How Does a Mining Pool Hedge Its Risk When Offering a Pay-Per-Share (PPS) Reward System?
A mining pool offering a PPS system assumes the variance risk of not finding a block when expected. To hedge this risk, the pool operator must maintain a large reserve of the cryptocurrency.
They may also use financial derivatives, such as short-term futures contracts, to lock in a selling price for the coins they expect to mine, ensuring they can cover the fixed payout promised to miners.
Glossar
PPS
Protocol ⎊ The term PPS, within cryptocurrency and derivatives contexts, frequently denotes a Payment Protocol Standard, a framework designed to facilitate atomic swaps between distinct blockchain networks.
Mining Pool
Consensus ⎊ Mining pools represent a collaborative effort among network participants to aggregate computational resources, increasing the probability of successfully mining blocks and earning associated rewards within a Proof-of-Work cryptocurrency system.
PPS System
Payout ⎊ The Pay Per Share system provides miners with a fixed, immediate reward for every valid share submitted, irrespective of when the pool actually finds a block.
Pay-Per-Share (PPS)
Methodology ⎊ Pay-Per-Share (PPS) is a cryptocurrency mining pool reward system where miners receive a fixed payout for each share they submit to the pool.