Bitcoin mining operates on a Proof-of-Work (PoW) consensus mechanism, where miners compete to solve complex cryptographic puzzles and earn block rewards. As individual miners often lack sufficient computational power to mine profitably, they join mining pools—aggregating their hash rate to increase the chances of successfully mining a block. Once a block is found, the reward is distributed among participants based on their contributed work. But how exactly do mining pools calculate and distribute these earnings?
This article breaks down the most common payout methods used by Bitcoin mining pools today, including FPPS, PPS+, PPS, PPLNS, and SOLO, explaining how each model works, its risk profile, and why certain methods have become more popular over time.
The Foundation: Proof of Work and Hash Shares
At the core of every mining pool’s payout system is the concept of shares. A share represents a valid proof of work submitted by a miner that doesn’t necessarily solve a block but proves the miner has contributed computational effort.
Pools set a lower difficulty target for shares than the actual blockchain, allowing miners to submit frequent proofs of activity. These shares are then used to fairly estimate each miner’s contribution when a block is finally mined.
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PPS: Pay Per Share – Stable Income for Miners
PPS (Pay Per Share) is one of the earliest and most straightforward payout models. Under this method, miners are paid immediately for each valid share they submit, regardless of whether the pool finds a block.
The formula for daily earnings in PPS is:
P = (H / (D × 2^32)) × RWhere:
P= Miner's theoretical daily incomeH= Miner's hash rate (in H/s)D= Network difficultyR= Block reward (e.g., 6.25 BTC pre-halving, 3.125 BTC post-halving)
In PPS, miners receive a fixed payout per share, making it highly predictable—similar to receiving a salary. This stability comes at a cost: the pool operator assumes all risk related to luck (i.e., variance in block discovery).
What is "luck" or "lucky value"?
Luck measures how frequently a pool finds blocks compared to statistical expectations. If a pool discovers blocks exactly as often as predicted by probability, its luck is 100%. Above 100% means it's outperforming odds; below means underperformance.
Because PPS guarantees payments even during unlucky streaks, pools typically charge higher fees to offset the risk.
PPLNS: Pay Per Last N Shares – Rewarding Loyalty
PPLNS (Pay Per Last N Shares) introduces a time-based window into reward distribution. Instead of paying for every share immediately, the pool looks at the last N shares submitted before a block was found and distributes rewards only to those contributors.
For example:
- A pool sets N = 1,000,000 shares.
- When a block is mined, the system checks who submitted the previous million shares.
- Rewards are split proportionally among those miners.
This model discourages "pool hopping"—where miners switch pools right after a block is found to maximize gains. PPLNS rewards consistent participation, making it ideal for long-term miners.
Unlike PPS, PPLNS does not pay out transaction fees by default and exposes miners to luck fluctuations. High-luck periods mean higher payouts; dry spells result in zero income—even with active hashing.
Evolution of Payout Models: The Rise of FPPS and PPS+
As Bitcoin transaction fees grew and competition between mining pools intensified, new payout models emerged to attract more hash power. Modern pools now often distribute both block subsidies and transaction fees, leading to two dominant models: PPS+ and FPPS.
PPS+: Pay Per Share Plus – Hybrid Stability
PPS+ builds on the original PPS model but adds transaction fee distribution.
Here’s how it works:
- Block subsidy: Paid per share, just like in PPS (stable, unaffected by luck).
- Transaction fees: Distributed based on actual fees collected by the pool, proportional to each miner’s share contribution.
Example:
- Miner A contributes 10% of the pool’s hashrate.
- Daily block subsidy: 10 BTC (guaranteed via PPS logic).
- Total transaction fees collected: 2 BTC.
- Miner A receives:
10 BTC + (2 BTC × 10%) = 10.2 BTC.
While the base income remains stable, fee income depends on the pool’s luck—more blocks found = more transactions processed = higher fees.
👉 See how top-tier mining pools balance risk and reward using hybrid payout models.
FPPS: Full Pay Per Share – Maximum Predictability
FPPS (Full Pay Per Share) takes predictability further by calculating both block rewards and transaction fees based on network averages—not actual collections.
Using historical data, the pool estimates:
- Average ratio of transaction fees to block subsidy (e.g., 1.5%).
- Then pays miners a fixed rate that includes both components.
Formula:
Total Payout = Block Reward × (1 + Fee Ratio)Example:
- Base reward: 10 BTC
- Network fee ratio: 1.5%
- FPPS payout:
10 × (1 + 0.015) = 10.15 BTC
Miners get slightly higher base income than pure PPS due to included fee estimates, and crucially, their payouts remain unaffected by short-term luck swings.
However, if real-world fees exceed predictions, the pool absorbs the extra cost. Conversely, if fees are lower, the pool profits. This makes FPPS riskier for operators but highly attractive to risk-averse miners.
SOLO: Mining Alone Within a Pool Framework
SOLO mode allows miners to act as independent entities within a pool infrastructure. Technically, all hashing power connects to a central server, but rewards are only paid if the miner personally finds a block.
It’s like running your own mini-pool with access to shared networking tools. Only large-scale miners use SOLO due to high variance—long periods without income are common.
In SOLO:
- No sharing of block rewards.
- No guaranteed payouts.
- Full exposure to luck.
- All rewards go directly to the successful miner (minus small service fee).
This model suits operators with massive hash power who can afford volatility for full reward capture.
Frequently Asked Questions (FAQ)
Q: Which payout method offers the most stable income?
A: FPPS provides the highest stability since both block rewards and estimated transaction fees are paid predictably, independent of pool luck.
Q: Is PPS better than PPLNS for small miners?
A: Yes. Small miners benefit from PPS or FPPS because they avoid income volatility. PPLNS favors consistent contributors and penalizes frequent disconnects or pool switches.
Q: Do all mining pools support FPPS and PPS+?
A: Most major Bitcoin mining pools offer both FPPS and PPS+, especially those targeting professional miners seeking predictable returns.
Q: How do transaction fees affect my mining income?
A: In models like PPS+, actual fees collected boost your income during high-fee periods. In FPPS, you receive an averaged estimate—so spikes don’t directly increase your payout.
Q: Can I switch between payout methods in the same pool?
A: Some pools allow switching, but not all. Always check the pool’s settings and fee structure before changing methods.
Q: Why did older models like PPS decline in popularity?
A: Because they excluded transaction fees entirely, older models became less competitive. Modern methods like FPPS and PPS+ provide more comprehensive revenue sharing, aligning better with current network economics.
Conclusion: The Shift Toward Comprehensive Reward Distribution
Over time, mining pool payout mechanisms have evolved from simple block-reward-only models like PPS and PPLNS to more sophisticated systems such as FPPS and PPS+, which account for both block subsidies and transaction fees.
Today, FPPS dominates among professional mining operations due to its balance of predictability and fairness. Meanwhile, PPS+ remains popular for those willing to accept some variance in exchange for potential upside during high-fee events.
Choosing the right payout method depends on your risk tolerance, scale of operation, and mining goals. Whether you prioritize steady returns or want to ride lucky waves for bigger payouts, understanding these models empowers smarter decisions in the competitive world of Bitcoin mining.