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Everything About a Mining Pool–Why SparkPool

We had SparkPool reach out to us about a week ago asking us to mention to our clients about their mining pool and why we should use them. We asked them to write up an article and that we would post it.

Please note we are NOT affiliated with SparkPool but offer this to our clients / customers as a reference point. For your reference they are listed in the top 5 mining pools – https://www.etherchain.org/charts/topMiners

So here goes:

Preface

The development of global blockchain technology has given birth to the emerging mining business. However, the majority of miners don’t know how their own profits being calculated. If you are a ETH miner, to maximize your mining profit, it’s essential to understand the mining process behind the scene. 

What’s a mining pool?

The work of the mining pools is nothing more than grouping computing power (hashrate) in order to get a stable block generation. In other words, a mining pool is where gamers team up, kick the BOSS ass, sharing the dropping treasure together.

They play an important role in rewards distribution, protocol deployment, stability protection (anti-DDoS) and efficiency (improve block utilization, lower uncle rate, etc). The stability protection and efficiency performance depend on the technical development of each pool. Many pools are spending tens of thousands of dollars every month in anti-DDoS and technical optimization.

 Mining Rewards

There are 4 kinds of rewards the system gives to the miner.

   1.Block reward (or Static block reward)

A static block reward for the ‘winning’ block, consisting of exactly 3.0 Ether.

   2.Transaction fees

All of the gas expended within the block (usually 0.1ETH/block).

   3.Uncle reward 

In Ethereum, the reward for a new block is 3 ETH. Since an average block time of Ethereum is very short, the uncle rate could be relatively high. Therefore, Ethereum provides descending rewards (from7/8 to 2/8 of a block reward, i.e. 2.625-0,75ETH) for mining an uncle block

  4.Reference uncle reward

An extra reward for including Uncles as part of the block, first 0.1875, second 0.09375ETH.

In addition, the transaction fee could contain around 400 transactions. With the block size being constant, the more we utilize a block to include high-priced transactions, the higher mining rewards miners will get. However, we can see that many mining pools don’t distribute those rewards to miners, which is totally unknown for the most. 

Hashrate

Before we get deeper into it, you need to figure out what is a Share.

In a mining pool, contributing miners are paid in proportion to the amount of hashrate they contribute. A “share” is awarded to members of the mining pool who present a valid partial proof-of-work. Shares must be submitted correctly and in time or would become invalid shares or stale shares.

You must distinguish between the reported hashrate and the effective hashrate or known as the calculated hashrate.

Reported Hashrate

Reported Hashrate is used by mining clients (e.g. Claymore, Phoenix, Ethminer, and other third party mining softwares). The mining client submits the computing power (a.k.a. hashrate) of your actual hardware (what you see on your console) to the pool. For example, the RX570 could be overclocked to 30MH/s. The reported hashrate is a convenience feature used to allow you to compare it to your calculated hashrate shown by the mining pools.

Most importantly, Reported Hashrate does not directly related to your payout from the mining pools. It is a value only displayed on the rigs and known by the users.

Effective Hashrate or Calculated Hashrate

Effective Hashrate takes the number of valid shares your miner has submitted over a period of time and uses a formula to convert the number of shares into a readable hashrate. This number can fluctuate, sometimes being lower or higher than your actual miner’s output hashrate on the console.

If we go deep into the problem, to ease the pressure of data communication between mining client and pool’s server, mining pools set a difficulty threshold with the Ethereum Proof-of-Work algorithm. Every time when those amount of work is completed, the miner will get a share. And the effective hashrate is calculated based on the shares.

Effective Hashrate(24h-avg) = your submitted shares in 24h * difficulty set by the pool

Mining pools calculate your hashrate based on the time interval you submit. For example, if we assume that the time of submitting a share for 100M should be 10 seconds, then if your interval for each submission is exactly 10 seconds, the pool shows you a calculated hashrate of 100M. But if you submit it in 5 seconds, from the mining pool side, you have 200M.

The effective hashrate shown by each pool are generated differently. Some pools shown lower effective hashrate, while some mining pools shown effective hashrate even higher than your reported ones. This has absolutely no effect on revenue, as explained later. Because mining in general is a probability game.

Hashrate Gap

So in most cases, if there is a large gap between reported hashrate and effective hashrate, you have to check on Claymore whether there is a GPU card dropped. If all run well, we can move to the problems presented below.

How come is a hashrate gap between your reported hashrate and efficient hashrate?

 1.Inappropriate overclocking abuse.

 How much a rig can be overclocked depends on miner’s experience. Different brands’ GPU’s performances are also different. You can find more information on Google. If overclocked too much, the client will give you an alert. Your submitted shares will be invalid and rejected. If you have found too many alarms, please downclock a little and re-check.

2.Network Delay

Network delay is a problem that can only be optimized but cannot be avoided. It takes time to transmit data between local rigs and the node server. Latency within 50ms is perfect, and within 150ms is normal. If it goes higher, you have to find a closer server node. To solve this, each mining pool has its own server nodes in various locations of the world.

3.Mining software (client)

 The author of mining client does not extract the crypto you mined, but instead somehow extract 1% of your rigs’ working time to mine for himself.
Since the creator has contributed to make the mining software, it is reasonable to pay for the technical intelligence. Most miners of the world use the Claymore. However, many copycats are build based on the core of the claymore. These copycats could miss report hashrate to generate profit for themselves.

4.Core voltage deviation

This is a hardware problem due to different GPUs factory settings but would cause the fluctuation of hashrate.
As calculated above, those reasons add up to 3-3.5% difference of mining. There are some hardware problems, such as the heat of your rigs, wire rod, network connection, power supply stability should not add more than 1%. Advanced mining farms rarely have these problems, so I think 3-4% is a theoretical long-term hashrate gap.

Payment Mode

When a pool earn money, it also should pay you back.

There should be 3 mainstream modes: PPS, PPLNS and PPS+ you have been told.

1.PPS

PPS calculates the proportion of your mining power in overall hashing power of the global network, and estimates the daily reward you can get by simple math calculation, giving you a fixed income. Moreover, the PPS mode doesn’t reward miners with transaction fees and reference reward. With PPS, your income is stable. Service fees are relatively higher to compensate the risks of pools.

2.PPLNS

PPLNS (Pay Per Last N Shares) is calculated by the proportion of miners’ hashrates in the pool’s total in the last N difficulty rounds. Each worker would be assigned some computing works. Every time when a difficulty calculation is completed, the miner will get a share. The PPLNS method calculates payments based on the “n” (Number) of shares that the pool finds. Transaction fees will be allocated to miners too. With the PPLNS model, the luck value is very important. With PPLNS, it is normal for you to see your calculated hashrate fluctuates every day.

3.PPS+

PPS+ (PPS Plus) combines the advantages of PPS and PPLNS. Compared to the PPS model, which only awards miners block rewards and does not allocate tx fees, PPS+ assigns bonuses to miners and allocates all the rewards. At the same time, the deficiencies of fluctuations in the PPLNS are avoided.

Each pools sets their own payment scheme. The PPS+ is better than PPS apparently. As for PPS+ and PPLNS, the comparison makes no sense. Because in a long run, the expected mining rewards should be almost the same. This is a calculus of probability problem.

Pool Luck

The proof of work algorithm used is called Ethash (a modified version of Dagger-Hashimoto) involves finding a nonce input to the algorithm so that the result is below a certain threshold depending on the difficulty. Luck is like rolling a dice. You have to take the risk with the PPLNS mode because it heavily depends on luck value, while in PPS+ the luck value is always 100%. Risks are taken by the pool.

Fee

Fee and Efficiency two fundamental criterions that determines the quality of a mining pool.

Nominal service fee of each pool could range from 1% to 3%. However, the real one is not necessarily that. The reasons are listed following:

1.We have introduced shares, hashrate and payment modes. In fact, there is no essential relationship between your payment with the calculated hashrate and the rejection rate. In other words, the payout distribution of any mining pool is a black box. As known to all, the payout distribution is based on the effective “shares” submitted, but your shares proportion can be adjusted by the mining pool theoretically.

2.Moreover, even claims a payment mode, PPLNS for example, the mining pool can also pay no Tx fees or reference uncle reward to you.

3.It all depends on a pool’s conscience and ethical performance. So don’t be fooled by a single rate shown by the pool or mining software, but believe the crypto you are paid every round.

4.The interest margin are used to pay for intermediaries for commission, like a franchiser, some software partners, a hosting farm. So stay sober and compare each pool by yourself.

Then how to distinguish good ones from bad? There is a difference in efficiency between mining pools. You should pick a mining pool with a better efficiency and lower real fee rather than misled by their nominal fee or their payment mode.

Efficiency

The uncle rate can represent the efficiency.

 With the same hashrate, the pool who could generate most blocks means it has more potential to earn ETH per hashrate unit than other pools. Although the uncle rate fluctuates everyday, you can see an average level in a long run.

 

WechatIMG6.pngData source: etherchain.org

 

Just look at the Nanopool, their uncle rate could sometimes reach 30%, which means 30% of their effort is not efficient.

 

The efficiency also represents the tech power of each pool. You will see how much effort has been put into to be a pool with the lowest uncle rate. With this regard, SparkPool is the best Ethereum mining pool over the world.

 

P.S. The reward for an uncle block is about 2.2ETH, 70% of the normal block. Each 5% of uncle rate gap leads to a 1.5% difference in profits. (5%*30%=1.5%)

Soft Strength

Nothing to talk about actually. Because world Top 5 pools all have done a good job with regard to stability, anti-DDoS and distributed nodes. Other factors are even softer, like the report interface, support team, anonymous mining, notification, payout timeliness, etc. So the judgement could be subjective.

Choose a Pool

One-stop solution: A/B test.

Using the same two sets of machines, in the same external environment, test continuously for more than 48 hours on two different mining pools to see which pay you more.

After a solid A/B test, you will find that SparkPool have no reason not to be the best.

1.SparkPool has the lowest uncle rate. Theoretically it helps you earn more ETH.

2.SparkPool pays all the rewards (blocks, uncles, reference uncle rewards & txs) with low fee 1%.

3.Most importantly, payment from SparkPool is second to none.

4.SparkPool team are proud of our fairness and transparency. We do not keep the interest margin to ingratiate ourselves with greedy intermediaries. Because the nominal fee is the real fee on SparkPool. We would rather distribute the reward to our users than cheat it for dishonest expansion.

5.SparkPool shares the mining resources friendly with our partners instead of commissioning by mining rewards.

6.We provides the warmest support 24/7.

7.SparkPool team are brave and dare to take responsibility for every instability.

8.SparkPool has excellent reputation among Asian miners and need to be recognized and verified by more people over the world.

9.We welcome questions about us and comparison based on solid practice.

10.We listen carefully to any suggestions for improvement and optimization.

 

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