KoinlyticsA solo miner today has near-zero odds of finding a block. Pools combine hashrate across thousands of miners and distribute rewards proportionally. But 'proportionally' hides several payout schemes with different risk profiles.
PPS: Pay Per Share
Pool pays miner for every share submitted at a fixed rate. If block is found, pool keeps the reward; if not, pool eats the loss. Miner has zero variance. Pool absorbs it (and charges higher fees to cover luck).
PPLNS: Pay Per Last N Shares
When a block is found, the reward is distributed among all miners who submitted shares in the last N. If your pool has bad luck, you earn less. Long-term expected value = solo mining. Fees are lower.
FPPS: Full Pay Per Share
PPS + also distributes transaction fees. Popular for Bitcoin because tx fees are meaningful now.
Which one to pick
- Small miner, cash flow sensitive: PPS or FPPS. Predictable income.
- Large miner, patient: PPLNS. Lower fees, more variance.
What actually matters
- Pool fee (0.5-4%).
- Payout minimum (some pools require accumulating 0.01 BTC).
- Pool centralization: top 3 Bitcoin pools = ~65% of hashrate. Concerning.
- Geographic distribution and censorship risk (some pools filter txs).
Solana / Ethereum equivalents
Ethereum after The Merge: no mining. Staking pools (Lido, Rocket Pool) are the equivalent. Solana: no mining; only staking to validators.
The pool centralization problem
If two of the top three Bitcoin pools coordinate, they could theoretically censor transactions or attempt a 51% attack. This is why pool diversity is monitored closely by the community, and why solo mining is still discussed philosophically even though economically it's dead.