Bitcoin Forum

The block reward is scheduled to be halved on around august 2016.
when that happens unless the amount of transactions fees rises to compensate for the reward drop,
mining will become unprofitable and the hash rate will drop rapidly.
what can be done to prevent this  ???

What needs to be prevented, exactly? And why?

People saying bullshit like "mining will become unprofitable" clearly haven't got a clue how mining and the adaptive difficulty works.

Minnig will always remain profitable for "enough" people. ALWAYS.

i assume you mean network hash rate... if it drops, then opportunities open up
for more miners and we reach a new equilibrium.  I dont see the problem.

Welcome to bitcointalk.org!

Please refrain from marginalizing yourself by using sensational titles then admitting total ignorance in your posting.
Perhaps stick to questions rather than statements until you know what you're talking about.
Fair warning; we have ignore buttons and you're question have been answered here in the forum multiple times already.
Act like an adult and watch what you type. Or be treated like a troll.

Keep learning!!
Respectfully,
L

Another dynamic to consider is that less new coins means less supply driving up the price and making mining more profitable

when i say mining will become unprofitable i obviously mean mining will become unprofitable at the current difficulty (or what ever it will be when this event happens).
the reward halving will force both difficulty and network hash rate to drop thus making the network more vulnerable to a 50% attack.
unless of course the transaction fee's will be the vast majority of profits made by miners by then.

you are correct that the reduced inflation will somewhat balance the reward halving shock.
but considering that today transaction fee's are a very negligible profit for miners it seems to me that the block reward halving (and thus almost halving of the miner's income unless the current situation changes)
will be a major shock to the network despite the relatively small reduction in inflation.

Adding too much fee will kill bitcoin. Only strongest miners will survive

Newbie, go do more research before posting nonsense.

I've seen block reward halfing with alt-coins and their mining profitability remains relatively unchanged. A perfect example of FUD in action on the OP behalf.

The question now is, is this an engineered attempt at FUD i.e. a TROLL!! or simply the result of ignorance and lack of research?

Many people made the exact same predictions (based on dubious analysis) before the last time the block reward halved and it occured with a wimper not a bang.  Some miners became unprofitable and quit.  The lowered difficulty means the remaining miners saw their revenue rise.  The rising exchange rate resulting in a higher USD revenue for a lower amount of bitcoins.

There are many factors that decide mining profability.

Difficulty
Transaction reward (fees)
Block reward
Hashrate of your miner
Power consumption of your miner
Cost of power in your area
Bitcoin value

Once the block reward halves, some of the other factors will surely balance out.

the last time the reward was halved the transition went smooth because bitcoin's dollar value grew rapidly.
bitcoin is no longer a hobby of a small group of people, it cannot continue growing in value this fast forever.
it is very possible the dollar value will stay relatively stable when the 2016 halving occurs and so with no fast rise in dollar prices there will be no compensation for miner's lost revenue.
with the cost of operation vs mining revenue equilibrium broken there will be no choice for miners but to shut their rigs down until difficulty and hash rate fall enough for a new equilibrium to be reached.

 

I honestly don't think so.  Major cost is in rigs to begin with.  Even if some minors stop ...so what

How many coins of any currency have you mined? I highly doubt that you're speaking from any kind of experience here.

Since we can't reliably factor in the value of a Bitcoin in the future, there's no way to know whether mining will be profitable by the time of the next halving.

ASIC manufactures will have to lower their price to compensate, mining will still be profitable

will always be profitable for someone...even if difficulty decreases (which is unlikely anytime soon)

Thanks for the prompt reply considering this was a strong argument before last years halving now we have seen what happens afterwards.

It doesn't matter whether mining is profitable or not.

There is a certain amount of SHA-256 ASIC mining gear in existence and this mining gear just can't magically "disappear".
If mining becomes unprofitable for some miners, then they will sell their hardware. This means that others will buy that very same hardware.
This doesn't change the hashrate at all. It only means that some part of the hashrate will change ownership.

The hashrate can't decrease unless people really start to throw their hardware into the recycle bin.
But no one with half a brain would do that while there are people who want to buy that hardware.

I know that the hashrate decreased once in the past, but that was only because there was still GPU mining at that time.
GPU mining has the serious flaw that mining gear can be used for something else than mining (e.g. gaming) which puts the network at risk of losing this hashrate again.

Luckily, GPU mining is over, so this can't happen anymore. The waste majority of produced ASICs will keep mining until the end of its lifetime.

Ok.  Lets say that happens.  Difficulty between now and then goes up 50x and then it cut in half so the network is "only" 25x more secure than it is now?

Still even that is highly unlikely as for most miners the hardware is a sunk.  The min operating revenue is much lower.  Simply put at the block halving if price doesn't rise then it will kill NEW miner hardware and it may make it unprofitable to run miners in high energy areas but existing hardware is already a sunk cost and for those in low power cost areas there will be no reason to stop mining.

+ Cost of space (in the future, this will probably become less and less negligible)

err nevermind. I was gonna say something very cruel and I changed my mind! :D

Welcome to our community, noobcake!

Yeah, mining will become unprofitable for YOU loser, not everybody.

In general, y'all sound pretty immature.  Ooh let's poke fun at the new guy and act intellectually superior cause we know a few more facts about bitcoin mining and we've been here on the forum a few months longer.  Grow up.  Unbelievable.

It is unlikely to be a shock,  because it is a known event, that miners planning to operate a certain mining venture past that date,  can take into account today;  the bigger risk for miners today, is not the predictable halving, BUT  the difficult or impossible to predict rate of increase of the network hashrate and therefore hash difficulty ---  and the future exchange rate of Bitcoins.

Mining can be rendered unprofitable, for many potential miners - due to their equipment+electricity cost --- long before the halving.

If some miners shut down their rig:  the hash rate goes down, and mining becomes more profitable for other miners who continue their mining operation.

Also, just because a certain mining operation has been rendered unprofitable -- does not mean that it stops mining:   as long as  the  incremental operational expense of operating the mining rig for 1 day  does not exceed the  incremental value of the daily reward,  then  stopping the mining rig  creates an even bigger loss.  

It is rational for mining to continue  for those that already purchased equipment, as long as the average daily Watts of electricity, air conditioning, space, and maintenance cost consumed per  hash per second continue to be less than the dollar value of the fraction of a daily Bitcoin that can be mined per hash per second.

Otherwise....  if the daily dollar/fiat cost of operating the miner is greater than reward + ~1% exchange fee,  then it makes sense to shutdown the mining rig,   and ----  if the idea was to get bitcoins,  trade fiat for Bitcoin on a reputable exchange instead.


On the other hand,  future increase in exchange rate might eventually change formerly unprofitable mining to profitable,   if the Bitcoin reward was retained.


ALSO,  Just because it might be rational to shutdown the rig, does not mean miners will do so.   It is quite possible many miners continue to operate,  even after the reward is less than the electricity cost.

In other words:  miners speculating on future exchange rates,  and using  mining  over  buying  Bitcoins on an exchange,     as a preferred way of obtaining Bitcoins,  since mined coins may be kept more securely  and  anonymously,   than bitcoins purchased from an exchange,  that might have privacy protection issues or questionable security.....

yawn.. we had these kind of arguments before the last halving.. and its not even 2016 yet so why worry about it 2 years beforehand..

this is like worrying about who is going to diaper change your baby, before you have even met a girl to impregnate. seriously enjoy the 'ride' and the many month of fun for now and youll se the future will sort it self out all by itself.

transaction fee's are now and in 2 years time small fry and shouldnt be the main 'wage earner' the idea of bitcoins is to be as cheap to transact as possible. so a transaction fee rise is out of the question.

but here are three options to settle your mind.
1) in 2016 the bitcoin price would naturally rise to an amount that will make the reward value per block, a value that miners can make a living out of.EG miners wont want to sell for less. so they will hoard and create more demand, raising the price.
2) some miners will realise instead of wasting $$$$ on electricity for EG: 0.25btc a day. they will start selling products and services at a retail price of 1BTC with a 25% markup. (giving them 0.25 profit) or selling 100  items for 0.01btc with 0.0025 profit (again totalling 0.25btc profit).. you get my point
3) those that cant afford to keep up with difficulty rises over the next 2 years. wil  die off, giving more of a share to those that stay. thus they get a bigger cut. thus they make more $$$$

there are many other options but, dont worry your lil head about it. its over 2 years away

Much less bitcoins will be coming in after the halving I assume, so the price will rise.

touche !

I think only factor is electricity cost vs exchange rate.

Presumably it can switch to alt-coins, though.

The future decrease in mining payouts will artificially increase the value of mining before the drop in mining payouts.

If the price of bitcoin doubled by then, the monetary reward in $USD would be the same when the reward is halved

this

This is a well known problem I described back in 2011 and extensively wrote about it.  I created a law for all proof of work crypto currencies that is known as Sweft's law.

Sweft's Law:  The network hashrate of a proof of work cryptocurrency must rise at a rate at least equal to that of Moore's Law to provide minimal network security.

The thread is here of anyone wants to read it.


https://bitcointalk.org/index.php?topic=12109

To some alts, yes.

Moore's law is about the number of transistors on a processor. Processor speed is generally a byproduct, but hasn't kept up in percentage terms for quite a while now.

The security of Bitcoin's network is that it's always more profitable to play by the rules than to break them.

There are several aspects to consider, but is likely to be profitable forever.

Just two out of many:

- ASIC miner companies price per GH/s is based on BTC market price.( Which is abusive practice IMO ) That's why they sell it to you instead of mining, they decide how much you may profit if anything at all. The actual manufacturing cost is very low in comparison to street price, so there is a big margin to be reduced.

-  Difficult should adjust with people giving up.


 

I don't know what you mean by it's more profitable to play by the rules than to break them.  Who is it more profitable for?  This generalization is vague and has hardly any evidence supporting it and even if it was sound it's reasonable to assume that people would sacrifice profit to destroy competition.  So the premise is irrelevant.

I'm confident that if the network doesn't double in hash once it matures every year aka grow in accordance to Moore's law, then the network will become insecure and miners will abandon it for other, more miner friendly, PoW currencies.

PoW cryptocurrencies cannot rely on a decrease in hashrate to increase mining profitability because the security of the network is derived from the hashrate.

luckily we got 5KaymNfFPhs1bp44zxYMopHKdDYyMxww4YJ2MJmE6GEz4Y8fxzi    to funnel money into everyone's account and cause inflation  ::)

How do you figure?  the network is supposedly already more powerful than the world's top 500 supercomputers combined.  If it shrinks a little bit,
it's still plenty secure.

What do you mean by "miner friendly"

What I mean by miner friendly is a cryptocurrency that has more than one revenue source for miners, or an inflationary PoW cryptocurrency.  A cryptocurrency with a fixed amount of bitcoins will eventually solely rely on tx fee's to support mining growth.  An inflationary currency will rely on tx fee's as well as block reward.  The only question is the amount of inflation that is required to balance mining profits and price stability.

if bitcoin continues its dominance over other cryptos and also reaches a certain
size, the tx fees could be large.

...or it could get overtaken by another coin (although we'll see it coming).
will be interesting.  the thing about alt coins competing with bitcoin
is they have such low adoption and low relative value, with maybe
the exception of litecoin.  so, no one can really say right now what
will happen because there are too many unknown variables.

That remains true until all Bitcoins are created. Then the only reward is transaction fees which as of right now is pretty much nothing.

If Bitcoin isn't any larger than it is now then in a hundred years or so it won't really matter.  Realistically even a decade from now Bitcoin will be much larger or it won't exist.

oh yeahh....thats right, mining new coins will continue for some time.  boy Satoshi thought of everything :)

if only there where other coins that could be mined... that wouldn't have a black reward reduction at that exact same time, thus providing an alternative , man wouldn't something like that be sweet? Like a Lite version of bitcoin... or some sorts of alternate coins, altcoins if you will. But that is just crazy talk, it would never happen.

The endgame for Bitcoin is either rise to power or dive into oblivion. The former ensures high enough fees by virtue of its design.

Genius.

That's mainly because most software written for general purpose CPUs doesn't scale well to many threads. Mining does scale well, so I'd expect hash power to increase with the number of transistors.

Total transaction fees will surely increase over time. Either by the number of transactions increasing, or the fee per transaction, or both. At the moment mining is effectively paid for by inflation. As that ends, we may find that Bitcoin transactions are no cheaper than credit card ones.