Solo mining, as the name suggests, is individual mining. Although currently most Bitcoin mining power is concentrated in mining pools, where rewards are distributed based on so-called power contributions, there are still many people who choose to mine solo with their own power.
Compared to steadily receiving 'work points' from mining pools, solo mining is akin to a gamble of 'either hit a block or waste it'. For today's Bitcoin block rewards, exploding a block means solo miners exclusively enjoy 3.125 Bitcoins, worth over $300,000 (almost 10 million Taiwan dollars). However, the probability of hitting a block is indeed so low that hope seems bleak.
How low is the probability of solo block explosion?
According to estimates of the total network hash power, the current total network power is approximately 900E (900EH/s). For simplicity, we take 900E. This number means that the entire Bitcoin network can calculate about 900E hashes per second. An astonishing astronomical figure.
According to internet user Matt Cutler's estimate, using a desktop mining machine with a power of 1T (1TH/s), based on the independent and identically distributed assumption, the block explosion probability is 1T/900E = 1/900M, which is one in 900 million.
How low is this probability? Considering that the Bitcoin network averages one block every 10 minutes, it would take an average of 9 billion minutes, or 17,000 years, to hit a block explosion once.
In contrast, he listed the winning probabilities of two typical lottery products:
Powerball Jackpot: 1/292M, or 1 in 292 million.
Mega Millions: 1/303M, or 1 in 303 million.
It is clear that, from a surface numerical view, the probability of block explosion is far lower than the winning probabilities of these two lotteries.
Hold on. We overlooked time. The two compared lotteries draw three times a week and two times a week, far less than Bitcoin's once every 10 minutes.
If the winning probability is calculated at 1 in 300 million, with draws 3 times a week, it would take an average of 100 million weeks, or 1.92 million years, to win a grand prize.
It is clear that, it seems solo mining has a higher probability than buying a lottery ticket.
Let's consider time and align it:
Per week:
Powerball (drawn 3 times), winning probability: 1/97M, one in 97 million.
Mega Millions (drawn 2 times), winning probability: 1/151M, one in 150 million.
Solo mining (1T power) (drawn 1,008 times), winning probability: 1/892K, one in 892 thousand.
Per month:
Powerball (drawn 12 times), winning probability: 1/22M, one in 22 million.
Mega Millions (drawn 2 times), winning probability: 1/35M, one in 35 million.
Solo mining (1T power) (drawn 4,320 times), winning probability: 1/208K, one in 208 thousand.
Per year:
Powerball (drawn 156 times), winning probability: 1/1.87M, one in 1.87 million.
Mega Millions (drawn 104 times), winning probability: 1/2.9M, one in 2.9 million.
Solo mining (1T power) (drawn over 52,000 times), winning probability: 1/17K, one in 17 thousand.
The probability of mining block explosions is over 100 times higher than that of winning the lottery.
Of course, probability calculations tell us that even if the probability is more than 100 times higher, for the vast majority of people, the contributions outweigh the gains, the costs outweigh the returns, in short—mining loses money.
Because most people's lifespan is less than 100 years, it is nearly one two-hundredth of 17,000.
This is precisely the cleverness of Bitcoin's underlying design.
Which type of investment (speculative product) in this world has a particularly large number of participants, where most people investing money are losing, yet everyone is enjoying it and can't extricate themselves?
Perhaps there are friends who like to tease and would answer. Wrong.
The correct answer is: lottery.
Bitcoin's PoW mining has a reward mechanism similar to a lottery.
Although miners do not make money, their tireless calculations have made an outstanding contribution to the world's largest 'public welfare project'—maintaining the Bitcoin public ledger, voluntarily and spontaneously.
In a daze, there seems to be a spirit of public welfare lottery within.
Since Bitcoin's inception 16 years ago, there have been doubts every year about how the Bitcoin network will sustain itself as rewards decrease with halving.
This is the dogmatic error of viewing problems from a static perspective rather than a developmental perspective.
It is just because currently most Bitcoin is mainly provided by mining pools and mining companies, that people question these businesses wanting profits; otherwise, they wouldn’t continue mining and providing power.
Maybe this is exactly what the design intended!
As miners and mining companies that mine for profit gradually exit due to reduced profits, solo miners and home miners who mine not for profit and are not afraid of losses will gradually take their historical position.
By that stage, Bitcoin will have entered a relatively mature phase.
The current situation is merely a phase of Bitcoin still growing rapidly (reflected in the rapidly rising price).
From a financial perspective, Bitcoin is a non-interest-bearing, non-exploitative currency. The Bitcoin blockchain does not allow for the partial reserve system and credit expansion found in traditional financial systems. Therefore, based on financial theories established in the last century, an institution providing such currency deposits without allowing loans cannot pay interest to depositors and must charge management fees, or it will become economically unsustainable.
The Bitcoin network is like an institution that offers Bitcoin deposits but cannot lend. It is a decentralized virtual institution operated by hundreds of thousands of miners distributed globally.
Therefore, the costs incurred by individual miners, such as electricity fees, are essentially what economists refer to as management fees paid to this deposit institution.
Unlike today where miners' motivation comes from earning block rewards (which essentially dilute the value of all holders) and transaction fees (costs traders are willing to pay), future individual miners will be personal users or business users who hoard Bitcoin and treat it as savings. Their motivation to pay the costs of running such a mining node is to ensure the security of their deposits.
Today, the combined hash power of several large mining pools in the entire network is about 900E. Assuming it is distributed to 9 million users, each user would need to provide an average of 100T of power.
In the future, as computational efficiency improves, energy consumption decreases further, noise reduction technology improves, and electricity costs lower (like fusion power generation), it may even be possible to reuse by-products (like chip heat for heating), where each user providing 100T or more power is not impossible.
We should consider the future now, ensuring the Bitcoin ledger's size is streamlined, strictly controlling garbage data and abuse, to avoid future irreparable issues and the inability to return to a greater degree of decentralization.
This article is reprinted with permission from: (Foresight News)
Original title: (Is the probability of winning in solo mining higher than that of lotteries?)
Original author: Liu Jiao Lian
'Mining to enjoy and earn millions! Is being an independent Bitcoin miner worth it? Helping you compare mining and lottery probabilities' was first published in 'Crypto City'
