> so higher miner fees would not be a viable incentive? Miner fees are irrelevant if one does not have the coins to begin with. The chain will be maintained by

> so higher miner fees would not be a viable incentive? Miner fees are irrelevant if one does not have the coins to begin with. The chain will be maintained by competing miners only if they are incentivized with initial distribution of a limited supply of units. If all units belong to just one guy, then why anyone should mine anything? If you need coins, you can just buy them from him. But why would they have any value then? > how will miners be compensated once we hit 21M bitcoins? We will never "hit" 21M bitcoins. We will slowly approach lower and lower inflation until it becomes zero. But we will notice how miners receive bigger and bigger portion of income from the fees. There will be more demand for on-chain transactions which will increase competition among users and fees will go up. To increase income, miners will be eager to increase the block size limit thus allowing more throughput and as a side effect making fees stabilize at some level. The process will be slow that no one will be shocked by the adjustment of the reward. At the same time, all known events of the future are already priced in. Miners already know that in 3 years they will have 2x smaller reward. Think of the process this way: miners want to maximize their revenue, users want to minimize their costs. If on-blockchain transactions become too expensive, users will use some clearing houses thus depriving miners from extra fees. Therefore miners will be eager to process more transactions at the current or slightly lower prices to collect those fees. But by allowing more transactions, they reduce competition between users thus preventing the fees from growing further. The system will stabilize at an intersection of 1) affordable bandwidth for miners (so they do not lose too much money on side blocks), 2) optimal fees for users to pay and miners to earn. If bandwidth/CPU is infinite, miners would collect trillions of transactions costing a 0.0001 of a penny and users would enjoy microtransactions right on the blockchain. But we have some real-world limitations that shift equilibrium somewhere to lower throughput and higher fees. See also: 1) http://blog.oleganza.com/post/43677417318/economics-of-block-size-limit http://blog.oleganza.com/post/43677417318/economics-of-block... 2) http://blog.oleganza.com/post/43849158813/this-is-how-block-size-limit-will-be-raised http://blog.oleganza.com/post/43849158813/this-is-how-block-...