How can proof of work mining be sustainable? I don't understand

[kokojie]

Right now, Bitcoin network spends on average $30-$40 in electricity(from mining) for processing each transaction. As Bitcoin price go up, so will the money that has to be spent on electricity because more miners join in.

How can this be sustainable?

[laowai80]

Only sustainable if its price grows all the time, which it may well do for quite a while.

When it doesn't, maybe Proof-of-Stake coins are the answer.

[odolvlobo]

Right now, Bitcoin network spends on average $30-$40 in electricity(from mining) for processing each transaction. As Bitcoin price go up, so will the money that has to be spent on electricity because more miners join in.

How can this be sustainable?

Every time the block reward is halved, the amount of BTC spent on mining is halved. Eventually, the cost of mining will be paid by transaction fees only.

[kokojie]

Right now, Bitcoin network spends on average $30-$40 in electricity(from mining) for processing each transaction. As Bitcoin price go up, so will the money that has to be spent on electricity because more miners join in.

How can this be sustainable?

Every time the block reward is halved, the amount of BTC spent on mining is halved. Eventually, the cost of mining will be paid by transaction fees only.

I see, after thinking about it real hard, I have reached the same conclusion. Once block reward become negligible, the mining network will be paid by transaction fee. But there's another problem,
at that point Bitcoin maybe $10,000 or more each, while transaction fee can still be negligible, so the mining network may become tiny, how can the network be secured by tiny amount of hardware?
An attack that wants to destroy Bitcoin, simply has to amass tiny amount of hardware, for a 51% attack.

[aynstein]

Right now, Bitcoin network spends on average $30-$40 in electricity(from mining) for processing each transaction. As Bitcoin price go up, so will the money that has to be spent on electricity because more miners join in.

How can this be sustainable?

Every time the block reward is halved, the amount of BTC spent on mining is halved. Eventually, the cost of mining will be paid by transaction fees only.

I see, after thinking about it real hard, I have reached the same conclusion. Once block reward become negligible, the mining network will be paid by transaction fee. But there's another problem,
at that point Bitcoin maybe $10,000 or more each, while transaction fee can still be negligible, so the mining network may become tiny, how can the network be secured by tiny amount of hardware?
An attack that wants to destroy Bitcoin, simply has to amass tiny amount of hardware, for a 51% attack.

HOPEFULLY, the transaction fees will be enough to make enough people want to stay involved. The ideal situation is many many transactions tiny tiny fees. If the network does not have enough participants both paying via bitcoin it should justify a stable growth. How much does Visa and Mastercard make?

Just a guess ...I don't know but I think its more then $50.

[dwdoc]

Eventually it will probably not be feasible to use transaction fees to maintain network security and ironically it might have to be government that secures the blockchain.

http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be/895#895

[kokojie]

Right now, Bitcoin network spends on average $30-$40 in electricity(from mining) for processing each transaction. As Bitcoin price go up, so will the money that has to be spent on electricity because more miners join in.

How can this be sustainable?

Every time the block reward is halved, the amount of BTC spent on mining is halved. Eventually, the cost of mining will be paid by transaction fees only.

I see, after thinking about it real hard, I have reached the same conclusion. Once block reward become negligible, the mining network will be paid by transaction fee. But there's another problem,
at that point Bitcoin maybe $10,000 or more each, while transaction fee can still be negligible, so the mining network may become tiny, how can the network be secured by tiny amount of hardware?
An attack that wants to destroy Bitcoin, simply has to amass tiny amount of hardware, for a 51% attack.

HOPEFULLY, the transaction fees will be enough to make enough people want to stay involved. The ideal situation is many many transactions tiny tiny fees. If the network does not have enough participants both paying via bitcoin it should justify a stable growth. How much does Visa and Mastercard make?

Just a guess ...I don't know but I think its more then $50.

Problem is, Bitcoin protocol and the current client does NOT encourage "many many transactions", in fact it punishes it by requiring a higher fee. Also, that many transactions will make the blockchain insanely big, again the current implementation of the Bitcoin protocol is not scalable, it would choke to death if it had to process 1% of the volume of VISA+Master card.

[infinitybo]

The BTC mining are used to protect the BTC system from hackers therefore that is intentionally made incredibly difficult for these specific reasons.

[t1000]

Difficulty and mining cost is linked. If mining becomes unprofitable, miners will ease off mining, and the difficulty will drop to match the target block time of 10 minutes, the remaining miners will share the mining reward, which would be greater than before.

In other words the whole system will stabilize on a reward level appropriate to justify the amount of mining.  Difficulty, mining reward and bitcoin value feed back to each other.

[dwdoc]

Difficulty and mining cost is linked. If mining becomes unprofitable, miners will ease off mining, and the difficulty will drop to match the target block time of 10 minutes, the remaining miners will share the mining reward, which would be greater than before.

In other words the whole system will stabilize on a reward level appropriate to justify the amount of mining.  Difficulty, mining reward and bitcoin value feed back to each other.

Yes but the question is what happens when all the coins have been mined?

[t1000]

Difficulty and mining cost is linked. If mining becomes unprofitable, miners will ease off mining, and the difficulty will drop to match the target block time of 10 minutes, the remaining miners will share the mining reward, which would be greater than before.

In other words the whole system will stabilize on a reward level appropriate to justify the amount of mining.  Difficulty, mining reward and bitcoin value feed back to each other.

Yes but the question is what happens when all the coins have been mined?

Fees are part of the mining reward. If no one pays fees, bitcoin mining collapses, difficulty collapses, value collapses. In the process someone will start to dispose of their bitcoins in anticipation of the crash. They will pay fees to get the transaction included. The system will eventually reach an equilibrium where enough rewards ((block reward + fees) X bitcoin value) will be provided to justify mining at a given difficulty.

As long as the value of bitcoin is high enough, even a satoshi in fees will ensure mining continues. Bitcoin being valuable is a result of it being in demand. If it is in demand it will change hands, there will be transactions.... etc etc.

Of course, if no one uses bitcoin, i.e. no one uses the network, it will die. If no one pays fees, bitcoin would be very easy to mine.