Lincoin Mining Pool and Platform Transparency Policy

It is our commitment to our users and to the integrity of the Bitcoin blockchain to clarify and disclose our policies, procedures, and rewarding method. While Bitcoin is built on transparency and trust, it is our aim to bring the same thing to mining pools.

There are many rewarding methods used by different mining pools such as PPLNS, PPS+, and FPPS. Each of these methods has its own upsides and downsides but FPPS rewarding method is the only one that could be 100% transparent. The problem with other rewarding methods is that you should trust the authenticity of the mining pool but in the FPPS rewarding method, you do not require to trust anyone in order to validate your income. Another benefit of real FPPS rewards is that the scale and the chance of the mining pool will not affect your revenue.

It should be noted that many pools claim to be using FPPS but practically they are not and they manipulate the hashrate and block rewards! In this document, we will explain how you can validate if your mining pool is using FPPS rewarding in an authentic way and will explain how Lincoin will guarantee that.

First, we should explain a few terms:

Mining: Mining is the process of guessing a number, known as a nonce, that would satisfy the requirements of the difficulty target. Whenever the right nonce is guessed the hash of the block will become equal to or less than the network difficulty target.

Difficulty: Network difficulty or simply difficulty, is a value set by the blockchain consensus in order to keep the block time close to 600 seconds. In the Bitcoin blockchain, the difficulty is recalculated every 2016 block (~2 weeks). The higher the difficulty, the smaller the target. This means as the network difficulty goes higher it will become more difficult for the miners to guess the right nonce.

Pool Difficulty: It could take a single device many years in order to be able to find a feasible nonce. But as the mining pool we require to validate every miner is playing fair, thus we simplify the difficulty target for each device separately to make sure they could find a valid nonce in a matter of seconds and prove their fair play by submitting that answer to the pool.

Share: Share is the solution to the mining tasks (work) that a mining device submits to the pool. The pool will accept and score that submission after validating that. The scoring will take place based on the difficulty of that specific submission.

Hash Rate: This is a number that represents how many accepted shares a mining device has contributed to the pool in a specific period of time. Hash rate is calculated using the formula below:

Hashrate= sum((difficulty of shares) *2^32)/time

Effective Hashrate: The real instantaneous hashrate of a mining device is so unstable. The pools filter that out with 2 main purposes. The first is to get a smooth reliable chart and number for calculation purposes. Second, in order to discourage pool-hopping among their users. The most common filter used by the pools is Exponential Moving Average (EMA) and Moving Average (MA). The effective hash rate, used for rewarding, is usually the instantaneous hashrate filtered by MA. Lincoin uses MA as its smoothing function.

PPS Rewarding: Pay Per Share (PPS) is a rewarding method used by mining pools. In this method, the miners are paid according to the probability of their success in mining a block regardless of their success in actually mining a block. The baseline for determining the probability of mining success is the block reward (6.25 BTC), network difficulty, and the block rate of 1 block per 600 seconds. The PPS reward is calculated using this formula:

Daily PPS Reward = 144 * (6.25) * Hashrate (Th/S)*600/(2^32*difficutly)

FPPS Rewarding: Full Pay Per Share (FPPS) is a method that takes the transaction fees (Tx fees) into account. The miners’ revenue consists of two elements, block reward, and Tx fees. While the block reward is 6.25 BTC per block (for now) the Tx fees per block depend on the fee paid by the Bitcoin transaction senders. After the recent Bitcoin halving that reduced the block reward from 12.5 BTC to 6.25 BTC; the Tx fees have become a lot more important for miners and form as high as 25% of miners’ revenue. In FPPS rewarding in addition to the PPS reward; the same PPS formula is used to reward the miners according to their probability of success in mining a block. The only difference is that instead of 6.25, the average Tx fees in a specific period of time (e.g. 1 Day) are used for calculations.

1 Day FPPS Reward= 144* (6.25) * Hashrate (Th/S)*600/(2^32*difficutly)

+ 144* (Average Daily Tx fees) * Hashrate (Th/S)*600/(2^32*difficutly)

How to validate your mining pool?

There are many websites that publish the data of the Bitcoin blockchain on a regular basis. For instance, you may download the daily block data from Blockchain.com at the following address:

https://gz.blockchair.com/bitcoin/blocks/

This data could be used to calculate the daily average of Tx fees in order to be used for reward auditing.

Note that in PPS and FPPS rewarding the baseline for calculations is 144 blocks/day and the average daily Tx fees are used for this purpose. In other words, the mining pool guarantees they pay you for 144 blocks per day whether 170 blocks or 100 blocks were mined on that specific day. It can mathematically be proven that FPPS and PPLNS reward potential is the same in a big enough window.