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If bitcoin does not succeed as a currency but does as a store of wealth, then eventually all of the coins will flow into a few funds and large wallets, right?

If bitcoin does not succeed as a currency but does as a store of wealth, then eventually all of the coins will flow into a few funds and large wallets, right? So once all the coins are mined and if there are not many p2p transactions occurring, then what incentive is there to mine and support the network? Will coin owners just mine their own private blocks whenever they need to move coin? Curious if this has already been considered by the bulls or bears. Seems like bitcoin will need to increase the upper limit of coins to continue to work.

jayd16 3y ago
Once the automatic coins are mined, the idea is you pay miners a tip to get your transactions completed. I'm more curious how they plan to handle a drop in popularity from a security standpoint. Will the total compute always need to remain high enough to keep a bad actor from dominating? As popularity wanes that sounds expensive.
- treyd 3y ago
  To maintain the current level of security then, all else being equal, the total fees collected will have to increase by the amount the subsidy decreases by. So each byte of block space will cost more for the person buying it. That could be an issue, but the solution to that problem is to extend the protocol to allow for more sophisticated "layer 2" systems so that the end-user experience has as small of a footprint as possible. Ideally without compromising security, which can be done with zero-knowledge proofs and such. But it's unclear if the political will is there from the community around the Bitcoin project.
  - arealaccount 3y ago
    In this case, wouldn’t institutions mine their own blocks in order to avoid high transaction fees?
    - dale_glass 3y ago
      There's no such thing as "own blocks". There's a single world-wide winner of the mining competition per 10 minutes. So if you want to have free transactions 50% of the time, the way to get there is to take the current world-wide mining capacity, and replicate it. That's obviously not a viable tactic.
- arealaccount 3y ago
  That’s exactly what I’m wondering, if all the bitcoin is held as investment and not utilized as a currency, then there is no incentive to receive tips, so no incentive to crunch hashes, so how does it work then?
  - zik 3y ago
    Even investments are bought and sold day to day, otherwise stock brokers would all go bankrupt.
cduzz 3y ago
When you refer to bitcoin as a "store of wealth" do you mean that a bitcoin will retain its value over time? Which bitcoin do you mean, some coin you recently minted or one that's from a hacked exchange and hard to cash in because it's tied to a known crime? Is this a bitcoin you have in a cold wallet somewhere? Are you running a connected node with the intention of exchanging your bitcoins with someone else? Or is your "bitcoin" just an entry in an exchange's ledger somewhere, in that case is it a bitcoin or just faith in that exchange? Is a bitcoin a store of value in the same way a bag of uncut diamonds is a store of value?

jayd16 3y ago

Once the automatic coins are mined, the idea is you pay miners a tip to get your transactions completed. I'm more curious how they plan to handle a drop in popularity from a security standpoint. Will the total compute always need to remain high enough to keep a bad actor from dominating? As popularity wanes that sounds expensive.

treyd 3y ago
To maintain the current level of security then, all else being equal, the total fees collected will have to increase by the amount the subsidy decreases by. So each byte of block space will cost more for the person buying it. That could be an issue, but the solution to that problem is to extend the protocol to allow for more sophisticated "layer 2" systems so that the end-user experience has as small of a footprint as possible. Ideally without compromising security, which can be done with zero-knowledge proofs and such. But it's unclear if the political will is there from the community around the Bitcoin project.
- arealaccount 3y ago
  In this case, wouldn’t institutions mine their own blocks in order to avoid high transaction fees?
  - dale_glass 3y ago
    There's no such thing as "own blocks". There's a single world-wide winner of the mining competition per 10 minutes. So if you want to have free transactions 50% of the time, the way to get there is to take the current world-wide mining capacity, and replicate it. That's obviously not a viable tactic.
arealaccount 3y ago
That’s exactly what I’m wondering, if all the bitcoin is held as investment and not utilized as a currency, then there is no incentive to receive tips, so no incentive to crunch hashes, so how does it work then?
- zik 3y ago
  Even investments are bought and sold day to day, otherwise stock brokers would all go bankrupt.

cduzz 3y ago

When you refer to bitcoin as a "store of wealth" do you mean that a bitcoin will retain its value over time? Which bitcoin do you mean, some coin you recently minted or one that's from a hacked exchange and hard to cash in because it's tied to a known crime? Is this a bitcoin you have in a cold wallet somewhere? Are you running a connected node with the intention of exchanging your bitcoins with someone else? Or is your "bitcoin" just an entry in an exchange's ledger somewhere, in that case is it a bitcoin or just faith in that exchange? Is a bitcoin a store of value in the same way a bag of uncut diamonds is a store of value?