Loch Ness is a giant spirit level

Or why Bitcoin metaphors suck.

In 2012, shortly after Bitcoin awoke, I saw some scientific stories about Loch Ness in my newsfeed. I am sure the headlines were scientifically accurate but… well, boring. Then I read this one. Loch Ness is a giant spirit level. I was intrigued. I clicked through.

The way we understand something new and unfamiliar is through metaphor. If we use the wrong metaphor, we will confuse.

Unfortunately, Bitcoin is rife with wonky metaphors, making it harder for people to understand what is happening. Using the same term Bitcoin to describe ‘value’ and ‘the network’ does not help either. Bitcoin as value refers to the intrinsic worth of Bitcoin as a scarce digital asset. Bitcoin the network refers to the underlying technology that powers Bitcoin, including the blockchain, the peer-to-peer network, and the software that runs the network.

There are no Bitcoins.

There are no Wallets.

Ergo, Wallets do not contain Bitcoin.

Mining does not happen.

Confused? You should be. It is beyond the scope of this article to redefine every Bitcoin metaphor.

We do need to do it, one metaphor at a time. Let us start with the word mining. Here is my attempt.

The word “metaphor” is itself a metaphor. It comes from the Greek word “metapherein,” which means “to carry over.” Go back one layer, and we come to the amphora — a ceramic jar with two handles and a narrow neck used in ancient Greece and Rome for storing and transporting precious liquids, such as wine, oil, and honey.

It is a beautiful image — the idea that we carry precious meaning from one thing we understand to something we are trying to grasp.

The phrase “Bitcoin mining” is a poor metaphor because it implies that there is a physical process that creates Bitcoin, like digging for gold. Nobody makes Bitcoin when a new block is added. Satoshi Nakamoto already created every one of the twenty-one million coins.

What happens is that a certain number of Bitcoin releases and ownership of a few of those previously released updates.

This release occurs like clockwork. It does not matter what today’s price is. Supply and demand have no impact. How powerful the computers used has no bearing other than to make it more likely (not inevitable) that an expensive rig wins.

Bitcoin releases through a pre-determined process in which computers compete to solve a puzzle. The puzzle is not complex as you have been told. A good analogy is that it is like two players throwing dice—the first person to throw a one wins.

Now imagine that your dice don’t have six sides but sixty-thousand, and instead of two players, hundreds or even thousands are competing. People join and leave the game as they feel, so the number of players fluctuates.

Say, you want a winner to occur on average every 10 minutes. You do not want a timekeeper—statistically, the more players, the faster a win. Instead, every two weeks, you adjust the difficulty. If there are more players, you might make it more challenging so that the first person to throw any number below one hundred is the winner. If there are fewer players, you might increase the threshold to five hundred. That is what happens with Bitcoin. The actual numbers are different, but that is the principle.

We can replace the word mining with puzzle solving.

How does everyone know that the winner has solved the puzzle? Here is a simple image. Think of a Rubik’s cube. If any face has more than one colour, you know they have not completed the task. The Rubik’s cube may be hard to solve but easy to check.

What is the point of this puzzle-solving? Think of an exceptionally long spreadsheet. Each row has the details of an individual transaction. There are thousands of copies of the spreadsheet distributed around the world. People want to have their new transactions added to the spreadsheet. If you are in a hurry, you can pay extra to go to the front of the queue. The puzzle winner gets to add the new transactions, and everyone with a copy of the spreadsheet checks that there are no mistakes and then updates their copy.

What is the point? A better metaphor is that the winner is bookkeeping, and everyone else with a copy is auditing.

So the puzzle winner does bookkeeping. Their reward is the latest release of Bitcoins. (They also earn fees from the new transactions listed in their block). Everyone else with a copy of the spreadsheet then audits the update to ensure it is correct. Tick tock. Another block. Not a Loch Ness monster in sight.

Existing metaphor

Bitcoin mining is the process of creating new bitcoins by solving extremely complicated math problems that verify transactions in the currency. When a bitcoin is successfully mined, the miner receives a predetermined amount of bitcoin. Source: bankrate.com

If we meld bookkeeper and Bitcoin, we get ₿ookkeeper.

Proposed New Metaphor

Bitcoin puzzling is a game by which one ₿ookkeeper is chosen to verify and add new transactions. The math problem is akin to rolling dice. The first ₿ookkeeper to roll a number below a threshold wins. The threshold is automatically adjusted every two weeks to ensure an average release of Bitcoins every 10 minutes. The successful ₿ookkeeper updates the Bitcoin blockchain — best understood as a ‘spreadsheet’. Every other node audits the update to ensure it is correct. For their effort the ₿ookkeeper gets a pre-determined number of Bitcoin released as a reward and charges transaction fees.

This post is by www.binkbonkbank.com, the website dedicated to helping Bitcoiners self-custody safely.