Is there any chance the fee will rise to replace block subsidy?

[johnyj]

At each reward halving, to keep the miners running with same incentive, either the bitcoin price need to double or the fee income per block would compensate for the loss of the block subsidy, but it seems that the fee per block is impossible to rise in near future:

Currently the fee income per block is around 0.5 bitcoin, very little comparing with the block subsidy. So the only thing works to keep the miner's incentive is to raise the bitcoin price by 100%, otherwise miners will shutdown their operation due to unable to profit, resulting in weak security

In general, there is an extra delay when including one transaction, and that delay will increase the risk of a block being orphaned thus lose the whole block subsidy and fee income altogether. If you include 2000 transactions today (1MB block), that will add up to 1 minute delay when broadcasting to the whole network, which is about 5% risk of being orphaned (not precisely calculated from Poisson distribution, just an example, 10 minutes delay means the block will have a 50% chance of being orphaned), so 5%x25btc=1.25 btc is the cost of 1MB, divided by 2000 transactions, you get 0.000625 btc fee per transaction, which is a fee that is accepted by all the miners today, means the real cost is lower

If the cpu/network speed doubles at next reward halving, then each block can include double amount of transaction at the same opportunity cost, e.g. 4000 transactions for 5% risk of being orphaned. However, the block subsidy is 12.5 coins by then, 5%x25btc=0.625 btc will be the cost of 2MB, divided by 4000 transactions, that is 0.00015625 fee per transaction

So the fee per transaction will be cut to 1/4 at next reward halving, if bitcoin price doubled, then it means the fee is getting 1/2 cheaper for end user. If bitcoin price quadrupled, then the fee costs the same as today

Following this route, when block subsidy is cut by half, the fee per block will also be cut by half, with double amount of transaction capacity, resulting in 1/4 of the btc fee per transaction. It seems that the fee per block will stay small relative to block subsidy in foreseeable future, unless there is a fee market driven by limited transaction capacity

It is possible that during a bubble next year, the transaction per 10 minutes raised to 8000, then they will be competing for 2000 transactions per block, causing a rise in the fee dramatically. But that is a situation much more difficult to analyze, since they will also reduce the transaction frequency and even use clearing based services to avoid high fee

And this is the case that you directly use blockchain to do transaction, if you use clearing based solutions then the fee can be 0 for end user, and the real traffic on blockchain might grow even slower

So, as long as bitcoin scales well, the fee income for miners will never be able to rise to replace block subsidy

[Sir_lagsalot]

Probably. It's happened before. Probably will increase to about 0.0005 for average txes, not much. Or at most, 0.001 satoshi. That will more than cover the lost btc.

What i'm really scared for is when 2140 comes. If bitcoin is widely adopted, the price will be huge. But will the tx fee be 1+ plus bitcoin? Not that's a scary thought.

[justspare]

Yeah they will probably make the fee higher. Hopefully not to high or it may ruin Bitcoin completely. And who here really wants to pay more fees?

[justspare]

Probably. It's happened before. Probably will increase to about 0.0005 for average txes, not much. Or at most, 0.001 satoshi. That will more than cover the lost btc.

What i'm really scared for is when 2140 comes. If bitcoin is widely adopted, the price will be huge. But will the tx fee be 1+ plus bitcoin? Not that's a scary thought.

You really think that the fess will go up that high? Do you have any quotes from anyone or any links to websites saying this?

[letsplayagame]

So, as long as bitcoin scales well, the fee income for miners will never be able to rise to replace block subsidy

Although you ask a legitimate question, your argument does not prove this conclusion.

Estimates will be easier to make once it becomes clear where transaction volume is going and how much volume is handled by the bitcoin blockchain itself vs. how much is being moved to something like the lightning network.

[johnyj]

So, as long as bitcoin scales well, the fee income for miners will never be able to rise to replace block subsidy

Although you ask a legitimate question, your argument does not prove this conclusion.

Estimates will be easier to make once it becomes clear where transaction volume is going and how much volume is handled by the bitcoin blockchain itself vs. how much is being moved to something like the lightning network.

This conclusion is based on the fact that the fee per block is decided by the orphan risk, and the loss from a orphaned block is decided by its subsidy. So as block subsidy goes down, the loss from a orphaned block also goes down, and the fee per block also goes down

If orphan risk rises exponentially above certain threshold, for example 2MB block to take 10 minutes to broadcast to majority of nodes, then maybe fee will rise quickly to get close to block subsidy

[Straux]

Of course, When something goes, something comes. The fees will probably have to rise to match the missing bitcoin, or to make up about half of it. That's a big problem that we face.

[larem]

Of course, When something goes, something comes. The fees will probably have to rise to match the missing bitcoin, or to make up about half of it. That's a big problem that we face.

People say this but not necessarily. It's all an open market. If people are still mining with the current fees, it will stay as-is. If they stop mining blocks, people will raise fees.

[lightfoot]

Well hm.

Fact is miners live to make money, if there is no profit in mining people will stop doing it till mining is profitable. Right now there is a mad rush to buy .28w/gh mining gear (I'm not quite sure why) and probably a ton of .8-1.0w/gh equipment sitting on the sidelines.

But think about it: If the price of bitcoin suddenly dropped to 225, then the mining difficulty would drop to about 50 instead of where it is now. Because at a 25btc block reward, a difficulty 50 was enough to eek out a profit at 225 a bitcoin. Was the network any "less secure"? I don't really think so, your chances of breaking the chain were basically zero then as now.

So when the block reward halves, either one of three things will happen:

1) 50% of the miners will drop out.
2) The price of bitcoin will double
3) Fees will go sky high.

I doubt #3, although it is nice to see miners demanding fees these days. #2 is possible, but more likely the less efficient miners and people fed up with heating their homes will drop out. No biggie, the network will adjust and it will still take 10 mins to confirm a block.

Now some people will say "yeah, but you can take that 50% that fell out and do a 50% attack!". Sure, but first:

You have to find the miners, they're all over
You have to incent them to mine again on a super-evil blockchain. That will cost 25btc every 10 minutes
You have to get them all to agree to fuck the chain for money
You have to keep paying them to keep their less efficient farms running away.

I strongly doubt this will happen. So no biggie.

[btckold24]

I already hate the fees. It annoys the hell out of me and I know its how the system works.
Its annoying to send .001 lets say to someone and get a huge % tax in fee's

[larem]

I already hate the fees. It annoys the hell out of me and I know its how the system works.
Its annoying to send .001 lets say to someone and get a huge % tax in fee's

Send the same $0.40 on PayPal or another like site and you've lost almost 100% of it to fees. BTC is still cheaper.

[eddie13]

How about we just let the miner bubble pop and half of them shut down instead of subsidizing them?

Not everyone that bought a miner can win no? They bought an investment, a risk, some are going to loose, let them loose..

[larem]

How about we just let the miner bubble pop and half of them shut down instead of subsidizing them?

Not everyone that bought a miner can win no? They bought an investment, a risk, some are going to loose, let them loose..

I couldn't agree more. Though some would argue that this leads to centralization (the richest get the cheapest hardware/rates so run the longest).

[Syke]

I already hate the fees. It annoys the hell out of me and I know its how the system works.
Its annoying to send .001 lets say to someone and get a huge % tax in fee's

You want to send any amount of money anywhere in the world in just minutes, for less than $.04? Good luck designing that system. Such a reasonable request, it must be easy to do.

[larem]

I already hate the fees. It annoys the hell out of me and I know its how the system works.
Its annoying to send .001 lets say to someone and get a huge % tax in fee's

You want to send any amount of money anywhere in the world in just minutes, for less than $.04? Good luck designing that system. Such a reasonable request, it must be easy to do.

Technically, it IS easy. The cost of modern systems is because of all of the red tape surrounding everything. If they didn't have to comply with so many regulations and systems, it wouldn't be that expensive.

[mezzomix]

How about we just let the miner bubble pop and half of them shut down instead of subsidizing them?

Not everyone that bought a miner can win no? They bought an investment, a risk, some are going to loose, let them loose..

I couldn't agree more. Though some would argue that this leads to centralization

The ones that lose are hardware operators and not those 5-10 miners. It's not a big deal if the hardware operators lose.

[larem]

How about we just let the miner bubble pop and half of them shut down instead of subsidizing them?

Not everyone that bought a miner can win no? They bought an investment, a risk, some are going to loose, let them loose..

I couldn't agree more. Though some would argue that this leads to centralization

The ones that lose are hardware operators and not those 5-10 miners. It's not a big deal if the hardware operators lose.

The bigger companies are the only ones making profit. By nature, that means they continue mining. The little guys at home continue losing money so they stop mining. How are the big guys being hurt when they're making profit AND that profit keeps going up?

[zetaray]

I think it all depends on the price of bitcoin. If bitcoin price stays at current level, fees will have to rise to keep mining profitable.

[franky1]

at the moment miners get $11,250 a block ($450x25btc)

or another way of looking at it

at the moment a block holds less than 1250 tx's per block
https://blockchain.info/charts/n-transactions-per-block
this leads to (based on bitcoins $ price divided by tx's) there being an average $8 per tx price
https://blockchain.info/charts/cost-per-transaction

another way to look at it
at 4.5cent a tx the most a miner would get (1250 tx or less) is <$50 right now in just tx fee's

if people want to only pay under 4cent fee, once the reward is not there, then each block needs to store 400,000tx just so that upto $16k a block just through fee's can be obtained..(or $10k at average current 62.5% capacity)

the solution would preferably that mining costs get cheaper, miners get less greedy so that the block limit doesnt need to increase to 200mb purely to pay them $10k plus every 10 minutes

[lightfoot]

Miners *can't* be less greedy. It costs money for electricity (yes I know everyone thinks it's free, but it's never really free), money for the ever obsolete hardware, and time to keep the things running (yes, they do blow up). At ten cents a kw/hr it's about break even at .5w/gh. Buying .25w/gh will make a small profit but not cover the cost of the miner anytime soon.

Likewise this will *always* be the case. Note the price of bitcoin doubled, and so did the difficulty. They are tracking right now. When the halving happens, either the number of miners will drop in half or the price will double.

There's really no greed here. Actually everyone is perfectly greedy, that's what makes bitcoin go. The people who make money are people who make miners (which isn't that profitable) and the people who run power plants (who are the final source of power and money).