tl:dr: If you are the sort of miner who likes to stay connected to the same pool for a fairly long time, PPLNS means higher earnings for you. It is a payout system that rewards miners who are loyal to a pool, and punishes “pool hoppers”.
The entire point of mining, of course, is to find blocks. Each block found gives a reward to the miner who finds it. Ravencoin, for example, currently awards 5,000 RVN coins to the finder of each block. The difficulty of finding a block is usually high enough that it would take you months, years, or even “forever” before you could find a block by yourself.
This is why we join pools. Your mining rig, when combined with the efforts of other mining rigs around the internet, has a chance to find a block in hours or even minutes, depending on how many people are working together. Alice’s rig might get super lucky and find a block. Then Bob’s rig finds the next block. Your rig might get lucky and find a block, or maybe it never will. The important thing is that everyone is working, and whoever finds the hash that produces a new valid block will submit the winning information back to the pool so the block can be actually created by the pool’s software and added to the blockchain.
Once a block is found, we want to split the reward amongst all the workers who contributed efforts to finding that block. So, how do we decide how to pay all the miners who are contributing work to the pool? This is where the various schemes of payouts come in.
Determining Payments to Miners
There are a number of different schemes pools can employ to determine how to distribute the coin rewards to the miners. The two main ones used these days are proportional and PPLNS, aka Pay Per Last N Shares.
Proportional payouts are simple and easy to understand. Each rig on the pool is working and submitting shares of varying difficulty. Once a block is found, the pool looks back and reviews all the shares that were submitted by all workers during that entire round of work that produced the block. If Alice contributed exactly 5% of the work during that round, she gets 5% of the block reward. If Bob submitted shares equal to 0.015% of the total work, then that’s the percent of the coin reward he gets. Then a new round begins, all shares are erased, and the pool starts working again on the next block, with everyone starting over from scratch.
The problem with this payout method is obvious. If a pool is being lucky and finding blocks quickly, then your shares are worth a lot of coins, since they represent a relatively high percentage of the efforts. Miners can abuse this method by keeping an eye on pools and when a pool find a new block (and thus starts a new round), they then join that pool and submit a few shares, and then disconnect. If the pool gets lucky again and quickly finds a new block, the pool hopper gets a huge reward from the few shares they submitted at the start of the round. These pool hoppers jump from pool to pool, joining each one just as a new round is started, and they tend to enjoy high rewards with less effort from their mining rigs.
The miners that stay connected to the same pool for a long time are the ones doing the hard work of grinding through the millions of hashes to find winning nonces. It seems unfair that others would benefit when a block is found quickly, but they are punished when a block takes a very long time to be found. The solution to this is PPLNS.
With PPLNS, old shares get discarded. When the pool is being unlucky and is taking a while to find the block, shares from the beginning of the round start to get pruned. The shares from the workers (including the pool hoppers!) that joined at the beginning of the round get discarded, and work continues. When a block is finally found, only the miners who contributed recent shares get paid.
It makes sense. People who worked a little bit at the beginning of the round, and then dropped out, ought not get rewarded if a block is only finally found 8 hours after they dropped off. The workers who were there for the duration are the ones that should get the payout in instances like that.
Long times between blocks are a fact of life for all pools. Luck means sometimes a pool will find a bunch of blocks all in a row, and everyone gets paid the same. But when luck turns bad for a while, the loyal miners who stay for the duration, should get the reward.
As you can see, if you are the kind of miner who likes to stay connected to the same pool for a while, you are much better off mining on a pool that employs PPLNS payouts.
Q: “I joined the pool a little while ago, and payouts are dismally low. Why?”
When you first join the pool, the server does not know whether you are a new loyal miner, or another pool hopper. Any pool using PPLNS is going to result in lower payouts for people who just connected to the pool, or who don’t stick around for long. Rest assured that if you stay connected to the pool, you will soon “join the ranks of the loyal” the pool will start rewarding YOU while punishing the others who just joined, as well as those who hopped off long ago. So stick around, leave your rigs connected, and go enjoy a beer. Check back in 12 hours and enjoy seeing those sweet rewards.
Ready to try PPLNS? Give our Ravencoin Mining Pool a try!