Say these smaller coins are more profitable than a large coin 50% of the time (I think this is high), and are more profitable by 50% (also a bit high). And we switch 5-10% of our pool to aim for them (500MHs-1GHs). You're looking at a 1.25-2.5% boost to profit, without taking into consideration any of the context switching.
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Thoughts?
Which is why you do not want the huge increase to the pool hash rate. If the pool was back to 1GH, that small increment would be much more over a smaller pool.
Regarding the botnet and how to terminate them without risking a DDoS attack:
Since payouts are done manually, or initiated manually, you could shave their payout by a few percent, and give it to everyone else. Slowly increase the percentage. Eventually they will see the declining profitability and go somewhere else.