Is mining bound to be impossible once all BTC's are being circulated?

[NestEggNessy]

Sorry if this has been asked before but i couldn't find a thread mentioning anything about this.
But basically my question is as above: Once all two million or so (its a number close to that, right?) bitcoins become available and circulated in the economy how will miners be able to generate more BTC?

Logic seems to point to this event as the complete end of bitcoin mining because how would you generate "new" bitcoins when every bitcoin has already been discovered and put into the economy. Furthermore how would this affect hashing transactions? At this point it would seem the only people left hashing would only be doing it just to keep the economy afloat and makes the overall currency seem to have a huge fundamental flaw in that it has an already known date of death.

I still consider myself a giant noob on how the bitcoin economy functions and maybe theres a very basic thing present that totally flips my argument on its head, but i don't know about it, yet!

Thoughts?

[AmDD]

Miners will still be needed to confirm transactions as far as I know.

[rjk]

Miners will still need to create blocks in order to confirm transactions, they just won't be getting a subsidized reward from newly created coins. They will get the proceeds from transaction fees still, however. By the time that this happens, it is expected that transaction fees will be profitable to replace the pre-existing block reward.

[NestEggNessy]

Miners will still need to create blocks in order to confirm transactions, they just won't be getting a subsidized reward from newly created coins. They will get the proceeds from transaction fees still, however. By the time that this happens, it is expected that transaction fees will be profitable to replace the pre-existing block reward.

So does that mean miners today don't receive transaction fee's along with the subsidy for solving a block? On top of that, what is the plan that is had for enacting fee's on transactions? Its hard to imagine mining being as profitable as it is now/next few years when the subsidies are replaced with small, constant fee rewards.

[crazyates]

Check out this thread. By the time 99% of all Bitcoins are in circulation, transaction fees will reward miners more than found blocks.

[lassdas]

Once all two million or so (its a number close to that, right?) bitcoins become available and circulated in the economy how will miners be able to generate more BTC?

It's a number not that close, 21million.
Once ALL coins are distributed, there is no "more" left to generate.

Bitcoin-mining is NOT about "generating BTC" anyway, that is just a nice side-effect of its main purpose, which is processing transactions.
If there is no mining, there is no more transactions, without mining bitcoin is dead.

So there will always and forever be the need for mining, even if there is no more BTC left to generate.

Its hard to imagine mining being as profitable as it is now/next few years when the subsidies are replaced with small, constant fee rewards.

Why should it be as profitable as it is now?
It was more profitable before and it was less profitable before too.
Of course it's hard to imagine what it might be like in a few years, it's always hard to predict the future.

[crazyates]

Once all two million or so (its a number close to that, right?) bitcoins become available and circulated in the economy how will miners be able to generate more BTC?

It's a number not that close, 21million.
Once ALL coins are distributed, there is no "more" left to generate.

We will never actually mine ALL 21 million.

The reward for finding a block is 50BTC right now.
That will soon drop to 25.
Then it will drop to 12.5
Then 6.25.
Then 3.125
.....
After 10 reward halves (~year 2050), each block will only reward 0.0488BTC.

We will start coming very close, but never quite get to all 21 million.

[NestEggNessy]

It's a number not that close, 21million.

Haha close enough for just needed a zero at the end 

Bitcoin-mining is NOT about "generating BTC" anyway, that is just a nice side-effect of its main purpose, which is processing transactions.
If there is no mining, there is no more transactions, without mining bitcoin is dead.

Its the side effect thats driving droves of mini-miners and the like (such as myself) into bitcoin mining. From what i've seen it seems like the major major major motivation for mining in the first place. When it began prices were wildly inflated (i remember reading about a guy paying for a pizza with 10k or 100k btcs just for the lulz) and people just did it because it was techy, new and seemed cool. Then as btc gained traction and a lot more people started mining/contributing to the economy it began to be more about profits than anything else. Now were having loads of people on the brink of leaving mining because it will no longer be profitable for them after asic's hit the market (im sure this thing has happened before too)

So there will always and forever be the need for mining, even if there is no more BTC left to generate.

Yes there will always be a need, but in order to fill that need there needs to be an incentive... need. If new fees are imposed on transactions to subsidize miners then wouldn't there have to be a huge amount of liquidity in the economy and just generally more transactions? Otherwise there wouldn't be enough fees to cover the amount of dedicated miners.

Why should it be as profitable as it is now?
It was more profitable before and it was less profitable before too.
Of course it's hard to imagine what it might be like in a few years, it's always hard to predict the future.

It just needs to be profitable enough so that people do it. And isnt this the speculation board? lol

[lassdas]

We will start coming very close, but never quite get to all 21 million.

Yeah, i know, but very close to 21million is still not that close to 2million.  

From what i've seen it seems like the major major major motivation for mining in the first place.

Probably true that it is the major motivation for mining now, doesnt change the fact that it isn't the major purpose of mining.

It just needs to be profitable enough so that people do it. And isnt this the speculation board? lol

What is enough?

Today fees, compared to the 50BTC per block, are like nothing, it doesnt really make a difference for the miner.
He gets 50BTC without fees and maybe 50.1BTC if there's lots of fees, that's 0.2% (woot!).
At the end of the year, as soon as the block reward halves for the first time, that 0.2% in our example would already double to 0.4%.
Someday, when most bitcoins are distributed, fees alone will be higher than the block reward itself.

However, noone can tell now what the value of those fees will be that day, or how profitable mining will be,
mining will still secure the network and make it actually work though, so everyone owning some bitcoins should have an incentive there to keep it that way, profitable or not (people are even folding@home, how profitable is that?).


 

[Graet]

We will start coming very close, but never quite get to all 21 million.

Yeah, i know, but very close to 21million is still not that close to 2million.  

From what i've seen it seems like the major major major motivation for mining in the first place.

Probably true that it is the major motivation for mining now, doesnt change the fact that it isn't the major purpose of mining.

It just needs to be profitable enough so that people do it. And isnt this the speculation board? lol

What is enough?

Today fees, compared to the 50BTC per block, are like nothing, it doesnt really make a difference for the miner.
He gets 50BTC without fees and maybe 50.1BTC if there's lots of fees, that's 0.2% (woot!).
At the end of the year, as soon as the block reward halves for the first time, that 0.2% in our example would already double to 0.4%.
Someday, when most bitcoins are distributed, fees alone will be higher than the block reward itself.

However, noone can tell now what the value of those fees will be that day, or how profitable mining will be,
mining will still secure the network and make it actually work though, so everyone owning some bitcoins should have an incentive there to keep it that way, profitable or not (people are even folding@home, how profitable is that?).


 

My pool pays out transaction fees
recently the income from TXN fees has passed the income from the NMC side of merged mining
ppls still asking pools to MM, surprised there isn't more demand for TXN fees to be paid out
a whole Namecoin block is worth 0.0921BTC currently
in the last 24 hours we have had blocks with 0.0245 - 0.6110001 in txn fees with them and this is on an upward trend.

these are not "new fees" to be introduced, they already exist

[PulsedMedia]

My pool pays out transaction fees
recently the income from TXN fees has passed the income from the NMC side of merged mining
ppls still asking pools to MM, surprised there isn't more demand for TXN fees to be paid out
a whole Namecoin block is worth 0.0921BTC currently
in the last 24 hours we have had blocks with 0.0245 - 0.6110001 in txn fees with them and this is on an upward trend.

these are not "new fees" to be introduced, they already exist

and these fees will continue to increase as BTC gains value and smaller and smaller sums are being transmitted.
Besides, 0.611BTC is more than 6$ at this moment! Sure it's still farcry to the over 500$ value of whole block, but it's worth a small meal still!

Businesses like Paypal lives on transaction fees. We pay enough transaction fees each month that we could hire another person with the transaction fees alone.

[DeathAndTaxes]

Yes there will always be a need, but in order to fill that need there needs to be an incentive... need. If new fees are imposed on transactions to subsidize miners then wouldn't there have to be a huge amount of liquidity in the economy and just generally more transactions? Otherwise there wouldn't be enough fees to cover the amount of dedicated miners.

Now you see why Satoshi used a subsidy to bootstrap the economy.  You can also see why the subsidy can decline.  Remember Bitcoin is a work in progress (BETA) so nobody has all the answers.

Today if there was no subsidy for miners to make the same (in USD terms) would require a fee of roughly $2.67 per tx.  Ouch obviously not viable (still cheaper than WU though ).   The good news is that roughly a year ago the cost per tx would have been ~$6.00 per tx and roughly 3 years ago the cost would have been closer to $50 per tx.

http://blockchain.info/charts/cost-per-transaction?timespan=1year&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

If tx volume continues to increase then the unsubsidized cost of the network gets cheaper per tx.  

VISA processed roughly 80 billion tx last year.  If Bitcoin was someday 10% of the size of VISA that would be ~8 billion tx annually.  At an average tx fee of $0.01, it would be the cheapest global payment network and would produce ~$80 mil per year in revenue for miners.  Today with a subsidy of 50 BTC miners are compensated ~$28 mil annually at current exchange rates.  Will Bitcoin grow that large?  I don't know just pointing out that a small fee on a lot of tx can result in a very large number.

[NestEggNessy]

Yes there will always be a need, but in order to fill that need there needs to be an incentive... need. If new fees are imposed on transactions to subsidize miners then wouldn't there have to be a huge amount of liquidity in the economy and just generally more transactions? Otherwise there wouldn't be enough fees to cover the amount of dedicated miners.

Now you see why Satoshi used a subsidy to bootstrap the economy.  You can also see why the subsidy can decline.  Remember Bitcoin is a work in progress (BETA) so nobody has all the answers.

Today if there was no subsidy for miners to make the same (in USD terms) would require a fee of roughly $2.67 per tx.  Ouch obviously not viable (still cheaper than WU though ).   The good news is that roughly a year ago the cost per tx would have been ~$6.00 per tx and roughly 3 years ago the cost would have been closer to $50 per tx.

http://blockchain.info/charts/cost-per-transaction?timespan=1year&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

If tx volume continues to increase then the unsubsidized cost of the network gets cheaper per tx. 

VISA processed roughly 80 billion tx last year.  If Bitcoin was someday 10% of the size of VISA that would be ~8 billion tx annually.  At an average tx fee of $0.01, it would be the cheapest global payment network and would produce ~$80 per year in revenue for miners.  Today with a subsidy of 50 BTC miners are compensated ~$28 mil annually at current exchange rates.  Will Bitcoin grow that large?  I don't know just pointing out a small fee on a lot of tx can be a very large number.

This is exactly what i think needs to happen for bitcoin to survive the next 50 or so years, maybe even the next 10 . A lot can happen in 5 decades. Im just unsure how a decentralized currency can work along side centralized ones (just sayin again i have limited economics knowledge limited to micro/macro-econ college classes :p) Bitcoin tx would have to grow by like 300% to reach a tenth of visa so idk, it would probably need a BIG niche to fill in.

I hope for the best though for btc cause i love it and want to see it built by real pros.