How Does a Pool Operator Hedge the Risk Assumed under a PPS Scheme? ▴ Learn

How Does a Pool Operator Hedge the Risk Assumed under a PPS Scheme?

Under the Pay-Per-Share (PPS) scheme, the pool operator assumes the variance risk. To hedge this, they can use financial derivatives, specifically by taking a short position in a futures or perpetual swap contract for the cryptocurrency they are mining.

This locks in the price for the coins they must pay out, regardless of whether they find the block. Alternatively, they can buy insurance or simply maintain a large reserve fund to cover periods of bad luck.

How Does a Pool’s Payout Scheme Affect Miner Loyalty and Centralization?

How Does the PPS Payout Scheme Transfer Risk from Miners to the Pool Operator?

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

What Is the Main Advantage of a Pay-Per-Share (PPS) Fee Structure for a Miner?