How Does a Mining Pool Hedge Its Risk When Offering a Pay-Per-Share (PPS) Reward System? ▴ Learn

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.

Explain the ‘Pay-Per-Share’ (PPS) Method of Reward Distribution in Mining Pools

What Is the Trade-off between Volatility and Expected Return in PPLNS versus PPS?

What Is the Difference between a “Long Hedge” and a “Short Hedge” in the Context of Mining?

How Does a Mining Pool Operator Manage the Risk Associated with the PPS Reward System?