Pleb bitcoin mining is having a Renaissance.
A new pool called Parasite Pool has popped up from Ordinal Maxi Biz founder ZK Shark with a new, unconventional payout model with zero fees.
Parasite Pool joins a league of cottage industry bitcoin mining startups that are challenging the corporate status quo. With noderunners bootstapping BitAxe miners alongside their Raspberry Pis, the open-source movement is gaining significant traction among both hobbyists and professionals.
A few narratives echo among the pleb mining movement: home heating, earn KYC-free sats, break up the mining hardware monopoly. As full-pay-per-share (FPPS) pools continue to dominate mining pool market share, the pleb mining movement has taken up the banner to challenge this trend, and now Parasite Pool joins this quest.
Let’s take a look at how this pool model could shake things up.
The state of bitcoin mining pools
As corporate mining converges around FPPS pools, a counterculture has emerged.
We’ve seen a rise in lottery mining pools such as ckpool and solopool, as well as a focus on blocktemplate selection from Ocean. But the overall mining business has some structural challenges.
Pools only receive BTC when they hit a block, but pool clients want consistent revenue. FPPS is by far the most desirable payout structure for miners as it offloads the variance in block luck to the pool instead of the miner. In “Full Pay Per Share” (FPPS) miners receive payouts for shares submitted to the pool regardless of whether the pool finds a block or not. The pool acts as a treasury and accounts for the statistical variance of blocks.
Many are critical of the centralizing effects of this payout scheme, most notably the uncompromising pleb miners. In response, the solo lottery mining trend has caught on. Pleb miners have in turn opted for the opposite payout model to FPPS: Lottery mining. In lottery mining, miners pool their hashrate so that the specific worker that finds the block receives the entirety of the block reward a block (3.125btc plus fees, worth roughly $320,000). Most lottery miners tend to be less-economically motivated as they run small home mining setups and do not account for the full business cost of running a scaled mining operation.
With Parasite Pool’s payouts, “plebs eat first”
Parasite pool takes an interesting hybridized approach to payouts.
The worker that finds the block receives 1 BTC and the rest is distributed to pooled workers. The hybrid lottery setup may still incentivize participation from plebs miners for a giant payday while also ensuring that it’s not just feast-or-famine for everyone else.
The remaining block reward is distributed similar to a pay-per-last-N-share (PPLNS) model. PPLNS models generally take a rolling window of recently contributed shares (for e.g., a common structure is the last one million shares contributed in the previous 24 hours). Parasite’s payout scheme appears to include all cumulative shares contributed since the pool’s most recent block, which is technically PPLNS but without any rolling window. This new hybrid payout scheme may warrant a new name, but we haven’t seen a statement from ZK and I haven’t seen a term emerge from the mining community yet.
Parasite Pool lightning network and other integrations
Bitcoin’s consensus rules prevent miners from spending the block reward for 100 blocks, but Parasite Pool has a workaround.
ZK says “Parasite’s coinbase logic sidesteps the 100-block maturity rule, delivering sats to your Lightning wallet within blocks.”
I intuit this to mean one of two things (possibly both): A) The pool is initially subsidized for when it first hits a block; B) There may be some developer wizardry under the hood in which a lightning channel is created from the coinbase payout. Lightning has been a bit of a white whale for mining pools, as the inbound liquidity problem makes designing payouts cumbersome. Getting around this would be a huge unlock for the pleb mining ecosystem – and perhaps mining in general.
In another interesting twist, Parasite’s Lightning payout model creates virtually no withdrawal minimum (technically it’s 10 sats). In the announcement post, ZK says that partners Sati and Xverse provide easy backend infrastructure for plebs to point, click, and reap the rewards of their mining by receiving lightning payouts.
Parasite Pool new incentives and mechanics
I’m a sucker for curveball ideas in mining, so here are some interesting observations I’ve gleaned about Parasite:
- The incentive for miners to withhold blocks is decreased under the hybrid payout model. One of the biggest thorns in the side of all pools regardless of its payout method are block withholding attacks. By ensuring that “honest” miners do get a substantial payout of 1 BTC if they play nice, Parasite Pool could diminish the financial incentive to capture payouts while also acting dishonestly.
- Pool participants are effectively receiving a discounted pay-per-share of -22% (2.125btc plus fees versus 3.125 plus fees). One of the big missing pieces of the pleb mining decentralization movement is the reality that it still costs money to pay your power bill. Ensuring pool participants get paid regardless increases their chance of survival on a longer timeline. It even opens up the possibility for non-pleb participants including more industrial scale miners.
- It might seem like a small thing, but the fact that the Parasite frontend literally has a “Connect Your Wallet” button tells a lot about who the target audience is for this pool at launch. I’m not aware of another pool that takes that design approach.
- There is an interesting “loyalty” metric on the dashboard. This does not currently have a public explanation but I will speculate that it has something to do with some power ranking of how “honest” and/or tenured workers are to the pool. There are some interesting things Parasite Pool could do with user loyalty to really tweak mining incentives.
The future of Parasite Pool
I think it’s possible that this pool could be attractive beyond just the pleb mining movement.
There’s a real case to be made that Parasite Pool could function as a real solo pool alternative for commercial miners who wish to protect against the downside of zero revenue.
It could be a while before Parasite actually finds a block. With only 5 PH/s (0.000006% of the entire Bitcoin network) pointing toward the pool at the moment, that’s an expected 3+ years before it may hit a block. However, the pool is still in beta and the team has not advertised it very much yet. ZK also says he will open source components of Parasite over time. I get the impression that we’re just looking at a V1 and there may be several more interesting features added to the pool.
Disclosure: I own several ordinals from Parasite Pool founder ZK Shark. The collection is not tied to the pool.
