Read more: Bitcoin mining is more difficult than ever

Within some pool payout schemes like pay per last N shares (PPLNS), a member might need to wait days or weeks for the pool to find additional blocks prior to receiving their first payout. As the name suggests, pay only occurs for the last shares of work that actually earned money for the pool.

While the pool waits to win blocks, its miners must also patiently wait for their payouts.

Highly variable transaction fees also mean that affordable BTC payments might suddenly become unaffordable depending on the whims of the market, spikes in transaction fees, or hour of the day.

Worse, the BTC denomination of mining work — which fluctuates rapidly in USD price, unlike electricity — means that pools can occasionally allocate templated work to their members with a massive BTC change in USD value by the time the pool actually gets lucky enough to win its coinbase reward.

Work for generous tips, win small tips

The non-profit Bitcoin Optech illustrates this with an example of a pool that instructs its members to mine a template that would be worth 3.125 BTC coinbase plus a massive quantity of extra BTC worth of transaction fees.

(Transaction fees are “tips” from BTC users to miners that incentivize inclusion of their transaction in the earliest block possible. It’s not unheard of for transaction fees to exceed 10X the value of the coinbase reward.)

Suppose that a member contributes substantial work on this template, expending energy and computation to hash 10% of that pool’s share of that block. That member might be hoping for 10% of that block’s, say, 30 or more BTC — a great payday.

Then, infuriatingly, another pool solves the mathematical puzzle for that same block and wins all of its coinbase and transaction fees. Suddenly, the member’s hoped-for 10% of 30 BTC is worth $0.

Tragically, by the time that original member and its pool finally win their next block, transaction fees have cratered and the block they actually win is worth just four BTC — a far cry from 30.

In this case, many pool operators honor the original work assignment based on the old template that was worth 30 BTC and compensate workers from corporate reserves. (Over time, pool operators smoothe out payouts in this manner to avoid losing their workforce to other, more well-capitalized competitors.)

However, this strategy is unsustainable in the long term if the pool operator assigns high-fee, BTC-denominated work that fluctuates too often to the downside by the time the pool actually wins its blocks.

Working on ecash

One apparent solution to this problem is a non-BTC token that might take the form of a redeemable “share” of BTC pool payouts. This crypto asset derivative might take the form of a “PPLNS ecash share” that is traded on a secondary market and is linked to the BTC held by pool operators.

Other proposals are also underway that offer features like faster transaction times, better liquidity, financeability, and other value propositions.

To be clear, these tokens aren’t intended to be speculative assets like memecoins or any type of ICO, but rather simple tokens that allow pool members to redeem their share of work earlier or faster than BTC itself would allow.

In short, it is ironic yet fascinating that BTC itself is becoming an occasionally problematic payment method within Bitcoin’s own industry of mining. Active discussions are underway regarding possible tokens or iterations of ecash that might solve payout concerns of pooled miners.

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