Pay-Per-Share (PPS) - Definition

Pay-Per-Share (PPS) is a cryptocurrency mining reward system. In this system, miners receive a fixed payout for each valid share they submit to a mining pool. This payout occurs regardless of whether the pool successfully mines a block. PPS offers a predictable and steady income stream by transferring the risk of block variance to the pool operator.

How PPS Works

In the PPS system, the mining pool determines a fixed reward for each share. This calculation is based on the current network difficulty and block reward. When a miner submits a valid share, they receive an immediate payout.

For example, if the block reward is 6.25 BTC and the chance of a share becoming a block is 1 in 1,000,000, each share might be worth 0.00000625 BTC. Therefore, submitting 1,000 valid shares would earn the miner 0.00625 BTC, no matter if the pool finds a block that day.

Key Characteristics

• Guaranteed Income: Miners receive immediate payouts for each valid share submitted.
• No Dependency on Pool Success: Earnings are stable, independent of the pool’s block mining performance.
• Higher Pool Fees: PPS pools usually charge higher fees, typically between 2% and 5%, to cover the fixed payouts and assumed risks.

Advantages

• Stable Earnings: Provides a consistent and reliable income for miners.
• Risk Mitigation: Miners are protected from the unpredictability of block discovery.
• Simplified Financial Planning: Predictable payouts make it easier to manage operational costs like electricity.

Disadvantages

• Higher Fees: PPS pools charge higher fees compared to other payout methods.
• Potential Lower Long-Term Earnings: Fixed payouts based on average block rewards may result in lower earnings over time.
• Limited Incentive for Loyalty: Miners can switch pools easily without financial penalties, potentially increasing turnover rates.

Practical Applications

PPS is ideal for miners who prefer consistent and predictable income streams. It benefits those operating mining rigs with fixed electricity costs by allowing more accurate financial forecasting. Additionally, miners who want to minimize risks associated with block variance find PPS an attractive option.

Example

Consider a mining pool with a PPS payout rate of 0.0001 BTC per share. If a miner submits 1,000 valid shares in a day, they will earn 0.1 BTC. This payout occurs regardless of whether the pool finds a block that day.

This system ensures that miners receive consistent payments, providing financial stability during periods when the pool's success rate is low.

Comparison with Other Payout Methods

Unlike Pay-Per-Last-N-Shares (PPLNS), which pays miners only when a block is found and distributes rewards based on shares contributed in the recent N shares, PPS provides immediate payouts regardless of block discovery.

This makes PPS more stable but often comes with higher fees. Full Pay-Per-Share (FPPS) extends PPS by including transaction fees in the payouts, offering additional earnings while maintaining stability.

Things to Remember

• Guaranteed Income: PPS provides miners with immediate and consistent payouts for each valid share submitted.
• Risk Mitigation: PPS transfers the risk of block variance to the pool operator, offering a reliable earnings stream.
• Higher Pool Fees: PPS pools typically charge higher fees, usually between 2% and 5%, which can impact overall profitability.
• Comparison with Other Methods: Unlike PPLNS, PPS offers more stability through immediate payouts but may result in lower long-term earnings and lacks incentives tied to pool performance.