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Bitcoin is Gamification – Reasoning from First Principles

Updated: Sep 1, 2021

Cryptocurrency, Blockchain, Bitcoin, Ethereum, Dogecoin…. Whenever I heard/read someone talking/writing anything involving these words, I would simply stop listening or start reading something else.

I didn’t understand them and it seemed very complex to me. And complex subjects have always bothered me.

Before I get into Bitcoin and how it is related to Gamification, I need to tell you about first principles thinking.

What is First-principles thinking?

I have been a very slow learner throughout school and even today. My classmates would grasp complex concepts very easily. The same concept could take me days or sometimes months to understand.

For instance, in my sixth grade, our teacher started teaching us how to find areas of different geometrical shapes. She started with Square.

Quick Refresher for myself —

Area of a Square of side 1 centimeter = 1 centimeter x 1 centimeter

The outcome is read as 1-centimeter square (written as 1 cm²)

I understood this very easily and Mathematics as a subject made perfect sense — A square with each side of length 1 centimeter is called a 1-centimeter square.

That was plain and simple English actually.

When she asked the class what is the area of a square with each side of length 5 centimeters.

Simple mathematics again — 5 cm x 5 cm

The outcome — 25-centimeter square. That seriously knocked me off!

It was not plain and simple English.

The teacher moved ahead as everyone except me understood the concept and I didn’t even clarify with her. I was afraid that I might sound stupid.

I had just shifted from an English medium school where they taught every subject in Hindi to a school where they taught only in English.

Coming back to Geometry, the next shape was Rectangle —

Area of Rectangle with Length 5 cm & Breadth (3 cm) = Length x Breadth

= 5 cm x 3 cm

= 15 cm²

I read it as — 15-centimeter square

I am sure, you must be confused and thinking — What was so difficult for me to understand in that?

I understood what is a rectangle.

I understood what is the length of a rectangle.

I understood what is the breadth of a rectangle.

Apply the formula and get the Area!

The problem was in understanding the mathematical concept of the Area itself.

Why multiply Length with Breadth?

I understood the concept of perimeter and its formula made perfect sense.

Add length and breadth twice –

L+L+B+B = 2L+2B = 2(L+B)

But the Area’s formula made no sense at all.

I asked my friends to explain –

They would tell me — Multiply Length with Breadth

But when I asked Why? No answer.

I got really frustrated.

One day while on the school bus saw a truck carrying Oil Tins. They were stacked horizontally. Below is the closest picture I could find that resembles what I mean—

I have this habit of counting, so wanted to quickly count the visible number of oil tins before the truck goes far.

I simply counted the number of tins across the width of the truck and then counted the number of tins across the height of the truck (above the wheels).

And multiplied both to get the total count of tins visible.

At that moment, I remembered reading something about the Area in my Maths book.

Quickly took the book out and re-read the definition of the area.

In simple terms it meant –

The total number of squares of the side 1 cm (or any unit) inside any enclosed figure is called its Area.

I didn’t know then that I was trying to think in “first principles” 🙂

You can read more about First Principles thinking here

By applying the first principles thinking, I have found that Gamification is at the core of how Bitcoin operates.

Basics of Bitcoin

To understand Bitcoin you need to know its building blocks —

  1. A public ledger (called Bitcoin’s blockchain). Think of it as a giant book that is publicly available and contains the bookkeeping record of all transactions ever made in the Bitcoin system, with new pages constantly being added.

  2. A cryptographic algorithm is used for the authorization of the transactions. Basically, an algorithm to verify that the bitcoins belong to the person sending them.

  3. A distributed network of computers/servers (also commonly known as miners) that verify and validate each transaction using a sophisticated cryptographic algorithm. They are also responsible for adding a new block (page) of transactions to the blockchain.

In simple terms, Bitcoin is a completely decentralized platform to perform payment transactions without the need for a central authority (like a government or bank)

In a traditional financial system, intermediaries like banks or payment processing systems get paid to ensure the authenticity of the transaction, however, this adds extra costs and risks.

Bitcoin relies on the blockchain (public ledger) to remove the need for intermediaries, thus allowing transactions at near-zero costs and restrictions.

Gamification & Bitcoin

As we can see that the two main building blocks of Bitcoin — the public ledger (Blockchain) and the Cryptographic algorithm are theoretical concepts. The third and the most important block — distributed network of computers/servers (i.e. miners) is a must for the cryptocurrency to function.

Another way to look at it is that the core gating factor in the viability of Bitcoin is not how well its protocols work or how willing people are to buy and sell with it — it’s about getting enough people to work hard enough at the boring task of validation.

Here’s where gamification enters the discussion. Gamification is the process of applying game elements to real-world situations.

It draws insights from digital game design and psychology and uses them to build systems that engage people to perform activities.

One important category of those activities is tasks perceived as boring, where appeals to altruism or intrinsic attraction fall short.

Gamification proposes to overcome this hurdle through game-like experiences. A game is just a set of rules and goals, structured to produce contingency and to induce players to play. And playing means following the rules.

The three important ingredients of Gamification are —

Autonomy — is the feeling of controlling your own destiny.

Mastery — taps into the feeling of getting better at something.

Purpose — is about connectedness and relatedness — with other people, with a shared cause, with something bigger than yourself.

When I dived deep into Bitcoin, I found all these ingredients at the core of it.

Bitcoin is based on a game called mining.

To win a round of the mining game, you must be the first to validate a ten-minute “block” of Bitcoin transactions, by performing a set of computations known as a “proof-of-work.”

If you win, you get a reward, in the form of a few Bitcoin (Block Reward). As with any good game, though, winning is contingent; you’re not guaranteed to succeed. You’re competing against others, and exactly how long it will take to solve a proof-of-work puzzle is impossible to predict.

Also, miners can join/leave the network whenever they wish to. They have full control over how they operate in the network provided they follow the Bitcoin protocol.

They can add as many mining machines as they want to. It is completely up to them. This gives them a sense of autonomy.

Many have quit their jobs and have committed themselves to Bitcoin mining full-time. However, it isn’t an easy job. They have to teach themselves the nuances of how mining machines work — and crucially, how to fix them.

Bitcoin miner Zack Pettit skating on his work break at the SCATE Ventures mining facility in Dallesport, Washington

Bitcoin miner Nick Sears lives on-site at the SCATE Ventures mining farm in Dallesport, Washington. There are 4500 mining machines on the farm.

He has to ensure that all these machines are working 24 hours a day, seven days a week. If even one of those machines goes offline or is only running at partial capacity, the SCATE ventures mine loses money.

That’s because when someone is mining for bitcoin, what they are actually doing is lending their computing power to the bitcoin network. The more machines you have online, the better your chances at winning bitcoin.

Bitcoin challenges miners to master their craft through ever-more-powerful and sophisticated mining hardware.

Miners feel connected to a higher purpose of enabling a completely digital payment system that’s not controlled by a central authority (Bank or Government).

This gives them a sense of connectedness with a shared cause and something bigger than themselves.

The three ingredients together (Autonomy + Mastery +Purpose) drives them to keep the Bitcoin network running.

And that’s how I conclude — Bitcoin is Gamification.




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