Bitcoin Forum

Will this is a far/mid-near question ..

Wanted to ask when it is non-profitable to mine any more which seems like a max of 2012 with all this FLOPS mining .. or whenever it is the time, by design - as much as I understand - mining will continue to protect the network and the bounty will be driven from the transaction fees -- well, ... will that increase the big advantage of Bitcoin Hawala and raise it above 5%-7% classical money transfer methods ?

I *think* the question being asked is if when coin generation for found blocks goes away and pools/miners will only accept transactions with fees how high will the fees go -- if they will be 5-7% or higher such as other methods of payment.

The answer to this, from what I've read, is that the network will set their own limits at that point. Some miners will still take free transactions, while some will set to only take transactions with X, Y or Z fee, and just depending on how much your fee is depends on how many miners will include that transaction in their block, thus lowering the possible time your transaction would be unconfirmed. This is as I understand it, which might be incorrect.

Right.  The beautiful thing is that the fees will automatically be as low as they possibly can be in a purely free market.  I don't see how a competitor could possibly be any better.  But who knows what the actual fees will be?  The price of secure transaction in a fixed currency is yet to be discovered.

Yes this is my question .. sorry for not clearing it up from the beginning ... .

And yes it will be a free market with high competition to lower the fees.

Yet again the market will be having a hungry huge mining power which do not benefit from 50 BTC from a new block any more thus wanting higher fees or goes offline ... as simple as that.

I dunno what to say to clear the question more ... but when mining ends (or no longer profitable) it will be a trade off (higher mining fees to keep secure huge hash network and no more small transaction fees for BTC system OR low transaction fees and a lot of mining data centers dropping out and less secure network).

I know the free market equilibrium is what will fold and survive. But logically these hungry mining monsters would require huge daily transactions with significant high transactions fees to keep existing and securing the network.

maybe there will be a market wash out and we back to CPU mining at some time ... but again that will make the currency insecure enough to hold large values of other monies and transactions as a couple Giga hash rigs can compromise it with invalid block generation (by design).


I hope my question is more clear this time .. and I really hope someone clarify this issue for me .. as I see this day very close with the crazy daily new Giga FLOPS jumping in the mining area daily.


 

Let's assume that you have completed a block. You have the opportunity to include any available unconfirmed transactions.

Would you as a miner choose not to include transactions with no fee?
Probably yes.

Would you as a miner choose not to include transactions with low fees, and only take transactions with high fees (for suitable definitions of low and hisgh)?
Probably no.

If you choose not to include transactions with low fees you will earn less from your block, leaving a higher bounty for the next block. You would bacically ignore a free lunch.

The problem is that we no longer have a competition of miners, but a competition of pools, lone miners will have no noticeable effect on transaction selection for the foreseeable future. The limited number of transactions pickers in the current mining eco-system, combined with the current  complete lack of scalability of transaction verification means that we will see a strong incentive towards fee laden transactions as the market matures. This creates the very real possibility of the mining pools arbitrarily setting rules that bypass the protocol to impose higher fees on the market.

At current we have a 1MB block size limit which is a kludge to prevent transaction spam, even if that limit is not lifted, and the average fee was 0.005BTC per transaction for full blocks a miner would still make 25BTC per block, which is enough to allow miner market equilibrium. This has the twin technical problems that there may not be enough transactions, or they can't be verified fast enough to fill the block. The first problem will fix itself if the market takes off, the second is far from intractable.

Fees don't need to get higher. As the number of transactions gets higher, the amount of fees for a block goes up automatically.

http://forum.bitcoin.org/index.php?topic=6284.msg92187#msg92187

Well that is great as long as you have a main bounty of a new block (BTC) .. but when all you have to earn is the free lunch would you be still mining ? that is teh question ...

anyway let me put it in this form as I have seen another post talking exactly about the mining economy vs the transaction economy and this is the real dilemma



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Great Post .. from mining economy to transaction economy ....

I just asked the same question several days ago here

http://forum.bitcoin.org/index.php?topic=24854.0

the question is .. will it survive ?

As for mining economy:

* Huge mining bounty.
* Huge mining community.
* Huge overall network security.
* Tiny neglect-able transaction fees.

BUT, for transaction economy:
* Will the transaction fees stay low enough to continue using this commodity as a sub-dollar Hawala medium ?

If yes then huge miners will cash-out leaving the system vulnerable to attacks can be made by them or any hacker network that can offer to utilize couple mining pools that we have right now.

If NO then the system will be less-business attractive with: no advantage in lower transaction fees, questionable anonymity, less security backed up by smaller mining community, delayed transactions, volatile sub-hour pricing .. etc.


* Will the mining community continue to be this large providing this amazing network safety ?


I am a BTC man ... and these questions to know more or to pin point near less-than-a-year issues.
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That's not how it works.  You decide which transactions to include before you "complete a block".  Completing a block means finding a nonce that makes the block hash to a low enough value, where the block includes the list of transactions you're including.

FLOPS stands for "floating point operations per second". There are no floating point operations directly involved in mining, hence the term is meaningless and incorrect in this context.

It's never "non-profitable to mine" due to excessive computation, not as long as people are still using bitcoin at least not for everyone.  The difficulty of mining will adjust so that the same amount of mining (in terms of blocks created) is happening no matter how hard people are working at it.

(Now, in the far future the income from mining might not be enough to provide adequate security, which is a concern, but thats not at all the same as there being no mining.

Maybe you mean to express the opinion that if the currencies that compete with bitcoin have a lower transaction fee than would cover the energy bill of the miners, that bitcoin would then stop functioning?