Mining Pool Payout Methods and Pool Types

This guide explains how mining pools distribute rewards and the main types of mining pools used in the industry.

Understanding these mechanisms helps miners choose the most suitable pool and better understand their revenue structure.

Part 1: Mining Pool Payout Methods

The payout method determines how mining rewards are distributed among miners.
Different models balance income stability, fairness, and risk allocation.

The most common payout methods are PPS, PPLNS, and FPPS.

1. PPS (Pay-Per-Share)

PPS is the most straightforward and stable payout model.

How it works

The pool pays miners a fixed reward for every valid share submitted.
Payments are made regardless of whether the pool actually finds a block.

Key characteristics

• Very stable income

• No luck variance for miners

• The pool operator bears all mining risk

Miner perspective

Income behaves like a fixed salary based on contributed work.

Pool perspective

The pool must maintain large reserves to cover unlucky periods when blocks are not found.
Because of this risk, PPS pools typically charge higher pool fees.

2. PPLNS (Pay-Per-Last-N-Shares)

PPLNS is currently the most widely used payout method among mining pools.

How it works

Rewards are distributed only when the pool finds a block.

The pool looks at the last N valid shares submitted before the block was found and distributes the block reward proportionally based on each miner’s share contribution.

Key characteristics

• Earnings depend on pool luck

• Higher variance

• Rewards long-term participation

Miner perspective

Miners who stay connected and continuously submit shares will occupy a larger portion of the rolling N-share window, resulting in higher rewards when blocks are found.

Frequent pool switching reduces expected earnings.

Pool perspective

The pool carries minimal financial risk, since rewards are distributed only after block discovery.

3. FPPS (Full Pay-Per-Share)

FPPS is an improved version of PPS that also distributes transaction fees.

How it works

Miners receive:

• A fixed block reward payout (similar to PPS)

• An additional transaction fee distribution

The pool calculates the average transaction fee income over a period and distributes it proportionally based on submitted shares.

Key characteristics

• More complete payout (block reward + transaction fees)

• Slightly higher expected revenue than PPS

• Very stable income

Industry practice

FPPS has become the standard payout method used by many large mining pools, especially for large miners and mining farms.

Other Variants

Some pools use hybrid models:

PPS+

• Block reward paid via PPS

• Transaction fees distributed based on actual blocks mined

SOLO Mining

• The miner receives the entire block reward

• Extremely high variance

• Suitable only for very large hash rate miners

Part 2: Types of Mining Pools

Mining pools can also be categorized based on their system architecture and connection model.

1. Centralized Mining Pools

This is the dominant model used by almost all major mining pools today.

Architecture

A central pool server coordinates all mining activity.

Miners connect to the server to:

• Receive mining jobs

• Submit shares

• Track earnings

The server handles:

• Job distribution

• Share validation

• Reward calculation

• Payout processing

Advantages

• High efficiency

• Stable performance

• Easy to use

• Low entry barrier for miners

Disadvantages

• Centralized control

• Potential single point of failure

• Large pools may raise concerns about network hash rate concentration

2. P2P Mining Pools

P2P mining pools are designed to remove centralized control.

Architecture

There is no central server.
Miners connect directly through a peer-to-peer network and collectively maintain a shared share chain.

Rewards are distributed automatically according to protocol rules.

Advantages

• Fully decentralized

• No single point of failure

• Resistant to censorship

Disadvantages

• Technically complex

• Lower efficiency

• Difficult to maintain and scale

Because of these challenges, P2P pools are currently used only in limited or experimental deployments.

✅ Summary