Why our mining pool will never offer a hosted wallet

01 What a hosted wallet is

Most large mining pools give each miner an account. Rewards accumulate in that account as a number on the pool's database, and the miner clicks "withdraw" when they want the coins sent to an address of their choosing. The pool holds the private keys to the wallet the coins actually sit in. Users see a balance; the operator holds the value.

That is a hosted wallet, and it is structurally identical to an exchange account. FinCEN's 2019 guidance puts it plainly: "Wallets where user funds are controlled by third parties are called 'hosted wallets' whereas wallets where users control the funds are called 'unhosted wallets'." The pool that offers one is, for that part of its business, a custodian, whatever it calls itself.

Spearmint Mining does not have one. A miner mines under an address they already control, and the pool pays block rewards to that address on a fixed schedule. The rest of this article is about why that is the design rather than a disclaimer.

02 What has happened to pool wallets

The failures that get remembered are exchanges. Mt. Gox halted withdrawals on 7 February 2014 and filed for bankruptcy three weeks later with roughly 750,000 customer bitcoins reported missing. FTX filed for bankruptcy in November 2022 with customer balances it could not honour. Both were custodians, and both failed in the way custodians fail: the internal ledger said one thing and the wallets held another.

Pools with hosted wallets have failed the same way, for the same reasons.

Note what these have in common. Neither was a failure of mining. Blocks were being found and rewards were being earned. The failure was in the part of the business that held customer value: a hot wallet that could be phished, and a ledger of balances that the wallet could no longer cover. A pool that does not hold customer value cannot fail this way, because there is nothing to lose that is not already in the miner's own wallet.

03 What a hosted balance changes technically

The moment a pool holds balances, three new systems exist, and all three are attack surface that mining does not need.

None of these systems produce a single hash. They exist to hold and move value, which is a separate business bolted onto a mining pool. Remove the hosted balance and all three go with it: the pool's only hot wallet is its own coinbase output between maturity and the daily payout run, there is nothing to log in to, and there is no address field to edit.

04 What it changes regulatorily

FinCEN's 2019 guidance on convertible virtual currency (FIN-2019-G001) discusses mining pools directly in section 5.4. It describes a pool leader that claims the mined reward and distributes it to members in proportion to their contributed processing, minus a fee, and says that this distribution "does not qualify as money transmission under the BSA, as these transfers are integral to the provision of services."

The same section continues:

That is the line. A pool that distributes rewards is described as doing something integral to mining. A pool that also hosts wallets is described as a money transmitter. The feature that moves a pool from one sentence to the other is the hosted wallet, and nothing else in the section does.

State law adds its own reasons. Pennsylvania's Money Transmission and Virtual Currency Transmission Business Licensing Law, as amended by Act 7 of 2025 and in force since 26 August 2025, requires a licence to transmit virtual currency "for a fee or other consideration with or on behalf of an individual" and, unlike the federal guidance, contains no mining or integral-services exemption. Whether a pool's payouts fall within that language is a question for Pennsylvania counsel and it is first on the review list. What is not in doubt is that holding an individual's balance and sending it where they direct is the fact pattern the statute is aimed at. Not holding balances keeps the argument as narrow as the facts allow.

None of this is a conclusion that the service is licensed, exempt or lawful; the compliance page is explicit about that. It is a description of where the guidance draws its line and a decision to build on the far side of it.

05 Address is the login, and there is no change button

The design that follows from all of this is described in the onboarding workflow and it fits in a paragraph. A miner's Stratum username is <their spmtc address>.<worker name>. Shares are credited to that address. When a block the pool found reaches 100 confirmations, the reward is apportioned by PPLNS and the miner's portion is added to a figure called pending mining reward. Every day at 00:00 UTC, any address with 1 SPMTC or more of mature pending reward is paid, in a batched transaction, to that address. There is no account, no password, and no place to enter a different destination.

Three consequences are worth spelling out.

• Address-change theft is impossible, not prevented. The attack requires a field to edit. There is none. An attacker who takes over a miner's notification email gets notifications. Rewards go where the work said they go.
• The pool has nothing of yours to lose. The pool's own coinbase reward sits in an operational wallet for at most the payout cycle before it is apportioned and sent. A breach of that wallet is the operator's loss, bounded by one day of blocks, not a loss of miner balances accumulated over months.
• Consolidation is deliberately absent. A "move rewards from address A to address B" feature would reintroduce, in one control, everything the design removed. It is on the regulatory change-control list and is not built.

06 What it costs miners

Honesty requires listing what is lost, because something is.

• You need your own wallet before you start. The pool will not generate an address for you. Spearmint Core does, and so will any wallet that supports the spmtc bech32 format.
• Small miners wait for the threshold. Payouts go on-chain, so they are batched daily and paid once 1 SPMTC has matured. A hosted balance could show you fractions moving every minute; an on-chain payout cannot. The payout policy explains why the threshold exists and the 30-day sweep that stops anything accumulating.
• Lost keys are lost. The pool cannot recover, reissue or redirect anything, because it never had your key. This is the same rule as the rest of the chain, but it is stricter than an exchange's password reset.
• No mobile-app conveniences. No in-app transfers to a friend, no "convert to BTC", no card. Those are separate businesses, and adding any of them is a new legal review, not a sprint.

The trade is a little convenience for the removal of the failure mode that has actually destroyed mining services. For a pool operated by a small named team in the United States, that is not a close call.

07 Key takeaways

• A hosted wallet makes a mining pool a custodian: the operator holds keys and keeps a ledger of what each miner is owed.
• Pool wallets have failed exactly like exchange wallets: NiceHash lost about 4,700 BTC to a 2017 phishing breach; Poolin's wallet service froze withdrawals in 2022 and issued IOUs.
• FinCEN's FIN-2019-G001 §5.4 treats reward distribution as integral to mining but says hosting wallets for members makes a pool a money transmitter.
• Pennsylvania's Act 7 of 2025 has no mining exemption; not holding balances keeps the factual argument narrow, and counsel review is required before opening.
• Spearmint Mining uses the payout address as the login, pays automatically to that address, and has no address-change or consolidation feature by design.
• The cost to miners is needing their own wallet, waiting for a 1 SPMTC daily threshold, and accepting that lost keys cannot be recovered.

08 Questions

09 Sources

1. FinCEN, Application of FinCEN's Regulations to Certain Business Models Involving Convertible Virtual Currencies, FIN-2019-G001, 9 May 2019, §4.2 and §5.4. fincen.gov
2. Pennsylvania General Assembly, Senate Bill 202 (2025), enacted as Act 7 of 2025. palegis.us
3. Wikipedia, "NiceHash" — December 2017 breach. en.wikipedia.org
4. CoinDesk, "Poolin, One of the Largest Bitcoin Mining Pools, Suspends Withdrawals From Wallet Service", 5 September 2022. coindesk.com
5. CoinDesk, "Poolin was Bitcoin's biggest mining pool and now it's filing for bankruptcy", 24 July 2026. coindesk.com
6. Wikipedia, "Mt. Gox" — February 2014 withdrawal halt and bankruptcy. en.wikipedia.org