What is Pool Luck？
Recently one of our mining pool partners changed its payment method from FPPS to PPLNS and clients have been asking why the mining revenue had such big difference. We’ve prepared the article and hope it can help them understand why.
What is pool luck?
Pool luck explains how many shares the pool needs to find a specific block in comparison to the average number of shares needed for finding a block based on the current network difficulty. In simple terms, pool luck is the actual number of blocks found / theoretical number of blocks found * 100%.
If luck is above 100%, it means that the pool will find more blocks than expected for the given difficulty and will be rewarded with more BTC. If the luck is below 100%, the pool will find fewer blocks at the same difficulty and will receive less BTC reward.
E.g. if Pool A’s hashrate is 20 EH/s, and the network hashrate is 200 EH/s, then the theoretical probability of Pool A finding blocks is 10%, which means that out of 100 blocks, there should be 10 blocks found by Pool A. In practice, however, Pool A could be lucky enough that it finds 20 blocks and A’s luck is 200%, or it could be unfortunate that only 1 block is found, so the luck is 10%.
Please, keep in mind that luck only describes the history but says nothing about the future blocks. Finding a block is fully independent from historical events. That is why joining the pool when the luck is high and disconnecting when the luck is low does not make any sense. In the long run, the luck averages out to 100%.
What is the effect of pool luck?
The mining mechanism of Bitcoin is Proof of Work (PoW), and the mining pool gathers the hash power of many miners and pays the miners according to the PoW. This is the foundation for the pool to pay miners according to their hashrate proportion.
This framework, combined with the difference between the actual profit and the theoretical profit generated by the ‘luck’ of the pool, has led to a variety of settlement methods. Currently BTC mining pools have PPS, PPS+, FPPS and PPLNS as their settlement methods.
What are the differences between PPS, PPS+, FPPS and PPLNS?
The different settlement methods affect the miners’ real earnings. Before understanding these settlements, users first need to understand that the profit components of the BTC mining profit generally consists of two parts, including the block reward for the block (current Bitcoin block reward is 6.25 Bitcoin) and mining fee/transaction fee (not a fixed value).
The followings are the differences between the four settlement methods. Currently PPS+, FPPS, PPLNS are mainstream methods while PPS is not adopted in BTC settlement because of the non-allocation of transaction fees.
How does luck affects a mining pool?
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As shown in the chart below, we have collected the average hashrate and pool luck of mainstream mining pools in the last 7 days. According to the current profit of 0.00000400 BTC per TH/s hashrate, we calculate their theoretical profit, actual profit, and the profit status of the mining pool settled in FPPS for the last 7 days. (Data source: BTC.COM)
As shown above, F2Pool’s luck for the last 7 days is 100.01%, which is close to the theoretical value of 100%, which means that the theoretical profit = actual profit. So, F2Pool’s total profit for the last 7 days is 0 BTC. As it uses PPS+ to settle for clients and the pool charges a 2.5% fee, eventually, the actual profit of F2Pool profit for the last 7 days is about 1115*2.5% = 27.88 BTC. Of course, the actual amount will be much smaller as they must have provided lower fees for VIP clients.
Next, we look at Poolin’s mining data, the luck is 123.08% for the last 7 days, which is at a high level. If Poolin uses FPPS settlement, the total profit for 7 days would be 79 BTC, but due to its PPLNS settlement model, it doesn’t actually make any profit as all the profit is distributed to clients. Moreover, since the current rate is 0%, the actual profit of Poolin for the last 7 days is 0 BTC.
Contrary to these two mining pools, AntPool’s luck for the last 7 days is about 94%, and the total profit for 7 days under FPPS is -67 BTC. It supports two settlement methods, 0% PPLNS and 4% FPPS. Assuming all clients choose FPPS settlement, the pool would charge 1109*4% = 44.35 BTC, so the actual profit of AntPool for the last 7 days is about -23 BTC; assuming all clients choose PPLNS settlement, the actual profit of AntPool for the last 7 days is 0 BTC.
In summary, never believe in statements that mining pools are 100% profitable business as they collect pool fee, especially for those who adopt PPS, FPPS, PPS+ payment methods.
How do our mining pool partners settle their profit?
Currently clients can choose between F2Pool and Poolin. F2Pool fee rate is 2.5% PPS+ and Poolin fee rate is 0% PPLNS. That is, if you choose F2Pool, you will get stable mining profit and F2Pool bears the risk of pool luck. If you choose Poolin, your profit will vary per day as you bear the risk of pool luck.
Then which pool shall I use, F2Pool or Poolin?
Let’s made a calculation based on recent performance of F2Pool and Poolin.
We assume that John has 1PH/s hash power, so his theoretical profit for the last 7 days should be 0.00000400*1000*7= 0.028 BTC. We ignore the difference between FPPS and PPS+ here as it only differs in the allocation of transaction fees, and the transaction fees /block reward ratio has remained around 1.56% recently, which has less impact on the overall profit.
If John chooses F2Pool, John finally gets 0.028*(1–2.5%)=0.0273 BTC.
If John chooses Poolin, John’s finally gets 0.028*123%*(1–0%)=0.0345 BTC.
In the chart below, we have got Poolin’s recent luck, and the pool is indeed at a high level of luck recently.
In the long run, luck always trends towards 100% over time — it’s just math. And the actual profit will be infinitely closer to the theoretical profit. Thus, regardless of the settlement method, the lower the pool rate the higher the profit the client will receive.
So the conclusion is, if you can afford to bear the pool luck risk, you may possibly get higher profit by using Poolin. If you prefer to have stable profit, choose F2Pool.
