Part 5/16:
Nick compares mining pools to lotteries, where miners submit "tickets" (shares) and are rewarded based on probabilistic outcomes. Luxor employs a paper share system, fronting payments to miners to maintain trust and transparency. The pool's goal is to distribute rewards fairly, based on the number of shares submitted, regardless of whether the pool hits blocks immediately.
An interesting distinction is Luxor’s approach where they essentially "rent" hash rate—a conceptual shift from traditional pools—by aggregating miners' hash power and purchasing it as an asset. This approach zeroes in on the market value of hash rate, tracked meticulously via Luxor's Hashrate Index, which informs what miners should expect to earn based on current hash price (about 42 cents per terahash).