How mining pools distribute rewards? PPS vs FPPS vs PPLNS

When placing a new order on NiceHash hash-power Marketplace, you must be careful to pick the right pool that suits your order.

In this guide, we will take a look at different payment methods (or reward systems) provided by mining pools and how they could affect your profits.

There are many different payment methods available, but we are going to throw some light on the most common ones:

• PPS - Pay Per Share
• FPPS - Full Pay Per Share
• PPLNS - Pay Per Last (N)umber of Shares

Pay-Per-Share (PPS)

This payment method is pretty straightforward. You get paid for each valid share contributed. Each share is worth a certain amount of BTC or any other mineable cryptocurrency.

Share worth is calculated based on the probability of the number of shares needed for a pool to find a block. If the pool statistically needs to send 1000 valid shares to find one block or 12.5 BTC (at the moment of writing), then each share is worth 0.0125 BTC. As the network difficulty changes, the price for each share is changed too.

It is worth noting that you will always get paid with the PPS payment method, no matter if the pool finds a block or not. This means that the pool can lose money if the pool luck is low, or earn money if the pool luck is high. Statistically, pool luck should be around 100%. (higher percentage equals higher pool luck).

IDEAL ORDER FOR PPS:  Low priced order for a longer period of time, which might not be mining constantly, but just when the price drops and attracts miners.

Full Pay-Per-Share (FPPS)

Full Pay-Per-Share or Pay-Per-Share Pus(PPS+) - these two are the same - they are very similar to ordinary Pay-Per-Share; the only difference is that the pool will also pay a transaction fee reward that is included if the block is found.

Typically when a pool finds a block, they split the BTC reward to the miners, but with the block reward, there also comes a transaction fee reward. This reward is collected by each transaction done on the blockchain (the fee you have to pay when making a transaction). With Full Pay-Per-Share, the pool will also pay the transaction fee rewards to the miners. For example, the Bitcoin block at depth 603308 had a fee reward of 0.49475167 BTC + 12.5 BTC block reward. (source: https://www.blockchain.com/btc/block/603308)

IDEAL ORDER FOR FPPS: Low priced order, which might not be mining constantly, but just when the price drops and attracts miners (lower price).

Pay-Per-Last N Shares (PPLNS)

Pay-Per-Last N Share system rewards miners only once the block has been found by the pool. This means that you will get paid only once the block has been found. Then the pool goes “back in time,” and checks for valid shares contributed before the winning block. This is called a time window. Miners get paid based on the valid shares that they have sent in that time window.

This method comes in handy for miners that do not hop from pool to pool and have a steady connection. Note that you may lose all your work (shares) if you disconnect from the pool before the block is found.

IDEAL ORDER FOR PPLNS: fix order on a big pool that has a high chance of finding a block within the order time limit. Or a standard order which will have miners connected for a longer time (at a higher price).

Conclusion

With the PPS and FPPS payment methods, you will get paid no matter if the pool finds a block or not. This is the most significant advantage over PPLNS. While on the other hand, PPLNS allows you to “gamble” in some way. If your order is sending hash power to a pool that happens to have a high block find at the time, you will most likely earn a lot more than on PPS or FPPS pool.

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What does it mean to mine cryptocurrencies?

If you stumbled across this blog post, it probably means that you are either expanding your knowledge or thinking about starting to mine cryptocurrencies. You have come to the right place for either of these.

In this blog post, we will explain how mining works. 

To answer this blog question, you must first understand the basics of blockchain.

What is blockchain and how does it work?

Bitcoin runs on blockchain technology. Blockchain can be visualized as a chain made of blocks. Each X amount of time, a new block gets created and added to the previous block. This is a continuously ongoing process. The Bitcoins block time is 10 minutes. Every 10 minutes a new block gets created which contains 1 MB of information about all the past 10 minute transactions that have been made. Each block also contains a reward for the miner who solves it first. "Solving a block" is all about finding a special number called a "nonce". If you want to understand how nonce is an essential part of mining, we suggest you watch this brilliant visualization. 

At the time of writing, the block reward is 6.25 BTC per block created.

Illustration of blockchain. Each square block represents one block.

What does it mean to mine cryptocurrencies?

Cryptocurrency mining or Crypto mining is a process where miners confirm transactions on the blockchain. This is also called Proof-of-Work or PoW. When miners are confirming transactions, they prevent double-spending on the network (spending a Bitcoin value twice). When sending or receiving Bitcoins (creating transactions), you will most likely have to wait for 3 or 6 confirmations before Bitcoin is deposited into your wallet. Behind the curtains, miners are making sure that the transaction is valid and included in the new blocks (3 confirmations will take approximately 30 minutes).

Miner

Miner is a device (computer with CPU/GPU or an ASIC) that is solving mathematical problems. Bitcoin miners are solving a hash function based on the SHA-256 algorithm. Whoever “finds” a solution first (a correct nonce), receives the block reward. This can also be said to finding a block.

Speed

Speed is measured by how many hash functions are solved in a second (Hash/s). At the time of writing, the total Bitcoin network (all the miners currently mining Bitcoin) hashing speed is around 120,000,000 TH/s.

Block Time & Difficulty

The Bitcoins block time is on average every 10 minutes. This means that every 10 minutes new Bitcoins are created. These Bitcoins are rewarded to the first miner who solved the mathematical problem (found a nonce). The average time to solve the mathematical problem is regulated by the difficulty which is increased or decreased, depending on the total network hashrate (more hashrate = higher difficulty). The difficulty is adjusted every 2016 blocks. This equals to 20160 minutes or 14 days.

Pools

Because the current Bitcoin network hashrate is 120,000,000 TH/s, it is impossible for an individual to mine competitively and expect to be lucky enough to find a block. Currently, an average ASIC performs with 50 TH/s, which gives the individual miner a 0.00004% chance to find a block every 10 minutes. That is why miners normally join a pool. Pools are a group of miners who act as single miner on the blockchain network. This gives them a higher probability of finding a block. Once they find a block, they split the reward among the contributors of hashing power according to the amount of hashing power one contributed. Read this post if you want to know more about how pools distribute rewards.

Coins & Algorithms

We can divide the coins by whether they are mined with GPU, CPU or ASIC. Below are the most common coins and algorithms that can be mined with GPU, CPU or ASIC.

COIN	ALGORITHM	MINED WITH
Bitcoin	SHA256	ASIC
Litecoin	Scrypt	ASIC
Ethereum	DaggerHashimoto	GPU
Monero	RandomX	CPU/GPU
Grin	Cuckaroom	GPU
Raven	KAWPOW	GPU

Note that these are not all the coins and algorithms, these are just a few of the most common ones. Also, remember that each of the coins offers something unique. For example faster block time, anonymity, ASIC-resistant…

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