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You probably mean deflation, right? In inflation the cost of goods and services are higher, because the currency is losing value.
by treve 6y ago
You probably mean deflation, right? In inflation the cost of goods and services are higher, because the currency is losing value.
- rspeele 6y agoThe reward paid to miners is mostly newly minted BTC. Presently 6.25 BTC newly created with each block, about 1-2 BTC in fees. Mining has been paid for by increasing the BTC supply, for all of Bitcoin's history so far. Eventually that will have to change as the reward keeps halving. At some point there is no block reward and it's all fees. Will people pay enough in fees to sustain mining at a rate that's impossible for a large actor to 51%?
- Ekaros 6y agoNo they won't. As the cost of 51% attack is actually the cost of fee of cancelled transaction(and subsequent ones) plus created coins. The attacker can collect all the fees also from those blocks they mined for attack... Ofc, if the mining is sufficiently large that it is impossible for anyone to collect enough power, then sure. But that is quite expensive proposition in general...
- WJW 6y agoNo he means inflation. New coins are being mined all the time, causing existing coins to lose value. This does not really matter yet since total demand for bitcoins has been increasing faster than the total supply, leading to an increase in price.
- paulgb 6y agoThanks, but I mean inflation: miners were paid a subsidy in new Bitcoin for their contribution to the network. This has an inflationary effect on Bitcoin, although it was overshadowed by increased demand over the same period.
- FabHK 6y agoGP might be referring to the fact that currently, 80-90% of the miners' reward is "coinbase", ie newly minted coins (which expand the money supply and could be considered inflationary), while only 10-20% of the mining reward is from fees, ie cut on the transactions.
- mumblemumble 6y agoI would assume that the author meant to mean "growth in the supply of bitcoin." Which seems like a reasonable error to make, because printing money typically has an inflationary effect, even if it isn't technically synonymous with inflation. Maybe dilution is a better term? If all other factors could be held equal, then the real value of the ~6BTC reward for mining a block would, in effect, come from a tiny reduction in the real value of everyone else's BTC assets that would result from the supply of BTC having increased. It creates an interesting situation. Right now, the cost of actually operating the BTC network is largely supported by every single person who owns BTC, proportionally to how much BTC they actually have. As the mining reward continues to taper off, that is going to shift toward the cost primarily being covered by transaction processing fees. That will change something fundamental about the economics of Bitcoin, although I'm not sure exactly how.