How Does a Mining Pool Operator Manage the Risk Associated with the PPS Reward System?
Under PPS, the operator guarantees a payout even if the pool does not find a block, effectively absorbing the variance risk. To manage this, the operator typically calculates the expected revenue based on the pool's hash rate and network difficulty.
They must maintain a reserve fund to cover payouts during periods of bad luck (fewer block finds). The PPS fee is usually higher than PPLNS to compensate the operator for taking on this financial risk.
Glossar
Mining Pool Risk
Centralization ⎊ Mining pool risk primarily stems from the centralization of hash rate, where a few large pools collectively control a significant portion of a Proof-of-Work network's computational power.
Mining Pool Operator
Function ⎊ A Mining Pool Operator is the centralized entity responsible for coordinating the computational power of numerous individual miners into a single, cohesive force to increase the probability of discovering a block.
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.
PPS Reward
Incentive ⎊ In cryptocurrency derivatives, a PPS Reward represents a performance-based incentive mechanism designed to align the interests of liquidity providers with those of the underlying protocol or exchange.
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.