The development of global blockchain technology has given birth to the emerging mining business. Perhaps you don’t understand the inherent mining mechanism, you might have heard some miners’ jaw-dropping financial returns when the price of ETH has been soaring to the moon. However, the majority of miners don’t know how their own profits being calculated. If you are a ETH miner, note that in order to maximize your mining profit, it’s essential to understand the mining process behind the scene.
According to the Ethereum Wiki, the successful PoW miner of the winning block receives:
- A block reward for the 'winning' block.
- All of the gas expended within the block (a.k.a. transaction fee).
- An extra reward for including Uncles as part of the block.
In Ethereum, the reward for a new block is 3 ETH. Since an average block time of Ethereum is very short, the uncle rate could be relatively high. Therefore, Ethereum provides descending rewards (from7/8 to 2/8 of a block reward) for mining an uncle block and 1/32 of reward for referencing up to 2 recent uncle blocks.
In addition, the transaction fee also serves as a reward and a block could contain around 400 transactions. With the block size being constant, the more we utilize a block to include high-priced transactions, the higher mining rewards miners will get. However, we can see that many mining pools don’t distribute those rewards to miners, which is totally unknown for the most.
In our current PPLNS mode, a mining pool’s daily reward is very clear and transparent. For a block, it consists of a block reward (3 ETH), a uncle referencing reward (if have), and transaction fees; For an uncle block, it consists of a uncle reward (descending from7/8 to 2/8 of a block reward), an uncle referencing reward (if have), and transaction fees.
For miners using pool services, their profits would be
(Pool rewards - Services fees) * Miner hashrate/ Pool total hashrate.
How to calculate your hashrate? Before we get deeper into it, you need to figure out what is a Share. Each mining pool would set a difficulty threshold with the Ethereum Proof-of-Work algorithm. Every time when a difficulty calculation is completed, the miner will get a share. The hashrate is calculated based on the shares.
Hashrate(24h-avg) = the number of shares in 24h* difficulty set by the pool
Therefore, with a constant hashrate, the two major factors affect one’s profit are
- The reward of a mining pool
- The commission fee of a mining pool.
Let’s look at a mining pool's profit again i.e., and uncle block rewards, transactions fees and uncle referencing rewards (if have), we have three tips for you to choose a mining pool.
- First, choose a reputable pool with low a commission fee. Note that, the real commission fee would be higher than the nominal rate a pool shows you when it doesn’t claim a transaction fee distribution. Some times the difference could be 2% or more!
- Second, choose a pool with a transaction fee distribution. Be aware that the transaction fee is usually 0.1-0.3 ETH per block and will be much higher when many ICOs are taking place. It contributes to a large portion of total rewards, but many mining pools even don't distribute those fees at all. While at SparkPool, we promise to pay our miners all the rewards they deserve rather than secretly eating them.
- Third, choose a mining pool with a lower uncle rate. Since an uncle reward is much smaller than a one, a pool with a higher uncle rate would drag down your average profit. Again, at SparkPool, our uncle rate is only 11.2% while the whole network is 17.2%.
SparkPool is waiting for you.