Bitcoin Forum

When bitcoins are no longer rewarded, why would people mine? Isn't it crucial for the system of bitcoins that a network of GPU power is available to keep the ledger going. What happens when no reward is given for this computational work?

Janus

Then they will receive payment for transaction fees.

thanks for the reply.

out of whose pocket will these payments be made?

Those who make Transactions of course.

GPU power hasn't been the main power for the Bitcoin blockchain for a long time (try ASIC) - as others have stated *fees* are the incentive when the new block reward itself becomes miniscule.

The block reward currently consists of the sum of a block subsidy (25 BTC) and all transaction fees from all transactions that are included in the block.

Over time, the block subsidy will shrink (it is cut in half approximately every 4 years).  As bitcoin becomes more popular, the total amount of transactions paying fees will likely increase.

Eventually the value of the transaction fees will exceed the value of the subsidy. Perhaps at that time we'll stop calling in mining, and start calling it what it actually is (transaction processing)?

Somewhere around the year 2140, the subsidy will shrink to 0 BTC.  At that point the transaction processing will be entirely supported by transaction fees.  Of course, I'll be dead by then so I'm not too concerned about it.

thanks again for elaborate answers. one thing though:

i have no insight to do the math, so...

does the
1. transaction reward
in relation to
2. computational force required to add a transaction to the chain
add up?


i hope posting in the newbie section will save me from ridicule. i may be asking obvious questions.   ???

Put it this way - if it isn't profitable to "mine" then why do you think anyone would do it?

You get MORE blocks to process with more computational force in any measured time.

Why bitcoin is so un$table?

Why do think it should be stable?

I don't know. but the real currencies are stable. so i think it should be either.

"Real currencies" haha. Bitcoin is stable. 1 Bitcoin is worth 1 Bitcoin. It's only unstable with people who peg it to the dollar and these "real currencies".

Time to learn about the history of fiat currencies I think (hint - none have lasted that long and none will due to their inflationary nature and the powers that control them).

I'm talking about the future when bitcoins aren't rewarded. At that time the computational force to keep the ledger going will still be huge, no? If the reward at this time will be fees for making transactions, then the transaction fee will be proportional to the expense of keeping the ledger, no? So if this expense is too great, the transaction fees will be proportionally too big.

Thanks

The cost in terms of hardware and electricity has greatly diminished since the advent of ASIC and as the tech gets more refined you can expect the costs to diminish further - so the amount required in fees will probably not need to be that much to still make it profitable provided that people still *transact* enough in the future (that is perhaps the biggest unknown).

Right, ok, so the problem is not that the expensiveness of computing the ledger will be too great for the customers' transactions to be cost-effective. It's rather that if money isn't changing hands often enough, too few pennies will be made by the people doing the computing.

Thank you!

Yes - but understand this potential issue is years away (as the block rewards will still be enough to drive mining for a long time).

I do think that a very long term concern for Bitcoin is that its status as "digital gold" could end up working against it because if people end up rarely transacting in it (and instead choose some other cheaper fee coin) then the mining strength could end up suffering.

But understand that this is not likely to happen for a very long time (if it happens at all).

Right...
Att: digital gold. It is as if people imagine they will be at the bottom of a pyramid that will grow humungous in the future; if they get in now... It's hard for me to see bitcoins as a currency rather than an abstract commodity if it is not put to use. And if not, it seems like only speculation will drive the value.

It is perhaps hard to see the future but already BitPay has apparently over 10K clients who are selling things for BTC (and I use such a service myself) so don't think that BTC txs won't become more prevalent as they may well do.

It may also be the case that other newer P2P "coin" technologies will do things better and may make BTC redundant.

The main point is no to invest a whole lot of money into an emerging technology as it may well crash and burn (also the greatest profits tend to come from taking the greatest risks).

You have that backwards.

You've switched the cause and effect around the wrong way.

The expense of keeping the ledger is proprotional to the block reward.

If the block reward decreases (for instance due to a reduction in transaction fees), then some miners become unprofitable and shut off their equipment.  This reduces difficulty, and increases the profitability of the remaining miners.  The total worldwide cost of maintaining the ledger automatically adjusts downward to match the total fees being voluntarily paid by the users.

In the end, bitcoin will only really succeed long term if there are usually enough transactions per day to fill most of the blocks.  This creates a market force driving most users to voluntarily offer at least a small transaction fee to get their block confirmed quickly, and provides the necessary revenue to keep hashing power high making it difficult for an adversary to attack the network.

If bitcoin has a few thousand users and the majority of them simply sit on their bitcoins, never engaging in transactions, then there won't be enough fees, and hasing power will eventually drop to insecure levels.

If bitcoin has a few hundred million users, and only 0.2% of them engage in transactions on a typical day, then there will be more than enough transaction fees to maintain a significant level of hashing power.