I think we'll learn more about this aspect of BitCoin at the start of next year, when inflation will halve.
I guess "inflation" here means "money supply growth" because bitcoin offers a deflationary model.
Incidentally, my undestanding was that the period was four years so BTC generation will halve only at the end of next year, right ??
This thread deals with two issues, namely robustness against possible attacks AND sustainability of mining when new bitcoin generation dwindles to zero. Even if the two issues are connected I would like to focus on the second one, the economics of mining.
If K
0 is the generation rate of the bitcoins in the initial period (300 Bitcoins/hour) and P the duration of each period (4 years), according to the rules of the bitcoin protocol Qn = P*K
0/2
n is the quantity of bitcoins generated in the n
th period.
In other words, the aggregate value of the money created in the nth period equals the aggregate value of the money created in the first four years (the initial period) if the value of the bitcoins grows by an annual rate of 2
n/4*n.
Now let us assume the utility of the bitcoin network is proportional to the square of N the number of users (a formula to factor in the “network effect”).
Assuming the utility of the bitcoin network correlates to the value of the bitcoins yields:
(N
n)
2 = k * 2
n-2/n.
The result shows that an exponential growth of the user base, i.e. a continued successful launch of the bitcoin network in line with what we are currently witnessing, ensures a steady growth of the value generated by mining at least until an inflexion point is reached.