Update on luck after Nicehash rentals suspension

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Steve Sokolowski
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Location: State College, PA

Update on luck after Nicehash rentals suspension

Post by Steve Sokolowski » Mon Sep 14, 2020 2:28 pm

I thought that it was worth providing a brief update after we suspended service to Nicehash mining rentals, as we announced in our previous post on Friday (viewtopic.php?f=11&t=7356.)

Since the suspension, the pool's luck improved from 89% to 94%. The 94% is only at 3-sigma significance, so it's not quite as rigorous as the 6-sigma standard for a vaccine trial or a physics experiment. However, the improvement is so unlikely to be due to chance that we are not going to hold off on implementing the next phase of action against the low luck miners issue solely to obtain more definitive proof.

Our theory is that Nicehash has always attracted abusive miners due to their lack of policing and enforcement; however, while Prohashing mined $250,000 per day, the small number of Nicehash miners was not significant and the huge number of bugs and other problems at the time hid their small losses. Now that the pool mines $10,000 per day, and the system is far more stable and developed than before, the low luck miners at Nicehash became more noticeable. The audit system is now close to exact, and Nicehash rentals' hashrate did not decline at the same rate as that of other miners. While we will continue to evaluate the effects of the Nicehash ban, right now it does not look likely that we'll be able to resume Nicehash rental support in October.

These results prove yet another negative impact that Nicehash is having on the cryptocurrency industry. We encourage other pools to ban Nicehash rentals to improve their luck and profitability.
robinsoz
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Re: Update on luck after Nicehash rentals suspension

Post by robinsoz » Tue Nov 24, 2020 11:10 pm

I know that this is an older post, but I have seen discussions of this subject for some years and have an idea about why Nicehash seems to always have low luck miners. Most of my miners are pointed at pools that mine bitcoin and this is a subject that keeps coming up. A couple years ago the pool operator of the mining pool I was using at the time went out and rented a bunch of Nicehash rental to give his pool a boost and ended up coming close to bankrupting himself and cost his users a significant amount of money as well. Afterwards he posted an analysis of the hash he had been delivered by Nicehash - the pool kept good logs of shares submitted - and it appeared that a high percentage of the shares above a certain difficulty were being discarded.

One possible explanation is that operators of mining rigs can increase their profits and artificially increase the market price of hash power by discarding blocks. A lot of Nicehash's buyers are people who calculate the value they statistically expect to receive by mining various altcoins. The buyers bid for hashpower based on the profit they statistically expect to make. If a block is found the difficulty of the altcoin being mined will increase, the value that can be obtained by mining that altcoin will decrease and thus the price that the hash buyer is willing to pay will decrease. By withholding blocks, miners can effectively participate in a rigged auction and thwart the normal laws of supply and demand. Nicehash itself has an incentive to withhold blocks for the same reason (the company gets paid a percentage of what the hashrate sells for) and I don't think there is a reason to believe they are a particularly ethical company.

This is a problem that is hard to get completely away from in PPS mining, though the more directly you do business with the miners (without middlemen) the less trouble you would be expected to have.

One solution might be to institute another mining mode - pay per block. It would be similar to pay per share with coin switching, but payment would be based on the value of blocks found instead of shares submitted. If it had a lower fee, it would be a better deal for any large miner who a large enough mining farm pointed at the pool to be statistically expected to find blocks regularly.
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Steve Sokolowski
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Joined: Wed Aug 27, 2014 3:27 pm
Location: State College, PA

Re: Update on luck after Nicehash rentals suspension

Post by Steve Sokolowski » Fri Nov 27, 2020 8:29 am

robinsoz wrote:
Tue Nov 24, 2020 11:10 pm
I know that this is an older post, but I have seen discussions of this subject for some years and have an idea about why Nicehash seems to always have low luck miners. Most of my miners are pointed at pools that mine bitcoin and this is a subject that keeps coming up. A couple years ago the pool operator of the mining pool I was using at the time went out and rented a bunch of Nicehash rental to give his pool a boost and ended up coming close to bankrupting himself and cost his users a significant amount of money as well. Afterwards he posted an analysis of the hash he had been delivered by Nicehash - the pool kept good logs of shares submitted - and it appeared that a high percentage of the shares above a certain difficulty were being discarded.

One possible explanation is that operators of mining rigs can increase their profits and artificially increase the market price of hash power by discarding blocks. A lot of Nicehash's buyers are people who calculate the value they statistically expect to receive by mining various altcoins. The buyers bid for hashpower based on the profit they statistically expect to make. If a block is found the difficulty of the altcoin being mined will increase, the value that can be obtained by mining that altcoin will decrease and thus the price that the hash buyer is willing to pay will decrease. By withholding blocks, miners can effectively participate in a rigged auction and thwart the normal laws of supply and demand. Nicehash itself has an incentive to withhold blocks for the same reason (the company gets paid a percentage of what the hashrate sells for) and I don't think there is a reason to believe they are a particularly ethical company.

This is a problem that is hard to get completely away from in PPS mining, though the more directly you do business with the miners (without middlemen) the less trouble you would be expected to have.

One solution might be to institute another mining mode - pay per block. It would be similar to pay per share with coin switching, but payment would be based on the value of blocks found instead of shares submitted. If it had a lower fee, it would be a better deal for any large miner who a large enough mining farm pointed at the pool to be statistically expected to find blocks regularly.
Excellent analysis! I couldn't figure out any way that people might intentionally be able to game the system, so I always assumed that this behavior was related to firmware bugs in specific miners. The best guess I had was that people pointed these miners at Nicehash, because they didn't take any action to police their systems and because their terms of service specifically prohibit refunds.

I think that you missed that the issue isn't limited to PPS pools. PPLNS pools, for example, are also affected, and a few people jumped ship from Slush to come here because Slush's luck was poor. The only difference between the modes is that PPS passes the losses onto the owners, and PPLNS passes the losses onto the miners. In both cases, someone is losing money and the pool is hurt.

Your comments about doing business directly with miners are spot on. That's why we ended service to Nicehash rentals a few months ago. Besides the poor luck, we also determined that Nicehash miners were a net loss even on the basis of 100% luck, because they always seemed to be involved whenever there were bugs or coin issues.
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