Is the probability of winning in Solo Mining higher than in the lottery?

The probability of Mining a Block is more than 100 times higher than winning the lottery.

Written by: Liu Jiao Lian

Solo Mining, as the name suggests, refers to individual miners. Although currently most of the BTC Mining power is concentrated in mining pools, with a few large pools distributing rewards based on so-called power contribution, there are still quite a few people who choose to use their own power to mine solo.

Compared to steadily receiving "contribution points" from a mining pool, solo mining is akin to a gamble of "either mining a block or wasting efforts." For today's BTC block reward, mining a block means the solo miner exclusively receives 3.125 BTC, equivalent to over 300,000 USD. However, the probability of mining a block is indeed so low that hope is almost nonexistent.

How low is the probability of solo Mining a Block?

According to the estimated graph of the BTC network's hash rate, the current total network hash rate is approximately around 900E (900EH/s). For simplicity in calculation, we take 900E. This number means that the BTC network can compute about 900E hashes per second. An astonishing astronomical figure.

According to netizen Matt Cutler's estimate, if using a desktop mining machine with a computing power of 1T (1TH/s), then based on the independent and identically distributed assumption, the probability of mining a block is 1T/900E = 1/900M, which is one in 900 million.

How low is this probability? According to the average of one block being mined every 10 minutes across the entire BTC network, it would take an average of 9 billion minutes, or 17,000 years, to mine a block once.

By way of comparison, he listed the winning probabilities of two typical lottery products:

• Powerball Jackpot: 1/292M, which is 1 in 292 million.
• Mega Millions: 1/303M, which is one in 303 million.

It is obvious that, from the surface numbers, the probability of Mining a Block is much lower than the winning probability of these two lottery tickets.

Hold on. We overlooked the time. The draw times for the two comparison lotteries are 3 times a week and 2 times a week, which is far lower than BTC's draw every 10 minutes.

If the probability of winning is calculated as 1 in 300 million, and there are 3 draws a week, then on average it would take 100 million weeks, or 1.92 million years, to win a grand prize.

It is obvious that Solo mining seems to have a higher probability of success than winning the lottery.

Let's take time into consideration and align it:

Every week:

• Powerball (3 draws), winning probability: 1/97M, one in 97 million.
• Mega Millions (draw 2 times), winning probability: 1/151M, one in 150 million.
• Solo Mining (1T hash rate) (1008 draws), winning probability: 1/892K, one in 890,000.

Monthly:

• Powerball (12 draws), winning probability: 1/22M, one in 22 million.
• Super Millions (drawn 2 times), winning probability: 1/35M, one in 35 million.
• Solo Mining (1T hash power) (4320 draws), winning probability: 1/208K, one in 200,000.

Every year:

• Powerball (156 draws), winning probability: 1/1.87M, one in 1.87 million.
• Mega Millions (104 draws), winning probability: 1/2.9M, one in 2.9 million.
• Solo Mining (1T Hashrate) (More than 52,000 draws), Winning Probability: 1/17K, One in 17,000.

The probability of Mining a Block is more than 100 times higher than winning the lottery.

Of course, probability calculations tell us that even with a probability more than 100 times higher, for the vast majority of people, the contribution is still greater than the return, the cost is greater than the reward, in short - Mining is a loss.

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 BTC's underlying design.

May I ask, what kind of investment (or speculation) in this world has a particularly huge number of participants, where most of the people who invest money end up losing, yet everyone is still enjoying themselves and can't get enough?

Some friends who like to tease might answer: wrong.

The correct answer is: lottery.

BTC's PoW Mining has an incentive mechanism that is very similar to a lottery.

Although miners do not make money, their tireless calculations have made an extraordinary contribution to the world's largest "public welfare project"—maintaining the BTC public ledger, voluntarily and spontaneously.

In a daze, there seems to be a spirit of public welfare lottery within it.

BTC has been around for 16 years, and every year there are doubts about how the BTC network will sustain itself as the rewards decrease with each halving and mining becomes less profitable.

This is the dogmatic error of viewing problems from a static perspective rather than a developmental perspective.

It is only because at the current stage, BTC is mostly powered by mining pools and mining companies that people question whether these enterprises seek profits and make money; otherwise, they would not continue Mining or providing computing power.

Perhaps this is just what the design intended!

As miners and mining companies that come to mine for profit gradually withdraw due to reduced profits, Solo miners and home miners who mine not for profit and are not afraid of losing money, but rather enjoy losing money, will gradually take their historical place.

By that stage, BTC had also entered a relatively mature phase.

The current situation is merely a phase where BTC is still growing rapidly (reflected in the rapid increase in price).

From a financial perspective, BTC is a non-exploitative currency that does not earn interest. The BTC chain does not allow for fractional reserve banking and credit expansion as seen in traditional financial systems. Therefore, according to financial theories established in the last century, a financial institution that offers deposits in this currency without allowing loans cannot only fail to pay interest to depositors, but must also charge them management fees, otherwise it would be economically unsustainable.

The BTC network is like an institution that provides BTC deposits but cannot lend. It is a virtual institution operated by hundreds of thousands of miners distributed globally.

Therefore, the electricity costs and other expenses incurred by individual miners are essentially the management fees paid to this deposit institution, as economists would say.

Unlike today, where miners' motivation for Mining comes from earning block rewards (which essentially dilutes the value of all holders) and transaction fees (the costs that traders are willing to pay), future individual miners will be personal users who hoard BTC and treat BTC as savings, or enterprise users. Their motivation to cover the costs of running such a Mining node is to ensure the security of their deposits.

Today, the total computing power gathered by several major mining pools across the network is approximately 900E. Assuming it is divided among 9 million users, each user will need to provide an average of 100T of computing power.

In the future, with the improvement of computing power efficiency, energy consumption will further decrease, noise reduction technology will continue to improve, electricity costs will drop further (such as through thermonuclear fusion power generation), and even by-product reuse may become possible (like using chip heat for heating), providing each user with 100T or higher computing power may not be impossible.

We should start considering the future now, ensuring the optimization of the BTC ledger size, strictly controlling junk data and abuse, in order to avoid future difficulties that cannot be reversed, making it impossible to return to a greater degree of decentralization.