Bitcoin Miner Riot Switches Mining Pool After Falling Short in November

The miner used Braiins mining pool, whose payout method caused the variance between Riot’s mining capacity and the amount produced, according to a person familiar.

AccessTimeIconDec 5, 2022 at 8:53 p.m. UTC
Updated May 9, 2023 at 4:04 a.m. UTC

Riot Blockchain (RIOT), one of the world's largest publicly traded bitcoin miners, is switching its mining pool to ensure “more predictable results” for its operations, the company said after failing to produce expected monthly bitcoins.

Riot said that it achieved record hashrate capacity in November with computing power reaching 7.7 exahash per seconds (EH/s), 12% higher than 6.9 EH/s in October, according to a statement. However, the miner produced 521 bitcoin in November, lower than the 660 it expected to mine, due to a payment variance in the mining pool it was using.

Riot mined only 2% more bitcoin in November than the previous month. Meanwhile, it mined 43% more bitcoins in October versus September.

“Variance in a mining pool can impact results and while this variance should balance out over time, can be volatile in the short term,” Riot CEO Jason Les said in the statement. “This variance led to lower bitcoin production than expected in November, relative to our hashrate,” he added.

A mining pool is like a lottery syndicate, where several miners “pool” their computing power to get a steady stream of bitcoin rewards. Joining a pool of other miners improves the odds significantly of solving a block and winning a reward, although the payout gets split among all members.

Publicly listed miners are usually secretive about the mining pool they use. However, a person familiar with the matter told CoinDesk that Riot was previously using Braiins, formerly known as Slush Pool, for its mining pool.

Most mining pools use several payout methods offering consistent rewards to its pool members. The majority of pools use a method called Full-Pay-Per-Share (FPPS).

Braiins is one of only a few mining pools that uses a mechanism called Pay-Per-Last-N-Shares (PPLNS), which introduces significant variance into its members' rewards. That variance likely contributed to Riot’s lower number of bitcoin rewards, according to the person.

Other payment methods usually ensure miners always get paid, even if the pool doesn’t find a block. However, PPLNS only pays miners after a block has been found by the pool, and then the pool goes back to check for valid shares contributed by each miner before winning a block. The miners then get paid in bitcoin rewards, based on those valid shares contributed by each miner during that time.

To avoid such variance, Riot decided to switch its mining pool, which “offers a more consistent reward mechanism, so that Riot will fully benefit from our rapidly growing hash rate capacity as we work towards our goal of reaching 12.5 EH/s in the first quarter of 2023,” Les said. Riot didn’t specify to which pool it will be shifting.

Braiins declined to comment on the story.

Miners are already facing a tough crypto winter as bitcoin's declining price and higher energy costs have eaten into profit margins, causing a few miners to file for bankruptcy protection. Predictable and consistent mining rewards, which are miners' main revenue source, are of utmost importance. The margin of error has been increasingly narrow this year amid the current tough conditions.

Riot shares fell about 7% on Monday, while its peer Marathon Digital (MARA) was down more than 12%. Bitcoin was recently down about 1.2% in price.


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Aoyon Ashraf

Aoyon Ashraf is managing editor with more than a decade of experience in covering equity markets

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