Clear DefinitionsPay-Per-Share
3 min read
Pronunciation
[pey-per-shair]
Analogy
Think of Pay-Per-Share as piece-rate work in a factory producing lottery tickets. Instead of workers only getting paid when one of the factory's tickets wins the jackpot (like in other mining methods), PPS pays workers a fixed amount for each properly manufactured ticket they produce, regardless of whether any tickets actually win. The factory owner calculates the expected long-term value of each ticket based on probability and pays this amount immediately when workers submit completed tickets. While some batches of tickets will win more than their production cost and others will win nothing, workers receive steady, predictable income for their effort without having to worry about the lottery's randomness. The owner charges a premium (higher fee) for providing this stability, essentially selling insurance against the natural variance of the lottery system.
Definition
A mining pool reward distribution method that pays participants a fixed amount for each valid share (partial solution) they submit, regardless of whether the pool successfully mines a block. Pay-Per-Share (PPS) eliminates reward variance for miners by providing guaranteed, immediate payments proportional to contributed hash power, with the pool operator assuming the risk of payout fluctuations while typically charging higher fees to compensate for this risk transfer.
Key Points Intro
Pay-Per-Share implements four key features that shape risk allocation and reward dynamics in mining pools.
Key Points
Variance Elimination: Provides miners with consistent, predictable rewards independent of the pool's actual block finding luck.
Immediate Payment: Compensates miners promptly upon share submission rather than waiting for block confirmations or reward maturity periods.
Risk Transfer: Shifts the mathematical variance of mining rewards from individual miners to the pool operator.
Expected Value Calculation: Pays miners based on the theoretical expected value of their contributions calculated from network difficulty and block rewards.
Example
A Bitcoin miner with 10 TH/s of hash power joins a Pay-Per-Share pool when the total network hash rate is 400 EH/s and the block reward is 6.25 BTC. The pool calculates that each terahash has a probability of 1/40,000,000,000 of finding a block per second, with each block worth 6.25 BTC, giving an expected value of 0.00000000015625 BTC per terahash-second. With the miner's 10 TH/s contribution, they earn approximately 0.0000000015625 BTC per second, or about 0.000135 BTC per day (minus the pool's 3% fee), regardless of whether the pool is lucky or unlucky in actually finding blocks. After joining, the miner immediately begins receiving small, steady payments to their wallet as they submit shares, without needing to wait for the pool to find complete blocks. Meanwhile, the pool operator might have a lucky day finding 50% more blocks than mathematically expected, or an unlucky day finding 50% fewer, but the miner's rewards remain unchanged throughout these fluctuations.
Technical Deep Dive
Pay-Per-Share implementsmall advanced statistical models to accurately price shares based on current network conditions. The core calculation follows the formula: Share Value = (Block Reward + Expected Transaction Fees) ÷ (Current Difficulty × 2^32), representing the mathematical expectation of each share's contribution toward finding a block. Most implementations incorporate dynamic difficulty adjustment for share submission, allowing miners of various hash rates to submit shares at appropriate intervals without overwhelming the pool's infrastructure. The payment system typically uses a micropayment accumulation approach, recording small increments to miner balances with each valid share submission but only executing on-chain transactions when balances reach withdrawal thresholds to minimize transaction fees. Advanced PPS variants include PPS+ which adds transaction fee rewards to the base calculation, and FPPS (Full Pay-Per-Share) which normalizes transaction fee expectations across longer time periods to reduce variance from fee fluctuations. The technical challenge involves accurately tracking and attributing hundreds or thousands of share submissions per second while maintaining cryptographic verification of each contribution. Modern implementations use specialized databases optimized for high-throughput time-series data, often with redundant validation systems to prevent fraudulent share submissions. The risk management system typically includes automatic payout limits, statistical anomaly detection for potential attacks, and reserve funds to cover periods when expenses exceed revenue due to bad luck in block finding.
Security Warning
PPS pools require operators to maintain significant reserve capital to cover periods of mining misfortune. When choosing a PPS pool, verify the operator's financial stability and reputation, as undercapitalized pools may delay payments or shut down if facing extended periods of below-expected block rewards.
Caveat
While Pay-Per-Share offers valuable stability for miners, it typically comes with higher fees than other distribution methods (often 2-4% versus 1-2% for variance-bearing methods) to compensate for the risk transfer to pool operators. This fee difference can significantly impact long-term profitability despite the reduced variance. Additionally, the PPS model creates an inherent conflict of interest regarding transaction selection, as operators bear all risk for including transactions with uncertain fees or validation times, potentially leading to more conservative block composition that maximizes operator economics rather than network utility. Some critics argue that eliminating variance from mining rewards fundamentally changes the economic incentives of the mining ecosystem, potentially encouraging less engaged participation and reducing miners' interest in the health of the networks they secure.
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