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Mining rewards will be replaced by transaction fees. There will still be an economic incentive to keep the hardware running.

modeless 7y ago
But at that point the cost of the electricity consumption of Bitcoin will be borne entirely by Bitcoin's users, who will not pay more than the value they derive from use of the network. That would only fund a small fraction of today's Bitcoin mining electricity consumption.
- gerikson 7y ago
  > But at that point the cost of the electricity consumption of Bitcoin will be borne entirely by Bitcoin's users I'm not sure what you mean by this. If a certain percentage of energy is used by PoW, less is available for other purposes, and thus prices will rise for all energy users.
  - modeless 7y ago
    My point is that Bitcoin users will not pay transaction fees that are anything close to the current mining reward that is subsidized by inflation of the Bitcoin money supply. Therefore when the subsidy inevitably falls, so will the total income of all Bitcoin miners. And in the long term Bitcoin miners collectively cannot afford to buy more electricity than their total income, therefore their electricity consumption will also fall.
    - gerikson 7y ago
      Thanks for clarifying! Fees are denominated in satoshis though, and even today the average USD amount of fees is around $8,000 per block[1] (around 6% of the total reward). A 10x increase of the BTC price will make that amount around the same as the current total reward. [1] https://fork.lol/reward/fees https://fork.lol/reward/fees
      - modeless 7y ago
        Fees may be denominated in satoshis but unlike the block reward they are not fixed. Users choose their fees at every transaction, and they will not pay more than the value they derive from making transactions. The total value of all fees paid is determined by the actual usage of the network, not the Bitcoin price. Of course today usage of the network is somewhat correlated with price, but it's not directly proportional and the correlation will weaken in the future.

modeless 7y ago

But at that point the cost of the electricity consumption of Bitcoin will be borne entirely by Bitcoin's users, who will not pay more than the value they derive from use of the network. That would only fund a small fraction of today's Bitcoin mining electricity consumption.

gerikson 7y ago
> But at that point the cost of the electricity consumption of Bitcoin will be borne entirely by Bitcoin's users I'm not sure what you mean by this. If a certain percentage of energy is used by PoW, less is available for other purposes, and thus prices will rise for all energy users.
- modeless 7y ago
  My point is that Bitcoin users will not pay transaction fees that are anything close to the current mining reward that is subsidized by inflation of the Bitcoin money supply. Therefore when the subsidy inevitably falls, so will the total income of all Bitcoin miners. And in the long term Bitcoin miners collectively cannot afford to buy more electricity than their total income, therefore their electricity consumption will also fall.
  - gerikson 7y ago
    Thanks for clarifying! Fees are denominated in satoshis though, and even today the average USD amount of fees is around $8,000 per block[1] (around 6% of the total reward). A 10x increase of the BTC price will make that amount around the same as the current total reward. [1] https://fork.lol/reward/fees https://fork.lol/reward/fees
    - modeless 7y ago
      Fees may be denominated in satoshis but unlike the block reward they are not fixed. Users choose their fees at every transaction, and they will not pay more than the value they derive from making transactions. The total value of all fees paid is determined by the actual usage of the network, not the Bitcoin price. Of course today usage of the network is somewhat correlated with price, but it's not directly proportional and the correlation will weaken in the future.