Total supply of BTC

[btcmind]

Two questions. One simple and one perhaps hard.

What happens when the total supply is reached? What is the incentive for mining after all BTC's are mined?

Supply: It is often said that BTC is valuable because it is scarce, citing the 21 m total BTC's. But each BTC can be subdivided to 1/10^6 which makes the total supply 10^6 larger. Whether one BTC equals to 1$ or 100$ or 0.00000001 BTC equals to 1$ - what's the difference? The total quantity of Satoshi's is 21 * 10^6 * 10^8 = 2.1 * 10^(15).

[Gabi]

1)Transaction fees
2)Meh, nonsense. The total doesn't change. 1 bitcoin, 100 bitcents. 1000 bitmills. It is the same, different names for the same thing. The total amount of btc won't change, 21 millions of bitcoins. Sure you can subdivide them,  but the total doesn't change.

[btcmind]

Thanks.

1) Could somebody elaborate on transaction fees? Does this change with the reach of the total supply?

2) Yes, I know, the total supply won't change. But the fact that the supply is fixed is not the interesting feature. What I'm saying is: citing the 21m as total supply is arbitrary. 21m sounds better then 21m * 10^8. I see that this doesn't matter, it's almost a question of marketing.

In general a change in money supply is irrelevant. What matters is what those changes effect. If the amount of USD would increase by the factor of 10 tomorrow that makes no difference. What makes all the difference is where the money goes to (subsidies of financial institutions and the government). Becoming more clear on these factors is I think quite important.

[wpk]

Bitcoins are mined whereas ripples are destroyed over time. Would their currencies therefore behave differently over time?

[deeper-blue]

The idea is that the transaction fees will be much higher due to bitcoin being used much more than now.

[btcmind]

Transaction fees paid by whom for whom? The beauty of it is that the fees are self-financing (the cost of electricity). If the incentive is too little no transactions can be made, if the incentive is too high, then the service providers will eat up the benefit. As soon as the services are online there is no reason to use USD, EUR, JPY anymore if you are paying more than 0.5%. This is basically the whole of the financial sector, which gets demolished potentially in a short period of time. This is really the radical part, but it is I believe unclear how much the network can handle. Marketcap is 2B$ but actual transactions are a small fraction of that (but this is changing day to day).

[revans]

Actually the total number of bitcoins may well exceed 21 million according to its developers. They are backing away from that 21 million limit being final.

[BTC_SI]

Wouldn't the transaction fees only be for vendors/exchanges and not effectively affect the amount of actual bitcoins in circulation?

[oda.krell]

2nd point of OP is a good question. Right now, mining (and thus ensuring the system keeps working) is rewarded by bitcoins. If they reach their target number, the wikipedia article mentions "transaction fees" that could become the new incentive to offer computing power. I don't get what those transaction fees would be, and who would pay them? Am I missing a crucial part here?

[caveden]

In general a change in money supply is irrelevant. What matters is what those changes effect. If the amount of USD would increase by the factor of 10 tomorrow that makes no difference. What makes all the difference is where the money goes to (subsidies of financial institutions and the government). Becoming more clear on these factors is I think quite important.

It's not irrelevant at all. Inflation is never "neutral". Some people will always receive the money first, and will drain wealth from the lasts to receive the new money. (it seems you understand that by your comment, but then how do you say it's irrelevant?)

[Dabs]

Transactions fees are paid by some people who send bitcoins that are either too small in amount (less than 0.01) or are too large in bandwidth size (bytes), such as transactions made by several unspent outputs. Tx fees are also encouraged if you spend coins too fast (less than 1 bitcoin day old). This is to discourage spam or network abuse such as people sending 0.0000001 to 1 million different addresses within the same hour or something.

At some points, the transaction fees have already exceeded the block reward.

[nebulus]

Two questions. One simple and one perhaps hard.

What happens when the total supply is reached? What is the incentive for mining after all BTC's are mined?

1) Bitcoin will become status quo
2) Keeping the network alive do people can continue transacting

[btcmind]

In general a change in money supply is irrelevant. What matters is what those changes effect. If the amount of USD would increase by the factor of 10 tomorrow that makes no difference. What makes all the difference is where the money goes to (subsidies of financial institutions and the government). Becoming more clear on these factors is I think quite important.

It's not irrelevant at all. Inflation is never "neutral". Some people will always receive the money first, and will drain wealth from the lasts to receive the new money. (it seems you understand that by your comment, but then how do you say it's irrelevant?)

That's what I was trying to say. If you look at the balance sheet of the Federal, the ECB, the BoJ, the size of the balance sheet is only very loosely correlated with the index value. Inflation is very little understood, because of it's linkage to debt and how it is issued. If Bitcoin is really the next big thing is of course by no means certain. Governments currently, more than ever, depend on the printing press.

[Gabi]

True, if everyone dollars increase 10 times, it is like nothing changed. Because this affected everyone. The problem with inflation is that only some people receive the new money, not everyone

[btcmind]

This is actually one of the core debates in economics, what causes inflation. The Austrians partly believe that banks and the central banks cause economic cycles. While there has been a lot of focus on the malpractice of banks, few realize that banks and central banks are really tied together in one system. The central bank has some status of lender of last resort. Effectively the central banks are now ever increasing the overall risk in the system. Gold is not a hedge, because there is no payment system. If BTC would be considered a hedge on the financial system, and it's capabilities proven the value would indeed be very high. But consider this: nobody says that when that infrastructure is established, that there will not be a Bitcoin 2.0 which will make BTCs less valuable. The value is really in the network and the belief that it is valuable in the future. Currencies are the most natural object of speculation. (Fiat) Money in itself is speculative. (see George Soros, Alchemy of Finance for details).