73% of Bitcoin mining pools pay the full reward to miners and use the method of distributing the rewards for mining known as “full pay per share” (FPPS or full page per share).

It is a variant of the “pay per share” (PPS) system in which miners not only receive a fixed percentage for participating in mining, but also the transaction commissions included in each block are distributed.

The previous data were published this September in the third Global Comparative Study of Cryptocurrencies (Global Cryptocurrency Benchmarking Study), made by the Cambridge Centre for Alternative Finance (CCAF).

Part of the investigation focused on the mining sector cryptocurrencies. When talking about the different payment methods used by miners, the study refers to the various methodologies that allow the mining profits to be divided among the participants of a pool.

Most forms of payment the distribution of the reward is based on the number of shares (or shares) contributed by each member when mining a block. Until now more than 12 forms of payment are known different.

According to the CCAF report, in addition to the FPPS method -the most popular- 23% of miners prefer the “pay per share +”(PPS +). The third most used method is the “payment for the last N shares” (PPLNS), chosen by 4% of the pools.

The second most used method, PPS +, combines two methodologies. On the one hand, the block reward is set according to the PPS mode, in which the miners sell the hashrate to the mining pool to obtain fixed income, while the mining group is responsible for its losses or gains. In the PPS + version, additionally, the mining service charge / transaction fee is settled based on another form of payment. This means that the miner can earn income from transaction fee, according to the PPLNS payment mechanism.

The PPLNS reward payment method is calculated in relation to the share percentages (N) with which the miners contribute to all the actions carried out by the pool. In this case, the shares accumulate over time, the more work the miner performs with the same pool. These actions are reflected and increase profits each time a new block is generated.

According to the CCFA, the payment method most used by pools is FPPS. With this form of payment, both the block reward and the mining service charge are settled according to the profit. Source: CCFA Report.

Regarding all the methods of payment to Bitcoin miners explained above, the Cambridge researchers add that distribution may vary for other cryptocurrencies. “In particular for those whose transaction fees are negligible for payments to miners.”

They further note that most reward systems are built to avoid “group skipping”. They cite as an example that the PPLNS system is based on scores and offers better rewards to “hashers loyalists ”, although other mechanisms are also being put in place.

The groups are developing novel techniques to better reward miners and win their loyalty (…) They offer algorithms for exchanging profits between PoW currencies, using the same hash algorithm (for example, Bitcoin, Bitcoin Cash, Bitcoin SV, Bitcoin Diamond, they use SHA256). Instead of doing the work for a single cryptocurrency, this service allows the group to add hashpower to the most profitable currency among those using the same algorithm.

Third Global Comparative Study of Cryptocurrencies

Risk of centralization in pools and uncertainty with Stratum V2

Regarding governance in the pools mining, Cambridge survey data reveals that a third of the mining groups use a combination of approaches in their decision-making process. Meanwhile, another third of those surveyed said they did not have a defined governance model.

The study speaks of the great influence that pools have about the work done by the miners. Note that their bargaining power has been relatively limited. “If encouraged, the mining groups they could choose to exploit their influences in multiple ways ”, they limit.

(…) For example, to dishonestly mine, blacklist transactions or addresses, or redirect the power of miners to support another chain. Similar scenarios could also materialize if a group were to be attacked and controlled by malicious actors.

Third Global Comparative Study of Cryptocurrencies

Based on these observations, mention is made of the solutions developed to ensure greater decentralization. Among them, the new open source standard for Bitcoin mining, Stratum V2.

Regarding this new protocol, the survey determined that 64% of the pools are still undecided regarding its implementation. Another 27% agree to implement it, although they have not made progress on it. The highest indecision threshold with respect to Stratum V2 occurs in Asia-Pacific countries (24%), followed by North America (18%), and Europe (16%).

Cambridge researchers determined that 64% of Bitcoin pools have yet to decide to use Stratum V2. Source: CCFA Report

This second version of Stratum promises several benefits for pools or mining pools in Bitcoin, as explained in several articles published by CriptoNoticias.

He hopes to provide greater decentralization, efficiency and security. It also aims to protect miners from kidnapping hashrate, the espionage of information transfers or the theft of metadata. For this, it has an encryption system that aims at the confidentiality of the data.

Stratum V2 was first introduced in July 2019. At the end of March this year, Braiins, the company behind the Slush Pool mining group, announced the launch Braiins OS + software, in whose update the new protocol is implemented.

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