The most basic function of a mining pool is to gather the computing power of miners to mine together. The difference in technology is very small. At this stage, the competition is computing power and service quality. At present, mainstream mining pools can be divided into Bitmain and non-Bitmain mining pools. Bitmain mining pools have inherent advantages such as discounted mining machine prices and fast access to mining machines; non-Bitmain mining pools rely on their own reputation and differentiated services are supported by miners, represented by F2Pool in China and SlushPool in foreign countries. This article analyzes the mining pool industry from the status quo and pain points of the mining pool industry, mining pool business model, market structure, investment logic and future development status.

author

Node Research Center Zhao Yue, Lang Hanwei

Whale Research Institute Wang Fan, Chen Hongyi

Paper Advisor

F2Pool Shenyu, Wang Chun, Big Fish

Fat Pool wiki

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Industry Status and Pain Points of Mining Pools

1.1 Industry Background of Mining Pool

Mining in the market can be divided into two ways, one is Solo (personal) mining, and the other is pool mining.

The following uses Bitcoin as an example to analyze the mining pool:

The characteristic of the Solo mode is that the miner node runs an independent Bitcoin network node. Therefore, the miner node has two basic functions: network routing (maintaining the IP list of trusted nodes) and local full-chain data backup. This brings up two problems:

1) Hard disk and bandwidth requirements are large

The hard disk space required for local data storage is also increasing, and it is already about 100 G.

2) The probability of successful mining is extremely low

Bitcoin is based on the POW consensus mechanism. With the exponential increase in the computing power of the entire network, the proportion of individual computing power is getting lower and lower, which means that the probability of obtaining bookkeeping rights is getting lower and lower. The success rate is getting lower and lower. On July 6, 2018, the computing power of the entire network is about 35.74Eh/s. An Antland S9i has a computing power of 13.5T, and the probability of producing a block is about 1 in 2.6 million. There are also electricity bills, Network fees and management fees. Faced with the risk of not being able to produce blocks for several months.

So in pursuit of more sustainable and stable income, the mining pool model emerged. The emergence of mining pools has greatly lowered the technical threshold for miners. You only need to connect to the mining pool and provide the mining pool with the share calculated by the effective computing power. Select transaction packaging, how to construct a packaging block, and how to publish it to the bit network as soon as possible after successful packaging.

Since then, thousands of Solo miners have gathered together to share their computing power and share the rewards obtained by one of the miners. Therefore, the behavior of "mining" has evolved from Solo mining to "mining pool" collaborative mining .

1.2 Market structure of mining pools

As of 11:00 on July 3rd, according to the share of mining pools in the past three months, the top six mining pools accounted for 79.2% of the mining pool, namely BTC.com (accounting for 25.5%), AntPool ( 14.5%), SlushPool (11.0%), ViaBTC (10.0%), BTC.TOP (9.2%), and F2Pool (9.0%), 5 of which are from China. BTC.com, AntPool, ViaBTC are directly related to Bitmain ; Only two of the top 10 mining pools are from abroad, namely SlushPool from the Czech Republic and BitFury founded in Russia.

BTC mining pool share chart in the past 3 months

Deadline: 20180723 Data source: BTC.com

1.3 Pain points faced by the mining pool industry

1) DDoS attack

Once the mining pool encounters a denial of service attack, it will be disconnected from the mining machine, and the computing power of all miners will be wasted.

2) Fund security

The Bitcoin mining industry involves fund custody and payment, and security issues are the top priority.

3) Communication network

Establishing a high-speed transmission network is a requirement to reduce the orphan block rate, and it should also reduce the block data delay.

4) Network stability

Considering the interoperability of the global network and the special situation of the domestic network, the stability of the network connection should be ensured.

5) Data structure complexity

The mining pool involves the reading and writing of the database, how to reduce the complexity of the data structure of the mining pool, in order to improve efficiency and stability and maintain the key points of the system.

6) Computing power support

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Introduction to mining pool business model

2.1 Mining pool agreement and roles

1) Mining pool protocol:

The "mining pool" coordinates hundreds or thousands of miners through a proprietary protocol. Miners set up their mining machines to connect to the pool server after creating a pool account. When the mining machine runs mining online, it needs to maintain a connection with the mining pool server and work synchronously with other miners.

Commonly used protocols include: Stratum (STM protocol) & getBlockTemplate (GBT protocol) and the outdated GetWork (GWK protocol).

2) Role:

The roles in the "mine pool" include:

Miners: Earn relatively stable rewards according to their computing power contribution share;

Mining pool administrator: A certain percentage of handling fee is charged, and the mining pool administrator can also participate in computing power contribution as a Solo miner.

2.2 Overview of mining pool access conditions and reward distribution mechanism

1) The mining pool is open to any miner. After a miner in the mining pool successfully mines, the block reward is paid to the fixed bitcoin wallet address of the mining pool. The reward does not belong to the miner who dug the mine, but to the entire mining pool.

2) The mining pool will set a "threshold" for reward distribution. This threshold is the difficulty target for each calculated TargetHash value, which is usually more than 1000 times lower than the Bitcoin network difficulty. For example, the mining difficulty of the entire network is the Hash value of 10 consecutive 0s at the beginning, and the difficulty threshold set by the mining pool is the Hash difficulty of 7 consecutive 0s at the beginning; Hash is calculated, and miners who meet the difficulty threshold of the mining pool can share the reward.

3) The distribution of rewards is not distributed immediately after digging a mine, but after the mining rewards have accumulated to a certain amount set by the mining pool, the rewards are distributed once, or settled according to a fixed time such as once a day .

There are mainly hosted mining pools and P2P mining pools in the market. Due to the low efficiency of P2P mining pools, this model has gradually faded out of the market.

There are mainly hosted mining pools and P2P mining pools in the market. Due to the low efficiency of P2P mining pools, this model has gradually faded out of the market.

1) Managed mining pool

That is, a company or individual operates a mining pool server, and the owner of the mining pool server acts as a mining pool administrator, and he collects a certain percentage of management fees from the miners' income.

The mining pool server is connected to the Bitcoin node and maintains a complete copy of the blockchain; therefore, the mining pool server can replace the miners in the mining pool for transaction verification. The mining pool protocol server belongs to a centralized node in the entire mining pool network. Centralized nodes will have two problems: node evil (managers can use mining pools to conduct double attacks or invalidate blocks) or node failures (disconnection causes collective paralysis of mining pool miners).

2) P2P mining pool

P2Pool is a peer-to-peer mining pool without a central manager. By decentralizing the functions of the mining pool server, a parallel blockchain-like system is realized.

The system is a blockchain system with a difficulty lower than the instant difficulty coefficient of the Bitcoin network. Share chains allow miners to cooperate in a decentralized pool to produce blocks at 30-second intervals and earn shares. Share blocks mark the computing power contribution of each miner. When the difficulty coefficient of a share block meets the Bitcoin network, it will be broadcast and back-chained to the Bitcoin main chain.

The miners in P2Pool need to be professional mining machines with sufficient memory, hard disk space and bandwidth. Each miner not only needs to maintain a complete copy of the Bitcoin blockchain locally, but also needs to maintain a full copy of the share chain and Run a professional P2Pool software. The way rewards are distributed is similar to hosted pools.

2.4 Mining Pool Revenue Settlement Mode

There are a variety of income settlement modes in the market. The mainstream mining modes include: PPS, PPLNS, PPS+ and SOLO mode. The mining pool also has a joint mining mode in the mining process. This method not only solves the waste of computing power, but also It can help some currencies, such as DOGE, resist 51% attacks. Mining modes such as Proportional have only existed briefly in the history of mining pools, or they have only been proposed but not implemented. Except for the joint mining mode, although the calculation formulas of different settlement modes are different, because the rewards for mining come from block rewards and handling fees, the source is fixed, so after the long-term income of various settlement methods is extended, the average are all the same.

List of mining modes:

PPS: That is, the amount is determined according to the contribution made to solve the problem. Users can instantly withdraw the rewards they earn. Rewards are paid out of the existing balance in the mining pool. The full name of PPS is Pay Per Share. In order to solve the situation of PPLNS that sometimes has high returns and sometimes has no returns, PPS adopts a new algorithm. According to the proportion of your computing power in the mining pool, PPS estimates the minerals that the mining pool can obtain every day, and gives you a basically fixed daily income.

PPLNS: It is very similar to PPS, its full name is Pay Per Last N Shares, "paying income based on the past N shares", and the transaction fee will be added to the block reward every once in a while, and then distributed to the miners. This means that once all miners discover a block, everyone will distribute the currency in the block according to the proportion of shares contributed by each person. In the PPLNS mode, if the mining pool can find many blocks per unit time, then the dividends will be very large. If the mining pool fails to find a block in a day, then everyone will have no profit. At the same time, due to the lag inertia under PPLNS, there will be a certain delay in mining income.

PPS+: It can be understood as the combination of PPS+PPLNS settlement, and the PPS+ mode is the most acceptable among miners. The mining income of each block = block explosion reward (12.5 BTC) + transaction fee of this block (about 1.9% of the block explosion reward). The PPLNS calculation method pays and provides incentives.

SOLO: Only when the mining machine bursts the block will it be profitable. If the mining machine bursts the block, it can get all the income of the block minus the handling fee. If the mining machine does not burst the block, there will be no profit.

Proportional: During each round of reward distribution, miners get blocks according to their submitted shares. The share reward depends on the shares that miners have submitted in each round, so hoppers will get excess rewards, while stable miners will get less rewards. This is the worst kind of reward system and cannot be used.

Slush's method: Each share is marked with a score, which depends on the time of submission (an exponential function of time), and block rewards are distributed according to their scores. Historically, this was the first method specifically designed to counter jumps, and although it is incomplete, some jumps are still possible. This method can be used by intermittent miners without affecting their long-term average returns. The variance will be especially acute for intermittent miners, though.

Geometric method: This is a more precise implementation of Slush's method. The return on shares decreases exponentially as more shares are submitted. Operators charge variable fees to maintain a stable history. The total variance of this method is high, but its distribution between operators and miners is adjustable. PPS is a special case of this method.

SMPPS: The distribution of rewards is similar to that of PPS, but the upper limit does not exceed the total amount in the mining pool.

ESMPPS: Under this rule, all miners receive the same share of rewards.

Double geometric method: This is a hybrid of the geometric method and PPLNS, including exponential versions of the former and the latter as special cases. Shares decay exponentially as the number of future shares and the number of blocks discovered increases. Maturity, variance and operational risk are adjustable.

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Market structure of mining pool industry

3.1 List of leading mining pool companies

According to the statistical data of the past three months, three of the top six mining pools in the world are directly related to Bitmain. Among them, BTC.COM is built by Bitmain’s technical team, AntPool is a brand directly under Bitmain, and ViaBTC is Bitmain’s A-round leader. invested enterprises.

Comparison chart of mainstream mining pool information

Data time: 20180423-20180723

3.2 Operating characteristics of leading mining pools

As for the operating characteristics of leading mining pool companies, it is analyzed from the perspective of Bitmain and non-Bitmain.

For Bitmain’s mining pools, because Bitmain is not only a mining machine manufacturer, it already has a complete ecosystem from mining machines, mining pools, media to investment. Therefore, these mining pools have inherent advantages. First, the price of the mining machine is favorable, and second, the speed of obtaining the mining machine is also faster.

For non-Bitmain mining pools, they can only get the support of miners by virtue of their differentiated services. Take F2Pool as an example in China. F2Pool was established early, mainly relying on the word-of-mouth of old customers and high-quality user experience to attract computing power. The composition of computing power is mainly domestic. Take SlushPool abroad as an example. SlushPool is affiliated to SatoshiLabs located in Prague, the capital of the Czech Republic. It has geographical advantages, and its computing power is mainly composed of foreign countries.

3.2.1 Bitmain System

The characteristics of Bitmain’s mining pools are: let miners weigh the pros and cons by themselves, provide greater options, and allow them to choose different income settlement models.

1）BTC.COM

In order to better benefit miners, the BTC mining pool launched the first [FPPS] settlement model on February 17, namely Full PPS (full PPS), which distributes all block revenues including transaction fees. Compared with the traditional PPS settlement mode, it can increase the income by about 10%-20%.

2）AntPool

AntPool supports 4 settlement methods: PPS, PPS+, PPLNS, SOLO. Each currency supports different settlement modes and rates, and customers can choose according to their needs.

Data source: AntPool Data time: 20180704

3）ViaBTC

set upset upChoose a different payment method.

Data source: ViaBTC Data time: 20180704

The ViaBTC mining pool also has joint mining. Taking the BTC-NMC joint mining pair as an example, it means that every BTC mined will give 2 NMC. The mode of joint mining can promote the activity of another currency.

Data source: ViaBTC Data time: 20180704

3.2.2 Non-Bitmain system

Non-Bitmain-based mining pools: Think from the user’s point of view, provide miners with one-click services, and reduce miners’ decision-making time.

1）F2Pool

F2Pool is also known as Yuchi, and one of the founders is called "Shenyu". It is one of the earliest batch of mining pools in China. F2Pool has more than 20 types of coins that can be mined. The settlement time for this mining pool is from 08:00 every day. The payment standard is automatically settled, and the unpaid income before 08:00 will be settled at 08:00 the next day if it is less than the minimum payment standard. Payment time: automatic payment every day from 08:00 to 16:00, once a day.

Data source: ViaBTC Data time: 20180704

The official website of F2Pool mining pool provides a joint mining mode of LTC and DOGE.

Data source: F2Pool Data time: 20180704

2）SlushPool

SlushPool's reward calculation method: reward =, where: mining area value = 12.5BTC + transaction fee included in the mining area, and the exponentially weighted hash rate indicates the hash rate at which a certain mining area is discovered. The pool fee is 2%. The minimum payout threshold is 0.001 BTC. When the payment is less than 0.01 Bitcoin, there will be an additional 0.0001 Bitcoin fee.

3.3 Overview of Mining Pool Share Performance

From July 2017 to June 2018, the market share of BTC.com gradually increased, while the share of AntPool remained basically unchanged. The old mining pools such as: F2Pool gradually expanded their influence by virtue of their advantages in technology and services. In December 2017 Months later, the share of “Other” other mining pools gradually decreased, and the mining pool market tended to be centralized.

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Data Sources:https://btc.com/stats/pool?pool_mode=month3

The investment logic of the mining pool

1) Large amount of funds

The returns and risks are relatively high. The problems that investors currently encounter are: first, when investors want to invest in mining pools, they have no shares to invest in the projects they are looking at. Second, mining pools require a large amount of investment. Even if a single investor Investment opportunities were obtained, but huge funds were not available.

2) Computing power is the core competitiveness of the mining pool

Measuring the mining pool project can be measured from the aspects of technology and computing power support, among which computing power support is a more important aspect. When setting up a mining pool, whether there is enough computing power to support the mining pool to obtain a stable cash flow is a must The key to the survival of mining pool projects.

3) Indirect investment

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Future Prospects for Mining Pools

1) Industry trends

From the perspective of internal competition in the industry: Mining pools are upstream companies in the entire market. Analyzing the market share in the past year, it can be found that enterprises in the mining pool industry are gradually becoming centralized, so small mining pools will withdraw from the market in the future.

From the perspective of the external construction of the industry: the market positioning of the mining pool is the service industry, so the prospect of the mining pool industry mainly depends on the industry trend of the minable currency, and the mining pool is closely related to the technology trend of the future blockchain world. From the perspective of historical development, there are fewer and fewer projects adopting the POW consensus mechanism. Under the circumstances of shrinking market demand, sensitive policies, and high industry entry thresholds, the entire mining industry is gradually becoming sluggish. Pools are in urgent need of transformation. Similarly, under the above background, the mining pool industry has shown the characteristics of repelling new entrants. First, the current computing power has been controlled by the top mining pools. Second, the overall market trend is downward, and no good development has been seen. expected.

2) Ecological construction

The ecological construction of mining pools is mainly in two dimensions: vertical and horizontal. The vertical construction is to deeply cultivate the mining pool industry, from software upgrades to financial arrangements, to handle the details to the best, and to consider everything for users. At the same time, in terms of technology, we must always grasp new algorithms, such as trying new mining rules such as PoS. play. The construction of the horizontal dimension is mainly based on the wallet ecology. The coins dug out by the miners are directly placed in the wallet of the mining pool. Reducing frequent transfers can not only facilitate the miners, but also reduce the pressure on the entire network.

3) Future pressure

Future mining pools may turn to PoS and other modes of mining, but at that time the industry will not only face competition within the mining pool industry, but also face competition from wallets such as imtoken.