Mining pool reward FAQ
How does mining in a pool improve my payouts?
What reward systems are there?
All reward systems use the concept of "share", a hash which is easier than the real difficulty and proves you have worked on finding a valid block. Your reward when the pool finds a valid block depends on the shares you submitted.
The main reward systems used are:
- Pay per share: Every share submitted receives a fixed BTC reward known in advance. This has virtually 0 variance and is thus good for beginners. However, the operator is subject to enormous variance, and will thus take a large fee to cover his risk. This means the expectation for participants is low, so it's not an attractive long-term solution. It is also vulnerable to sabotage where the miner simply withholds all block-finding shares, causing a loss to the pool operator.
- Proportional ("Share-based"): Every time a block is found, its reward is split between participants according to the number of shares they submitted. This method is vulnerable to a type of exploit known as "pool-hopping". In the theoretical limit, this can reduce the payout for non-hopping participants by up to 30% (in practice the decrease would be much less, but can still be significant).
- Score-based: Each share submitted receives a score based on its age, and the block reward is split between participants according to their score. Certain mining pools, like Slush's pool and BTC mine, are designed to be resistant while the one used by Continuum pool ("geometric method") is designed to be completely immune. The amount of bitcoins a miner may recieve from their effors will vary over time, due to the variance of this system.
Every share will give you, on average, the block reward (minus any pool fees) divided by the difficulty. For example, with a block reward of 50 BTC, 2% fee and difficulty of 240000, each share submitted will give on average 0.000204 BTC (204 μBTC).
On average, one share will be found for every 2^32, or 4.295 billion, hashes calculated. So at 1 MHash/s, you will find a share on average every 72 minutes.
How much will the pool decrease my variance?
If you constitute a significant part of the pool (say, above 1%), your variance will be roughly proportional to your portion of the pool. If, for example, you are 20% of the pool, your variance will be 20% of solo mining variance (a decrease factor of 5 times).
If not, your variance will not depend on the size of yourself or the pool, but rather on the scoring method used. For proportional, the decrease factor is roughly difficulty/ln(difficulty). For the geometric method the decrease factor is roughly (1 + 2*difficulty*c), where c is the score fee parameter used.
Increasing the size of the pool will always decrease the variance, but at some point you will have diminishing marginal utility.