develop a method that can combine a small amount of hashrate and jointly operate. The website established in this way is called "Mining Pool".
The significance of the mining pool is to improve the stability of Bitcoin mining and to stabilize the profits of miners.
How Does Mining Pool Work?
The miningpool is connected to the miner through a special mining agreement, and the miner is connected to the designated domain name and port of the mining pool through the mining software running in the machine. The miner maintains the connection with the mining pool server during mining, and synchronizes the work with other miners, so that different miners in the mining pool (corresponding to different mining workers) get different mining tasks and then share the benefits. The mining pool pays the miners profits to the miners’ wallet according to mine workers’ contribution on a daily basis. But because the payment has a service charge, the mining pool will set a minimum threshold. If your balance does not reach the minimum threshold of the mining pool, the mining pool will accumulate this part of profits. The amount is accumulated until the profits to be paid by the miner on a certain day is greater than the minimum threshold of the mining pool.
The picture above displays the minimum threshold for each cryptocurrency of Poolin.
The mining pool divides the blocks in accordance with job difficulty and sends them to the miners for different difficulty jobs. After each calculation is completed, the miners submit a share to the mining pool. When the mining pool verifies that there are no problems with these shares, it will accept and count the quantities. When the mining pool allocates profits, it allocates these new cryptocurrencies according to the shares submitted by each miner.
The biggest advantage of the mining pool is that the mining pool breaks through the geographical limitation and links the hashrate of the mining workers and mining farms scattered around the world together. The mining pool is responsible for packaging transactions, and the incoming miners are responsible for competing accounting rights. In theory, the greater the hashrate of the mining pool, the easier it is to mine the block. But just from the perspective of probability, each mining pool and miner enjoy the same probability of block out.
The mining pool is a fully automatic mining platform, that is, the miner is connected to the mining pool - the miner provides hashrate – the mining worker gains profits.
What are Payment Methods of Mining Pool?
The mining pool will integrate the unit miners' hashrate, and divide the difficulty of mining into many small tasks and send them to the mining workers. The mining workers will calculate according to the tasks, and at the same time submit the task answers to the mining pool, that is, submit the share we always say (a workload). When mining pool settles your earnings, you need to have a certain payment method to get mining profits. Commonly payment methods that we use include PPS, PPLNS, PPS+, FPPS, SOLO, etc. The allocation of profit in some of the payment methods will be linked to the luck of the mining pool.
The luck refers to the luck of the mining pool, which is equal to the actual number of blocks/the theoretical number of blocks*100%. For example, if you see a mining pool's luck is 200%, it means that you can theoretically mine n blocks in the past 24 hours but actually mine 2n blocks.
Main Payment Methods:
PPS（Pay Per Share）
Simply, PPS is a mode of working. The miners sell the hashrate to the mining pool to obtain fixed income. The mining pool is responsible for its own profits and losses. Because the mining pool bears certain risks, pool fee is relatively higher in the PPS mode.
Share refers to the task answer submitted by the miners to the mining pool. Profit is calculated according to the amount of shares submitted by the miners in the PPS mode.
For example: the miner's hashrate is 1T, hashrate in the whole mining pool is 100T, the total network’s hashrate is 1000T. It is generally clear that 1 block out every 10 minutes in the Bitcoin network, and the block out reward is 6.25 BTC. The hashrate of mining pool accounts for one tenth of the total network’s hashrate. The expected profit of the mining pool is 1.25 BTC, and the hashrate of the miners accounts for one percent of the hashrate of the mining pool. No matter whether the block out or not in the mining pool, the profit of the miners is 1.25 BTC according to the theoretical profit.
PPLNS（Pay Per Last N Share）
The profits will be allocated based on the number of shares miners contribute. This kind of allocation method is closely related to the block out (that is, the pool luck mentioned above). If the mining pool excavates multiple blocks in a day, the miners will have a high profit; if the mining pool is not able to mine out a block during the whole day, the miner’s profit during the whole day is zero.
In the short term, the PPLNS mode has a great relationship with the the mining pool's luck. It should be noted that miners joining a new PPLNS mining pool will find that the profits in the first few hours are relatively low. This is because other miners have contributed a lot of shares in this mining pool. The contribution of newly added miners is still very small, so the benefits of new miners are relatively low when paying dividends. This is because PPLNS has a certain lag inertia and periodicity. And the mining profits of the newly added miners will have a certain delay.
PPS+ （Pay Per Share + Pay Per Last N Share）
PPS+ is a combination of two modes above, PPS and PPLNS, that is, the block reward is settled according to the PPS mode. And the mining service charge /transaction fee is settled according to the PPLNS mode. That is to say, in this mode, the miner can additionally obtain the income of part of the transaction fee based on the PPLNS income model.
FPPS（Full Pay Per Share）
In this mode, both the block reward and the transaction fee are settled according to the theoretical profit.