Mining Pool Reward Methods

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Mining Pool Reward Methods

Bitcoin 2013, San Jose

Meni RosenfeldBitcoil

5/19/2013 Written by Meni Rosenfeld

Written by Meni Rosenfeld 2

OutlineMining primerSimple reward methods

PPSProportional

Advanced methodsDGMReward method triangleShift-PPLNS

The futureQuestions

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Mining primerBitcoin mining exists to:

Determine initial distribution of coinsSynchronize transactions

Miners calculate hashes in an attempt to find blocks and be rewarded with bitcoins

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Mining rewardsOne in 232 hashes will be a shareA share has probability p = 1 / D to be a block

Currently D ≈ 10 MA block is rewarded with B bitcoins

Currently B = 25 (+ tx fees)

Expected reward per share: pB

Example: a 10 GH/s miner finds:8K shares per hour (73M per year)Per year, on average, ~7 blocks (180 BTC)

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VarianceActual number of blocks found is random

Follows Poisson distributionVariance is equal to meanRelative variance: D / #shares

Example: 10GH/s miner, one year, B = 25, D = 10MAverage reward: 180 BTCStandard deviation: 68 BTCReward range: 25 – 350 BTC

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Mining poolsGroup of people mining together sharing rewards

Relative variance based on combined hashrateAllows continuous rewards similar to expectation

Contribution is measured by number of shares

Actual calculation of rewards is not trivial!Hence the need for (and variety of) “reward methods”

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PPS (Pay per share)Pool operator takes an active role

Pays miners a fixed amount pB per share (minus fees)Operator keeps all block rewards

Advantages:SimpleMiners completely shielded from randomness and variancePayment sent instantly

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PPS (Pay per share)The problem

Variance is entirely assumed by pool operatorOperator requires high fees to compensate for riskBankruptcy chance:

Still viableBut difficult to get right

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ProportionalMining is organized into rounds

Finding a block ends previous round and starts new one

Block reward distributed among miners in latest round in proportion to shares they submitted this round

Operator has no risk; miners do have variance

Problem: Method is completely broken!

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Pool hopping

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In good times…

and in bad?

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Pool hoppingProportional method based on wrong intuition

Suitable for deterministic tasksNot for random, memoryless tasks

Reward per share = B / (#shares in round)#shares in round = #past shares + #future shares#future shares unknown but always look the same#past shares is known and variable!Mining most lucrative when #past shares is low

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DGM (Double geometric method)When miner submits a share, his score increases

Score decreases geometrically when:1. A share is found2. A block is found

Miners are rewarded for blocks according to current scoreIndependent of everyone else’s scores!

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DGM (Double geometric method)Reward per share depends only on pool’s future

Hence, method is hopping-proof

Works like a capacitor

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Reward method triangle

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Shift-PPLNSWork is divided into “shifts”

Ending a shift is arbitraryBut not based on finding blocks!

Miners are paid for shares submitted in last N shifts

Method can work asynchronouslySuitable for scalable, parallel implementations

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Pool landscapePool Method

BTCGuild Shift-PPLNS / PPS50BTC PPSSlush Slush

Bitminter Shift-PPLNSBitparking DGM

Eclipse DGM / PPSDeepbit Proportional / PPSOzcoin DGM / PPSItzod RSMPPS

Eligius CPPSRBP2pool (decentralized) PPLNS

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The futureCurrently: “Standard” pools

Pool assigns work to minersMiners submit proof of completed workPool pays miners

Problem:Pool performance improves with pool sizeMining tends to concentrate at biggest poolsControl of mining is centralized

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The futureSome combination of:

Multi-pool miningp2p poolsVariable-difficulty sharesSmart minersDistributed insurance agentsProxy pools

Will allow:PPS payments (simple, no variance)Low feesDecentralization of power

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Questions?

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Thank youMeni [email protected]://bitcoil.co.il1DdrvajpK221W9dTzo5cLoxMnaxu859QN6

“Analysis of Bitcoin Pooled Mining Reward Systems”https://bitcoil.co.il/pool_analysis.pdf

5/19/2013