What Is the Impact of a Low Variance Period on the Pool’s Reserve Fund?
A low variance period means the pool's actual block discovery rate closely matches the expected rate. Under a PPS system, this period allows the pool to consistently generate a profit margin on the fixed payout, leading to a steady increase in the pool's reserve fund.
This strengthens the pool's ability to cover future 'bad luck' periods.
Glossar
Reserve Fund
Capital ⎊ A reserve fund is a pool of assets held by a blockchain protocol or organization to ensure financial stability and support future operations.
Block Discovery Rate
Genesis ⎊ Within the context of cryptocurrency and decentralized finance, the Block Discovery Rate signifies the temporal frequency at which new blocks are appended to a blockchain, directly influencing transaction confirmation times and overall network throughput.
Variance
Dispersion ⎊ In cryptocurrency, options, and financial derivatives, variance quantifies the degree to which returns deviate from their expected value, representing the inherent uncertainty within an asset’s price movements.
Pool Reserve
Reserve ⎊ A pool reserve is a collection of assets locked within a smart contract or held by a centralized entity to provide liquidity for derivatives trading or lending activities.
Low Variance Period
Period ⎊ A low variance period represents a finite time interval during which the stochastic outcomes of a process, such as cryptocurrency block discovery or options market movements, closely align with their theoretical expected value.