“Variances within mining pools affect results, and while this variance will level out over time, it can fluctuate in the short term,” Riot CEO Jason Les said in a statement. “Relative to our hash rate, this discrepancy resulted in lower-than-expected bitcoin production in November,” he added.
A mining pool is like a lottery syndicate, where several miners “pool” their computing power for a steady stream of bitcoin rewards. Joining a pool of other miners can significantly increase the odds of solving a block and winning the reward, although the reward is divided equally among all members.
Publicly listed miners are often secretive about the pools they use. However, Riot previously used Braiins, formerly known as Slush Pool, for its mining pool, a person familiar with the matter told CoinDesk.
Most mining pools use multiple payment methods to provide consistent rewards to their pool members. Most mining pools use a method called Full Pay Per Share (FPPS).
Braiins is one of the few mining pools that uses a mechanism called Pay Last N Shares (PPLNS), which introduces significant variance in the rewards of its members. According to the person, this discrepancy could have resulted in a reduction in the number of Bitcoin rewards for Riot.
Other payment methods generally ensure that miners always get paid, even if the pool doesn’t find a block. However, PPLNS only pays miners after the pool finds a block, and the pool then goes back to check the valid share each miner contributed before winning the block. Miners are then rewarded with bitcoins based on the effective share each miner contributed during that time.
To avoid this discrepancy, Riot has decided to replace its mining pool, “to provide a more consistent reward mechanism so that Riot will fully benefit from our rapidly growing hash rate capacity as we aim to be the first to reach 12.5 EH/s Target the 2023 quarter,” Rice said. Riot did not specify which pool it would transfer to.
Braiins declined to comment for this story.
Miners are already facing a tough crypto winter as falling bitcoin prices and rising energy costs erode profit margins, leading some miners to file for bankruptcy protection. It is crucial that predictable and consistent mining rewards are the main source of income for miners. In the current difficult conditions, the margin of error is getting smaller this year.
Riot shares fell about 7% on Monday, while peer Marathon Digital (MARA ) fell more than 12%. Bitcoin prices were down about 1.2 percent recently.
Post time: Dec-08-2022