Why Ocean says its miners make more money
The short answer is: lower fees. Mining pools don’t distribute *all* of their revenue to their miners because the admins keep some revenue for themselves as fees. Ocean charges *lower* fees than all other pools, so they give *more* revenue to their miners than all other pools. But there’s a somewhat complex reason why Ocean can afford to do that. So I’m about to give the long answer.
But before I do that, here’s some background: Ocean Mining is a controversial mining pool in bitcoin for several reasons. One reason is the loud opposition to “arbitrary data” voiced by some of its administrators. Most mining pools in bitcoin have a welcoming attitude toward almost any transaction that pays competitive mining fees, regardless of what data it embeds on the blockchain. But Ocean’s administrators loudly oppose transactions that embed pictures, audio, and other non-financial data on the blockchain, and they propose a default mining template to their miners that excludes many such transactions, even though the pool collects less money from transaction fees as a result.
This stance causes some bitcoiners to wonder how Ocean remains competitive with other mining pools. Aren’t they making less revenue than other pools? That must be the consequence of rejecting a whole class of fee-paying transactions by default, right? And shouldn’t that lead their miners to make less money than they can make at other pools, and abandon Ocean as a result?
Ocean’s loud answer is: “Nope, on the contrary, our miners make more money than the miners at other pools make.” And this is not because Ocean *earns more* than other pools (in fact, as might be expected with their stance, the pool earns slightly less); it is because Ocean *distributes more* of their revenue to their miners.
Think of it this way: suppose there are two pools, Ocean and Desert. Both have 100 miners who all contribute equal amounts of hashrate. But while Ocean earns $500,000 per block, Desert earns $501,000, because it welcomes transactions containing lots of arbitrary data. In that scenario, you might expect Ocean’s miners to collect $5,000 in revenue apiece while Desert’s miners should get $5,010. But admin fees change this: if Desert charges 2% in admin fees, and Ocean charges only 1%, then Desert’s miners will only make $4,909.80 per block while Ocean’s will make $4,950. So a pool can earn slightly *less* money in total but still distribute *more* money to its miners simply by charging lower admin fees.
So that explains part of how Ocean remains competitive, but there’s another factor I’d like to cover: how can Ocean afford to charge lower admin fees than its competitors?
The answer involves something called “variance.” Mining bitcoin is partially random; which pool mines a given block is not exactly predictable, but a general rule is, the pools with more hashrate mine blocks more often. But sometimes a pool gets unlucky, and doesn’t mine very many blocks for a while, and when that happens, its payouts are smaller than expected. This creates a layer of unpredictability – aka variance – that mining pools don’t like: many miners would *like* a guarantee that they will receive a particular amount each month, but variance makes this difficult.
The solution adopted by most mining pools is to use a portion of their admin fees to create a kind of “luck fund.” When the pool is unlucky, and doesn’t make enough money to pay their miners what they usually pay, they get the difference from this fund, and replenish it when their luck returns.
Ocean simply does not have this luck fund, so they just don’t charge the portion of their admin fees that they *would* otherwise deposit into that fund. When you mine with Ocean, your payouts only come from what they earned in recent blocks, and none of it comes from the luck fund, which does not exist. This means you make more money than other pools so long as the pool’s luck is average or higher than normal (because they charge lower admin fees), but less money when their luck is poor (because they mined fewer blocks than expected, and have no luck fund to make up the difference).
In summary, Ocean claims its miners make more money than miners in other pools because Ocean charges lower admin fees, and thus they can distribute *more* money to their miners, even though the pool makes slightly *less* money *in total* than other pools. They can charge lower admin fees because they do not have a luck fund, and this means the amounts they payout vary more than other pools do, but with a significant skew to the upside. I hope that helps!
