Certified Bitcoin Professional Practice Exam

How are payouts from mining pools generally characterized?

1. High payouts at the beginning.

2. Low variance compared to solo mining.

3. High risk of loss.

4. Completely random distributions.

The correct answer is: Low variance compared to solo mining.

Payouts from mining pools are generally characterized by low variance compared to solo mining because a mining pool combines the resources of multiple miners, which leads to a more consistent and predictable payout structure. When miners contribute to a pool, they share the rewards for successful blocks based on their individual contributions to the pool's total hash rate. This means that instead of experiencing the randomness and variability associated with solo mining—where a miner may go long periods without finding a block due to the high level of competition—the pooled miners receive payouts at a more regular and steady pace, resulting in lower variance in earnings. This regularity helps participants manage their earnings more effectively and plan for expenses related to their mining operations. Unlike solo miners who could experience long droughts in finding blocks, pooling resources can mitigate the risk of unpredictable income, allowing miners to benefit from shared rewards based on collective effort rather than individual chance.