Bitcoin mining is a complex process that is not easy to understand after reading a single blog post or article. It takes a while to fully grasp the incentives, mathematical process, and game theory of it all. To help conceptualize the entire process, I have decided to explain bitcoin mining with Rubik’s cubes.
Solving A Rubik’s Cube Requires Work
To start this example off, let’s compare bitcoin mining to solving a Rubik’s cube.
The reason I’ve chosen a Rubik’s cube is because it’s a math and logic equation that is difficult to solve but easy to verify that it has been solved correctly. I only know a few people who can actually solve a Rubik’s cube but everyone I know can easily verify whether or not one has been solved correctly simply by looking at it for a couple of seconds.
Bitcoin Mining Requires Work
Bitcoin mining relies on a similar sort of math called proof of work. It is the process of systematically guessing a number that completes a specific kind of math equation known as “a hash“. When a bitcoin miners completes the math equation correctly, it shows proof to the bitcoin network that it found the number that completes a math equation and they are rewarded with brand new bitcoin and some transaction fees.
It’s mathematically difficult to find the solution to a proof-of-work problem but easy to verify that the problem has been solved correctly. This asymmetry is a big part of what makes bitcoin so secure. It requires a large amount of energy to add new transactions to the blockchain but it is easy to verify that the changes to the blockchain are valid.
Now let’s explain bitcoin mining with Rubik’s cubes using an imaginary competition.
The Rubik’s Cube Competition
Imagine someone offered a prize to anyone who could solve a Rubik’s cube. The first person to solve a Rubik’s cube receives 50 points, called “the cube reward”, on an online scoreboard that the entire world can see and audit to ensure that the points are accurate.
As soon as a contestant solves a Rubik’s cube, the winner shows proof to the whole world that they have successfully solved the cube. Due to the nature of a Rubik’s cube, anyone can easily verify that it has been solved correctly. The winner is awarded 50 points and the competition starts all over again with a new scrambled Rubik’s cube.
Let’s explain Bitcoin mining with Rubik’s cubes as an analogy.
Carol’s CPU Cube Solver
As word of the contest spreads, more people become interested in solving the Rubik’s cube in an attempt to win some of these points. To increase chances of winning, contestants use specialized hardware that can solve the cube faster than other contestants.
The first contestant, Carol, has developed a tool made out of Lego to solve the Rubik’s cube faster than she can with just her hands. It only has a single central computer module (a central processing unit) so it’s slow but it still gets the job done.
CPU Bitcoin Miners
When bitcoin mining first began, it could be done with nothing but a desktop/laptop computer CPU (central processing unit). All you needed to do was run some mining software on your computer and you could win some bitcoin when your computer finds the winning number that completes the math equation. It didn’t take long for bitcoin miners to mine bitcoin more efficiently with more advanced hardware.
Bob’s Better Cube Solving Hardware
As more people hear about this competition, it doesn’t take long for a new contestant, Bob, to come along and solve the Rubik’s cube in less time using more advanced hardware. Look at how fast Bob’s hardware can solve a Rubik’s cube. It’s equipped with more computational power than Carol’s machine. This increase in processing power enables the new hardware to solve the cube in less time than Carol’s hardware and increase Bob’s chances of winning the cube reward.
Carol’s Cube Solver Upgrade
Although Bob’s cube solving hardware is faster, Carol has decided to buy better hardware so she can solve the cube in less time than Bob. Carols is now using some more advanced hardware and software to solve the cube even faster than Bob’s hardware.
GPU Bitcoin Miners
Bitcoin miners are always looking for any way to gain an advantage over other bitcoin miners so they can increase their chances of finding the number that produces a winning hash and claim the block reward. In the early days of bitcoin mining, they used GPU cards (graphics processing units) to generate more computational hashes than with just a CPU. Not only did they use more advanced hardware, they also began to make changes to the algorithms that were used to mine bitcoin so that they could mine more efficiently.
Dave’s Optimized Cube-Solving Software
Now that the competition is getting bigger, a new contestant named Dave has decided to increase his chances of winning the cube reward with what he believes is the most efficient software to solve the cube faster than all of the other machines. Dave’s cube solver has been completely optimized for the most efficient way to turn each side and each side has a dedicated motor so that it can be solved as quickly as possible.
Bitcoin Mining Software Algorithms
Not only is using efficient bitcoin mining hardware important, the software also plays an important role in how efficiently a bitcoin miners can mine. Different companies have developed software that can mine bitcoin more efficiently than others which gives an advantage to any miners that consume less electricity than the competition.
Alice’s Application Specific Cube Solver
The issue with these cube solvers is that they are all made out of Lego which are general purpose building blocks that aren’t made specifically for solving Rubik’s cubes. They can get incredibly efficient with more computational power, improved hardware design, and optimized software but they will never be able to compete with a machine that was made specifically for the application of solving a Rubik’s cube.
Alice has decided to use Dave’s optimized cube-solving software and basic design but she has designed new hardware that is specifically made to solve Rubik’s cubes. With the most efficient hardware and software, Alice is able to dominate the competition and solve the cube in less time than everyone else. Her cube solver is not made up of general purpose building blocks. This was made specifically to do one thing. It solve Rubik’s cubes really fast.
Pooling Computational Resources
With all of this more advanced hardware and software, how are the competitors with slower machines going to compete? In order to compete with these more efficient cube solvers, some of these contestants are pooling their resources to be able to compete with more efficient machines.
Bob, Carol, and Dave have all decided to upgrade their cube solvers to be able to solve more just like Alice and pool all of their combined computational power. If any of them solve the cube, they split the cube reward based on how much work they each contributed. By all working together, it’s possible that they will win the cube reward more often than if they all worked independently.
Bitcoin Mining Pools
In relation to bitcoin mining, groups of individual bitcoin miners all pool their computational hash power together in mining pools. They all contribute their own mining hardware to solve the proof of work problem and find a number that successfully completes the hash. When a mining pool finds the winning number that completes the math equation, all of the miners receive a portion of the block reward based on how much computational hash power they contributed.
Adjusting The Difficulty
Now with the increasing competition and all of the new specialized hardware and software that everyone is using, the cube reward is going to be depleted in no time. If everyone keeps using hardware with more and more computational power to solve the Rubik’s cube, then all of the points will be awarded too quickly and the competition will be over way too quickly.
In order to ensure that the cube reward is not depleted too quickly, there needs to be an adjustment in the difficulty of the Rubik’s cube to slow down the competition. Well, luckily there is a system in place to increase the difficulty of the Rubik’s Cube from 3x3x3 to 4x4x4. This difficulty adjustment means that the contestants now need to work harder to solve the cube.
Bitcoin Mining Difficulty Adjustment
This difficulty adjustment is an important part of how bitcoin mining works as well. To prevent bitcoin from being mined too quickly, there is a difficulty adjustment approximately every 2 weeks to ensure that new bitcoin is only mined approximately every 10 minutes. As more people mine bitcoin, the difficulty adjusts to make it more difficult. As fewer people mine bitcoin the difficulty adjusts to make it easier.
Final Thoughts
Comparing Bitcoin mining to a contest to solve a Rubik’s cube is not a perfect representation of how bitcoin mining works but the basic concept is accurate.
A Rubik’s cube is a math problem that is difficult to solve but easy to verify that it has been solved correctly. In a competition to solve a Rubik’s cube for a “cube reward” of points on a digital scoreboard, contestants will use efficient hardware in an attempt to solve it in less time with less energy consumed. As more and more users compete for the prize, the problem is solved in less time and the difficulty of the problem needs to be adjusted to compensate for the increase in participants. Those who are not able to compete all by themselves are able to join groups who pool their resources in an attempt to win as a group.
Bitcoin mining works in a similar way. Bitcoin miners compete to solve a math equation that is difficult to solve but easy to verify that it has been solved correctly. As more bitcoin miners enter the competition to win the block reward, blocks are mined in less time. To prevent blocks from being mined too quickly or too slowly, the mining difficulty adjusts to compensate for the increase or decrease of hash power. Anyone who is unable to mine bitcoin efficiently on their own is able to join a mining pool in an attempt to win as part of a group.
Like I said at the very beginning, learning how bitcoin mining works takes some time to fully understand but I hope that bitcoin mining explained with Rubik’s cubes helps you to better understand how the game theory of bitcoin mining works and what keeps bitcoin going. Bitcoin mining is not solving a digital Rubik’s cube or puzzle but both are math problems that are computationally difficult to solve but easy to verify that they have been solved correctly.
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