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I always wondered about that and perhaps someone here can explain. After bitcoin reaches its "full" volume, mining rewards will go away and the only way miner i

by WJW 6y ago

I always wondered about that and perhaps someone here can explain. After bitcoin reaches its "full" volume, mining rewards will go away and the only way miner income can stay the same is if transaction fees rise to match. Since the competition of miners basically converges to "block reward is equal to electricity cost equivalent", this would mean transaction costs increase to an insanely huge amount. Not paying the larger transaction costs would lead to the less efficient miners being squeezed out of the pool of miners, leading to less hashing power overall and thus an increased vulnerability to attack. How does the system intend to keep up miner income after all bitcoins have been mined?

Ekaros 6y ago
It's interesting as well. If block rewards+transactions fees over confirmation period is lower than value of transaction it will lead to 51% attack being actually profitable. And actually even the transaction fees don't matter. As you can still collect them in 51% attack.
pitaj 6y ago
BCH addresses this by increasing the number of transactions per block. This decreases the fee per transaction.
- swinglock 6y ago
  No, that doesn't address the question at all.
cloudhead 6y ago
There are a couple answers to this question, but the truth is we have ~100 years to figure this out, and the world will be a very different place then.
fanciestManimal 6y ago
It's an unsolved problem, and all solutions would require a majority of the mining pool to get on board. You could periodically increase the block size, splitting the transaction fee among more transactions. Although larger blocks make it more difficult to produce hashes, so more power would be consumed, thus increasing the transaction fees further. You could change the block reward such that there's a larger block reward or even some kind of sustained rate of inflation. The cap of 21 million bitcoin isn't a fundamental unit, it can be changed if a majority of the mining pool decides to. You could switch to Proof of Work, which doesn't use nearly as much electricity. Given how long this has taken Ethereum, this would probably be a multi year effort. If the Lightning network were to take off, it might also help with this for day to day users. I'm not super confident about that though. I don't think a Layman is going to deal with the Lightning network, personally. Especially with the current narrative of bitcoin being a "store of value" rather than a currency. Bitcoin proponents don't seem to be advocating using it as a day to day payment tool. Of course, there could also just never be any consensus on the direction to take, the network could be attacked, people could bail on bitcoin for other cryptocurrencies or just abandon cryptocurrencies all together and it could become a relic of history.
- wruza 6y ago
  periodically increase the block size, splitting the transaction fee among more transactions. Although larger blocks make it more difficult to produce hashes Couldn’t they simply lower the baseline difficulty along with a block size? Edit: and wouldn’t difficulty drop automatically in this case?
  - Laforet 6y ago
    Bitcoin is best understood as a timestamping service that signs up to 1MB of information every 10 minutes. Recording monetary transactions is only one of its applications. The 10 minute interval is an important part of the consensus mechanism as it has been proven secure both theoretically and practically. With shorter block interval and odds of orphan blocks and small chain reorgs would become more likely and this could break some aspects of security model such as zero-conf transactions. By the way larger blocks don't take longer to hash - only the fixed size header is used for PoW. However larger or more blocks do require more bandwidth and storage to process.
    - wruza 6y ago
      By the way larger blocks don't take longer to hash - only the fixed size header is used for PoW. Yeah, I forgot about merkle trees or something like that. So, do I get it right, there is no problem in increasing a block size? Just start to sign up to 50MB every 10 minutes in 2022 and that’s it? However larger or more blocks do require more bandwidth and storage to process. But isn’t amount of data depend on tx count? No matter how big chunks you split them into, it’s the same bytes per minute in the end. Why hard limit at all?
      - Laforet 6y ago
        The original security model of bitcoins also assumes that: 1. Every network node participates in mining. So everybody is incentivized to keep, validate and forward the blocks they receive as quickly as possible. 2. Anybody should be able to bootstrap a network node and verify the entire blockchain from the genesis block without explicitly trusting any other node. Thus when a new block arrives one can independently verify it. #1 has not been the case for a few years since the advent of mining pools, whereas #2 might as well be a lost cause. The entire bitcoin blockchain sits at 330GB and counting, and the live UTXO database is rarely below 3GB. Hence people have argued against making the blocks larger as it could bloat the blockchain to the point that only people with very powerful computers could afford to validate the chain on their own. However with the status quo we are already seeing the number of network nodes stagnate around 10k since 2017 as running one is largely an altruistic effort. >But isn’t amount of data depend on tx count? No matter how big chunks you split them into, it’s the same bytes per minute in the end. Why hard limit at all? That is correct. You could also see the limit as putting a minimum cost for putting information on the chain and this could benefit the miners too.
gfody 6y ago
> basically converges to "block reward is equal to electricity cost equivalent" the electricity cost falls significantly with the difficulty, see: https://en.bitcoin.it/wiki/Difficulty https://en.bitcoin.it/wiki/Difficulty ..and: https://breakermag.com/difficulty-adjustment-is-why-bitcoin-will-never-die/ https://breakermag.com/difficulty-adjustment-is-why-bitcoin-...
hanniabu 6y ago
Bitcoin holders will probably migrate their funds to wBTC and live on Ethereum.
polyomino 6y ago
Transactions will move to lightning, and since this allows multiple transactions to be aggregated into a single on-chain transaction, fees will be higher per transaction on chain.
tgsovlerkhgsel 6y ago
There is no strict technical limit on the number of transactions per block. Due to the rising price, each block is currently worth something like $350k. The Bitcoin network rules restrict it to a couple thousand transactions per block. Even with that, each on-chain transaction would "only" need to cost $100 or so to replace the block reward. Infeasible for micropayments, perfectly fine for large scale settlements. Another possible solution would be increasing the block size limit - the mining effort is a per-block cost, the cost of additional transactions is minimal. So small fees + massive transaction volume could work. With a million transactions each block, $0.35 per on-chain transaction is enough to pay for the current security level. More transactions allow for even lower fees. The Bitcoin Cash fork aims for this. However, all of this is very long term. The halvings happen a bit faster than every 4 years. Let's assume 3.5 years - that means 20 halvings in 70 years. The block reward not drop to 0 until 34 halvings, so this is not a problem we have to deal with in our lifetime. So for the forseeable future, one possible solution is for the Bitcoin price to keep going up, paying for the same or an increasing security level despite the halvings.
- Robotbeat 6y ago
  A million transactions per block would increase the block size to a Gigabyte or so. That means the blockchain grows at 52TB a year, significantly increasing the cost of maintaining a full node. But even that is really not fully taking into account how expensive transactions would be. The current Bitcoin block size and block rate and transaction size limit the network to 7 transactions per second. There are over 7 billion people. Which means that if everyone used Bitcoin, they could get at most 1 transaction every billion seconds. A billion seconds is over 31 years. Bitcoin as it is now is not for the rubes. Layer 1 transactions will, long-term, only be for larger entities. There’d effectively be a hierarchy of who can actually afford to submit transactions on the blockchain, which very much goes against the ethos of the original Satoshi paper. And even with your million transactions per block, you’re still talking about only one transaction per month or two per person in the world, which is far from microtransactions. The transaction fee would necessarily be a lot more than 35¢, as otherwise more people would use it directly. So it’s just not feasible to be both scalable and accessible without a huge hierarchy (ie only big players get to do transactions) and high transaction costs. At least not with the current architecture.
tromp 6y ago
This is discussed in this bitcointalk thread [1]. By constraining the block size, bitcoin is developing a fee market where transactions have to bid up the fee in order to be included in the next few blocks. Without such a constraint, transactions would only pay around 1 cent to be included (just to cover network broadcast costs), and it's next to impossible to make up for that tiny fee with a huge tx volume. In the next 3 or 4 halvings, as the block subsidy drops by an order of magnitude, fees will start to dominate the bitcoin block reward. The exponentially diminishing block subsidy is a bigger problem for less popular PoW coins that fail to develop a fee market, such as Bitcoin Cash. [1] https://bitcointalk.org/index.php?topic=5306354.0 https://bitcointalk.org/index.php?topic=5306354.0
- CyberDildonics 6y ago
  Bitcoin talk is basically propaganda for the lightning network since everything that goes against increasing throughput is deleted. Right now the average transaction costs $25 and the throughput is about 1.5 KB/s (900KB block every 10 minutes on average). The entire blockchain over 11 years takes up about $6 of hard drive space. It is technically trivial for the few people who need to sync with the actual chain of any cryptocurrency to do it. There is no universe where people use bitcoin for normal transactions now or in the future. There is also no reason to use a complicated second layer that still has to go through the bitcoin chain when other cryptocurrencies can be used more easily, more directly and much more securely. People are not going to pay $25 fees for anything other than speculation, there is no utility for normal transaction and plenty of competition. Right now that only makes up 14% of the total mining reward. A year ago fees only made up 0.3% of the mining reward. For mining fees to ever take over, there needs to be a lot more transactions. Then there is the volatility of combining both the price and transaction fees. When the price goes down, the transaction fees dip even lower. Three months ago the average transaction was 1/20th the price. If the mining reward goes down rapidly to 1/20th of what it was before the block time can adjust, mining should go down to match. Then blocks will be created more slowly and the time to the block reward will be pushed into the future. This might make the average fee price go up since the transaction throughput will go down. I'm not sure what effect this will have on the network since it might mean miners monitor transactions and wait until there are enough out there to make their chance at finding a block worth turning their mining on.
noxer 6y ago
Block rewards are designed finite but also designed to end outside most peoples lives. So in short no one needs a solution. Block reward of 0 theoretically would be reached in 2140. Of course earlier halving will already have a similar effect BUT ONLY if the price does not at lest double every halving (4 year). Essentially this means bitcoin will allays run on inflation. The finite supply is a "lie" that just doesn't work the same way if the price per unite can simply multiply. You constantly add a smaller fraction of the total but suck out more and more value anyway. mining has never become cheaper if price/hash drops it just raises the hashing required to mine. The people who hold BTC but dont use it pay (via inflation) for thous who use it so they have cheaper (still laughably expensive) transactions. They just dont care about that as long as price gains far outperform the inflation loses. At some point it has to crash and wont recover because double-spends happened and the network can no longer be trusted which renders it useless. If the price (real world purchase power not the price in USD) doesn't multiply for more than 4 years... the end is near. Likely the end would come before the 4 years are over. historically hash rate drops the most 1-1.5 years before halving in sync with the price. it basically boils down to how good large miners are at managing risk. they need to have the money to keep mining while its not profitable. if a large player goes bankrupt it could create a chain reaction crashing the whole thing. BTW, next generation blockchains like the XRPL have solved all of theses problems a long long time ago. The lead dev (ex btc dev) saw these problems ~10 years ago and it took them 1-2 years to come up with something better.
bitxbitxbitcoin 6y ago
I don't think it's a problem at all: There have already been blocks in the past where the transaction fee portion of the miner reward was higher than the block reward.
altspace 6y ago
Transaction fee will go up or value of Bitcoin will rise enormously to keep mining profitable with small Bitcoin reward. I believe it’ll be latter.

by WJW 6y ago

Ekaros 6y ago

It's interesting as well. If block rewards+transactions fees over confirmation period is lower than value of transaction it will lead to 51% attack being actually profitable. And actually even the transaction fees don't matter. As you can still collect them in 51% attack.

pitaj 6y ago

BCH addresses this by increasing the number of transactions per block. This decreases the fee per transaction.

swinglock 6y ago
No, that doesn't address the question at all.

cloudhead 6y ago

There are a couple answers to this question, but the truth is we have ~100 years to figure this out, and the world will be a very different place then.

fanciestManimal 6y ago

It's an unsolved problem, and all solutions would require a majority of the mining pool to get on board. You could periodically increase the block size, splitting the transaction fee among more transactions. Although larger blocks make it more difficult to produce hashes, so more power would be consumed, thus increasing the transaction fees further. You could change the block reward such that there's a larger block reward or even some kind of sustained rate of inflation. The cap of 21 million bitcoin isn't a fundamental unit, it can be changed if a majority of the mining pool decides to. You could switch to Proof of Work, which doesn't use nearly as much electricity. Given how long this has taken Ethereum, this would probably be a multi year effort. If the Lightning network were to take off, it might also help with this for day to day users. I'm not super confident about that though. I don't think a Layman is going to deal with the Lightning network, personally. Especially with the current narrative of bitcoin being a "store of value" rather than a currency. Bitcoin proponents don't seem to be advocating using it as a day to day payment tool. Of course, there could also just never be any consensus on the direction to take, the network could be attacked, people could bail on bitcoin for other cryptocurrencies or just abandon cryptocurrencies all together and it could become a relic of history.

wruza 6y ago
periodically increase the block size, splitting the transaction fee among more transactions. Although larger blocks make it more difficult to produce hashes Couldn’t they simply lower the baseline difficulty along with a block size? Edit: and wouldn’t difficulty drop automatically in this case?
- Laforet 6y ago
  Bitcoin is best understood as a timestamping service that signs up to 1MB of information every 10 minutes. Recording monetary transactions is only one of its applications. The 10 minute interval is an important part of the consensus mechanism as it has been proven secure both theoretically and practically. With shorter block interval and odds of orphan blocks and small chain reorgs would become more likely and this could break some aspects of security model such as zero-conf transactions. By the way larger blocks don't take longer to hash - only the fixed size header is used for PoW. However larger or more blocks do require more bandwidth and storage to process.
  - wruza 6y ago
    By the way larger blocks don't take longer to hash - only the fixed size header is used for PoW. Yeah, I forgot about merkle trees or something like that. So, do I get it right, there is no problem in increasing a block size? Just start to sign up to 50MB every 10 minutes in 2022 and that’s it? However larger or more blocks do require more bandwidth and storage to process. But isn’t amount of data depend on tx count? No matter how big chunks you split them into, it’s the same bytes per minute in the end. Why hard limit at all?
    - Laforet 6y ago
      The original security model of bitcoins also assumes that: 1. Every network node participates in mining. So everybody is incentivized to keep, validate and forward the blocks they receive as quickly as possible. 2. Anybody should be able to bootstrap a network node and verify the entire blockchain from the genesis block without explicitly trusting any other node. Thus when a new block arrives one can independently verify it. #1 has not been the case for a few years since the advent of mining pools, whereas #2 might as well be a lost cause. The entire bitcoin blockchain sits at 330GB and counting, and the live UTXO database is rarely below 3GB. Hence people have argued against making the blocks larger as it could bloat the blockchain to the point that only people with very powerful computers could afford to validate the chain on their own. However with the status quo we are already seeing the number of network nodes stagnate around 10k since 2017 as running one is largely an altruistic effort. >But isn’t amount of data depend on tx count? No matter how big chunks you split them into, it’s the same bytes per minute in the end. Why hard limit at all? That is correct. You could also see the limit as putting a minimum cost for putting information on the chain and this could benefit the miners too.

gfody 6y ago

> basically converges to "block reward is equal to electricity cost equivalent" the electricity cost falls significantly with the difficulty, see: https://en.bitcoin.it/wiki/Difficulty https://en.bitcoin.it/wiki/Difficulty ..and: https://breakermag.com/difficulty-adjustment-is-why-bitcoin-will-never-die/ https://breakermag.com/difficulty-adjustment-is-why-bitcoin-...

hanniabu 6y ago

Bitcoin holders will probably migrate their funds to wBTC and live on Ethereum.

polyomino 6y ago

Transactions will move to lightning, and since this allows multiple transactions to be aggregated into a single on-chain transaction, fees will be higher per transaction on chain.

tgsovlerkhgsel 6y ago

There is no strict technical limit on the number of transactions per block. Due to the rising price, each block is currently worth something like $350k. The Bitcoin network rules restrict it to a couple thousand transactions per block. Even with that, each on-chain transaction would "only" need to cost $100 or so to replace the block reward. Infeasible for micropayments, perfectly fine for large scale settlements. Another possible solution would be increasing the block size limit - the mining effort is a per-block cost, the cost of additional transactions is minimal. So small fees + massive transaction volume could work. With a million transactions each block, $0.35 per on-chain transaction is enough to pay for the current security level. More transactions allow for even lower fees. The Bitcoin Cash fork aims for this. However, all of this is very long term. The halvings happen a bit faster than every 4 years. Let's assume 3.5 years - that means 20 halvings in 70 years. The block reward not drop to 0 until 34 halvings, so this is not a problem we have to deal with in our lifetime. So for the forseeable future, one possible solution is for the Bitcoin price to keep going up, paying for the same or an increasing security level despite the halvings.

Robotbeat 6y ago
A million transactions per block would increase the block size to a Gigabyte or so. That means the blockchain grows at 52TB a year, significantly increasing the cost of maintaining a full node. But even that is really not fully taking into account how expensive transactions would be. The current Bitcoin block size and block rate and transaction size limit the network to 7 transactions per second. There are over 7 billion people. Which means that if everyone used Bitcoin, they could get at most 1 transaction every billion seconds. A billion seconds is over 31 years. Bitcoin as it is now is not for the rubes. Layer 1 transactions will, long-term, only be for larger entities. There’d effectively be a hierarchy of who can actually afford to submit transactions on the blockchain, which very much goes against the ethos of the original Satoshi paper. And even with your million transactions per block, you’re still talking about only one transaction per month or two per person in the world, which is far from microtransactions. The transaction fee would necessarily be a lot more than 35¢, as otherwise more people would use it directly. So it’s just not feasible to be both scalable and accessible without a huge hierarchy (ie only big players get to do transactions) and high transaction costs. At least not with the current architecture.

tromp 6y ago

This is discussed in this bitcointalk thread [1]. By constraining the block size, bitcoin is developing a fee market where transactions have to bid up the fee in order to be included in the next few blocks. Without such a constraint, transactions would only pay around 1 cent to be included (just to cover network broadcast costs), and it's next to impossible to make up for that tiny fee with a huge tx volume. In the next 3 or 4 halvings, as the block subsidy drops by an order of magnitude, fees will start to dominate the bitcoin block reward. The exponentially diminishing block subsidy is a bigger problem for less popular PoW coins that fail to develop a fee market, such as Bitcoin Cash. [1] https://bitcointalk.org/index.php?topic=5306354.0 https://bitcointalk.org/index.php?topic=5306354.0

CyberDildonics 6y ago
Bitcoin talk is basically propaganda for the lightning network since everything that goes against increasing throughput is deleted. Right now the average transaction costs $25 and the throughput is about 1.5 KB/s (900KB block every 10 minutes on average). The entire blockchain over 11 years takes up about $6 of hard drive space. It is technically trivial for the few people who need to sync with the actual chain of any cryptocurrency to do it. There is no universe where people use bitcoin for normal transactions now or in the future. There is also no reason to use a complicated second layer that still has to go through the bitcoin chain when other cryptocurrencies can be used more easily, more directly and much more securely. People are not going to pay $25 fees for anything other than speculation, there is no utility for normal transaction and plenty of competition. Right now that only makes up 14% of the total mining reward. A year ago fees only made up 0.3% of the mining reward. For mining fees to ever take over, there needs to be a lot more transactions. Then there is the volatility of combining both the price and transaction fees. When the price goes down, the transaction fees dip even lower. Three months ago the average transaction was 1/20th the price. If the mining reward goes down rapidly to 1/20th of what it was before the block time can adjust, mining should go down to match. Then blocks will be created more slowly and the time to the block reward will be pushed into the future. This might make the average fee price go up since the transaction throughput will go down. I'm not sure what effect this will have on the network since it might mean miners monitor transactions and wait until there are enough out there to make their chance at finding a block worth turning their mining on.

noxer 6y ago

Block rewards are designed finite but also designed to end outside most peoples lives. So in short no one needs a solution. Block reward of 0 theoretically would be reached in 2140. Of course earlier halving will already have a similar effect BUT ONLY if the price does not at lest double every halving (4 year). Essentially this means bitcoin will allays run on inflation. The finite supply is a "lie" that just doesn't work the same way if the price per unite can simply multiply. You constantly add a smaller fraction of the total but suck out more and more value anyway. mining has never become cheaper if price/hash drops it just raises the hashing required to mine. The people who hold BTC but dont use it pay (via inflation) for thous who use it so they have cheaper (still laughably expensive) transactions. They just dont care about that as long as price gains far outperform the inflation loses. At some point it has to crash and wont recover because double-spends happened and the network can no longer be trusted which renders it useless. If the price (real world purchase power not the price in USD) doesn't multiply for more than 4 years... the end is near. Likely the end would come before the 4 years are over. historically hash rate drops the most 1-1.5 years before halving in sync with the price. it basically boils down to how good large miners are at managing risk. they need to have the money to keep mining while its not profitable. if a large player goes bankrupt it could create a chain reaction crashing the whole thing. BTW, next generation blockchains like the XRPL have solved all of theses problems a long long time ago. The lead dev (ex btc dev) saw these problems ~10 years ago and it took them 1-2 years to come up with something better.

bitxbitxbitcoin 6y ago

I don't think it's a problem at all: There have already been blocks in the past where the transaction fee portion of the miner reward was higher than the block reward.

altspace 6y ago

Transaction fee will go up or value of Bitcoin will rise enormously to keep mining profitable with small Bitcoin reward. I believe it’ll be latter.