Basic Mining Reward Question

[Mikejacobs73]

Hello, I have a quick question regarding mining rewards.

I've been looking to invest in a few ASIC's but something is causing me a little bit of confusion. I've been looking at a bunch of calculators but with my understanding of how mining works, I'm not sure how these can be considered accurate at all.

Ignoring things like difficulty, block reward, BTC price etc, my biggest question is how can it give you an X amount of bitcoin mined per hour figure. If the rewards are only given to the miner that actually solves the hash, surely it's just completely random who gets the reward.

I.E You could wrong for 5 years and never receive a single bitcoin for your troubles. Is this just a pure probability answer? Do these calculators assume that you are mining in a pool of some sort that gives you X amount of a block reward for each block?

Sorry if that is not a coherent question, I'm just struggling to understand how they can give you an X amount figure for your BTC gained.


Thanks!

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[BitMaxz]

All things you said above look like you are pointing to solo mining, all calculators out there are not for solo mining and it is not so accurate. If you are a solo miner you can get the whole block reward which is around 6.25 but if you are mining on the pool there are a few types of payment methods how the pool pays you to mine on their pool like PPS(fixed rate), PPS+ and PPLNS.

If you want to know more about how they work then check this Mining pool payment methods

And I'd like to add this calculator which includes break-even analysis for long-term projection.
- https://www.mycryptobuddy.com/BitcoinMiningCalculator

[Mikejacobs73]

All things you said above look like you are pointing to solo mining, all calculators out there are not for solo mining and it is not so accurate. If you are a solo miner you can get the whole block reward which is around 6.25 but if you are mining on the pool there are a few types of payment methods how the pool pays you to mine on their pool like PPS(fixed rate), PPS+ and PPLNS.

If you want to know more about how they work then check this Mining pool payment methods

And I'd like to add this calculator which includes break-even analysis for long-term projection.
- https://www.mycryptobuddy.com/BitcoinMiningCalculator

So to confirm these calculators assume you are running in a pool? But in this case the calculators must assume that the pool will win a certain percentage of the block rewards right? How would they even begin to guess what that percentage would be?

[decodx]

So to confirm these calculators assume you are running in a pool? But in this case the calculators must assume that the pool will win a certain percentage of the block rewards right? How would they even begin to guess what that percentage would be?

This is how I understand it: Imagine that there are only two mining pools, and each of them holds exactly half of the total hash power of the Bitcoin network. Logically, this means that each of them will mine an equal percentage of blocks in the long run.

So, in this context, the calculators don't need to know the winning percentage; they only need to determine the percentage of your hash power in relation the network's total power. Of course, it can happen that some pool is extremely unlucky for a while, but it all tend to balance out over time.

[hosseinimr93]

So to confirm these calculators assume you are running in a pool?

Your profit is estimated to be (Your hash rate / total hash rate) * reward amount

If you join a mining pool, the equation should give you a good estimation of your profit. The bigger the total hash rate of the pool, the more accurate the result will be.
If you are a solo miner, it's more like that you are gambling.

But in this case the calculators must assume that the pool will win a certain percentage of the block rewards right? How would they even begin to guess what that percentage would be?

Regardless of what percentage of blocks are mined by the mining pool, your profit is estimated using the above equation.

[citb0in]

I suggest doing your own maths. By this you will understand how it works don't just believe other numbers and figures, you can use them for reference though

[BitMaxz]

So to confirm these calculators assume you are running in a pool? But in this case the calculators must assume that the pool will win a certain percentage of the block rewards right? How would they even begin to guess what that percentage would be?

There is no win percentage it depends on luck and difficulty and the calculators only calculate your daily Bitcoin earnings whether you win or not.

There is a formula that you can use to manually calculate your Bitcoin earnings.
Check this formula below.

Code:

H = Hashrate (hashes / second)
D = Difficulty (Reference for values below)
B = Reward per Block (Reference for value below)
N = Number of days per month (default = 30)
S = Number of seconds per day (S = 60 * 60 * 24 = 86400)

You can exclude N if you only want to calculate daily total earnings.

Source: https://bitcoin.stackexchange.com/questions/18629/what-is-the-algorithm-to-create-a-bitcoin-mining-calculator

[kano]

Reminder that any calculation past the end of the current difficulty will be wrong.
The longer the time frame, the way more inaccurate it will be.

A time frame of even just a few months will already have a high inaccuracy.

Difficulty changes every 2016 blocks - which inaccurately, approximates to about every 2 weeks, but usually less.

[mikeywith]

Ignoring things like difficulty, block reward, BTC price etc, my biggest question is how can it give you an X amount of bitcoin mined per hour figure. If the rewards are only given to the miner that actually solves the hash, surely it's just completely random who gets the reward.

I.E You could wrong for 5 years and never receive a single bitcoin for your troubles. Is this just a pure probability answer? Do these calculators assume that you are mining in a pool of some sort that gives you X amount of a block reward for each block?

Thanks!

Most mining calculators use PPS based method that tells you how much you would make at any given time, the accuracy of those calculators is pretty accurate at the time of execution, going past a difficulty change will require another execution of the calculation.

You are right with the assumption that miners only get the rewards when they hit a block, and while that is identified as a random event, the larger the hashrate the less variance, the network as a whole is more likely to find blocks following the predicted path than a single pool with 10%, but then a pool with 10% is more likely to have less variance than a pool with just 1% the hashrate.

Nowadays, the majority of mining is done on PPS pools, where you know beforehand exactly how much every share you submit is going to be paid, there is little difference between FPPS and PPS+ in terms of how transactions fees are calculated, and regardless, the F (for full) or + will only have an impact on the percentage of rewards related to the transaction fees which can't be predicted with 100% accuracy.

Keep in mind that just because most pools pay out in PPS fashion, it doesn't mean they are not subject to variance, a pool that is "predicted" to hit 10 blocks a day may hit only 5 today and then 15 tomorrow, again (the larger the hashrate the less variance), the pool handles the variance and pay out of their own reserves, so in the previous example they pay out the missing 5 blocks using their own funds, and then on the next day, they pay 10 and keep the 5 blocks, of course minus the pool fees.


If you mine to a PPS pool you will notice that your daily payouts are almost identical throughout the entire difficulty epoch, the tiny little difference will be the result of a change in the transactions fees (up or down) as well as your overall hashrate since you can't hit the exact hashrate every day, stale, rejected shares a miner reboots today but not tomorrow, but if transaction fees are near static and your reported hashrate is the same the payout will be exactly the same.

For obvious reasons, using PPS pools means that you will have a higher fee since the pool needs to put away a lot of reserves to cover up for the variance, it's not worth the risk and the hustle just to charge you 0.5%, PPLNS pools can afford the low fees because they don't have to pay you a thing until a block is found, they just have to pay pool operation fees.