what happens if all bitcoins are mined

[schnuber]

Hi , probably this topic has already been discussed somewhere in this forum but I was a bit lazy to search it.

I still do not fully grasp the concept of Bitcoin. The miners do the job of calculating the the hash codes and are rewarded with bitcoins. So what happens after all the BTC have been mined? There will be no incentive for anyone to mine anymore, which in turn means that the Bitcoin system will die.

Ok there are the fees. But they are optional arent they? Does this mean that if I do not attach a fee to my transaction it simply wont be processed? And how will I determine how big the fee should be in order it will be processed properly fast.

Please elaborate on that.

Best regards
schnuber

[naphto]

Hi , probably this topic has already been discussed somewhere in this forum but I was a bit lazy to search it.

I still do not fully grasp the concept of Bitcoin. The miners do the job of calculating the the hash codes and are rewarded with bitcoins. So what happens after all the BTC have been mined? There will be no incentive for anyone to mine anymore, which in turn means that the Bitcoin system will die.

Ok there are the fees. But they are optional arent they? Does this mean that if I do not attach a fee to my transaction it simply wont be processed? And how will I determine how big the fee should be in order it will be processed properly fast.

Please elaborate on that.

Best regards
schnuber

If you don't give any fee, it will take years to proceed. So, as you stated, there will always be fees to keep it up.
And the last bitcoins will never be mined. When we will come close to that, they will produce less than today.


+ it is possible to change the rate with a 51 % attack if most of the miners agree on something different.

But you're right, the bitcoin system will die, but for other reasons.

[schnuber]

ok now you are making me curious, what reasons the Bitcoin system will die for?

Ok, there will always be fees, but is there a benchmark that tells me how big the fee should be in order to get the transaction process properly fast?

[Aahzman]

You won't be alive in 130 years to see the last block reward, so does it matter?

[naphto]

ok now you are making me curious, what reasons the Bitcoin system will die for?

Endless discussion.
Just wait, you'll see by yourself.

Ok, there will always be fees, but is there a benchmark that tells me how big the fee should be in order to get the transaction process properly fast?

People usually believes that in the future the value of bitcoin will increase, and the fee will decrease because you will send smaller amounts.
But as for now, 0.01 btc (1 usd) is somewhat what you should pay.

[yucca]

Coin production is not asymptotic, coin production does go to zero, from Wiki:

a hard limit of 21 million bitcoins is reached during the year 2140

When that time comes nodes will no longer mine, but will be a free market of transactors, competing to offer the lowest fees.

Obviously transaction fees will have to meet hardware/energy expenses of the nodes to make this worthwhile, and that solely depends on total transaction volume. So we can have these two outcomes (and the infinite shades in between):

• few transactions going on with high transaction fees, this would be the death of bitcoin.
  
  
• many transactions going on with fees lower than alternative methods, bitcoin thriving.  
  

[schnuber]

You won't be alive in 130 years to see the last block reward, so does it matter?

Wow I didn't expect an answer of this kind. So you are saying we should not care whether the Bitcoin concept is sustainable since if it implodes in 130 years or so we are all dead anyway. Do you have children?

[Geist]

I admit, I'm no expert, but I've lurked around reading every thread I could in the speculation forum and it sounds to me like the development of bitcoin isn't quite finished yet. Many of the problems that have occurred in just the last week will just repeat themselves over and over again, so something needs to change. What that is remains to be seen. I do believe that cryptocurrency is the future, but if that is a further developed bitcoin or it's successor, I'm not sure.

[DannyHamilton]

You really should learn a bit more about how bitcoin works yourself, before you try to teach others.

If you don't give any fee, it will take years to proceed.

While this is theoretically possible, there is no way to know right now if this will be true.  There are several reasons a miner might include a transaction even with no fee.

And the last bitcoins will never be mined.

This is not true.  The last bitcoin will be mined in block 6,929,999.

I suppose it might be possible that the entire bitcoin community could reach a consensus to change the protocol and continue issuing bitcoin beyond that, but that is extremely unlikely.  If it is found that long term inflation is necessary, it is far more likely that it will be included in the design of some other cryptocurrency that replaced bitcoin.

When we will come close to that, they will produce less than today.

The block subsidy is cut in half every 210,000 blocks.  When the new subsidy is calculcated, any amount less than 0.00000001 BTC is discarded.  After the block subsidy has been 0.00000001 BTC for 210,000 blocks, it will become 0 BTC and remain as such.

+ it is possible to change the rate with a 51 % attack if most of the miners agree on something different.

This is not true.  Peers will simply refuse to relay blocks from those miners that try to change the protocol in that way.  It would require a consensus of users (not just 51% of miners) to change the rate of new bitcoin production.

But you're right, the bitcoin system will die, but for other reasons.

Certainly.  Nothing lasts forever.  Eventually the sun will burn out, and everything will die.

[DannyHamilton]

- snip -
is there a benchmark that tells me how big the fee should be in order to get the transaction process properly fast?

Generally a fee of 0.0005 BTC per kiloByte of transaction size is plenty right now.  Unfortunately, at the moment, none of the current wallets seem to give very good advice about how to choose an appropriate fee.  As fees become more important, I expect that wallets will be enhanced to do a better job of advising users on this matter.

[Dunois]

An author on Slate wrote on this. I'm not sure what to think about it, but I'll leave you to interpret what you will:

Felix Salmon and many others have pointed out that a currency cannot succeed with a supply that is fixed, or if it grows too slowly. A currency is used to enter transactions; the more transactions there are, the more of the money you need. As the economy grows, a fixed-supply currency becomes worth more in terms of goods and services, and people begin to hoard it—expecting that if they wait a little longer, they will be able to buy more. Once hoarding takes over, circulation ends, and with it the function of the currency. Hoarding accounts for the large increase in the value of bitcoins[...].

An even more fundamental problem with bitcoins, and indeed any private currency, is that there is no way to limit its supply. True, bitcoins cannot be manufactured beyond the limits set by Nakamoto. But there is no way to prevent future Nakamotos from creating bitcoin substitutes—say, bytecoin, or botcoin. If merchants are willing to accept bitcoins, they will be willing to accept the substitutes, especially as bitcoins become scarce and consumers scramble for substitutes. Nakamoto must have realized this because there are not enough bitcoins to substitute for the currencies around the world. The currency can only succeed if it is expanded or supplemented. But if there are no constraints on substitute digital currencies—and there aren’t—then the value of bitcoins will plummet as the subs begin to circulate. And once it becomes clear that there is no limit, people will realize that their holdings could become worthless at any moment, and demand for bitcoins and the other currencies will collapse, ending the experiment.

You can read the entire thing here:
http://www.slate.com/articles/news_and_politics/view_from_chicago/2013/04/bitcoin_is_a_ponzi_scheme_the_internet_currency_will_collapse.html

[creativex]

An author on Slate wrote on this. I'm not sure what to think about it, but I'll leave you to interpret what you will:

Felix Salmon and many others have pointed out that a currency cannot succeed with a supply that is fixed, or if it grows too slowly. A currency is used to enter transactions; the more transactions there are, the more of the money you need. As the economy grows, a fixed-supply currency becomes worth more in terms of goods and services, and people begin to hoard it—expecting that if they wait a little longer, they will be able to buy more. Once hoarding takes over, circulation ends, and with it the function of the currency. Hoarding accounts for the large increase in the value of bitcoins[...].

An even more fundamental problem with bitcoins, and indeed any private currency, is that there is no way to limit its supply. True, bitcoins cannot be manufactured beyond the limits set by Nakamoto. But there is no way to prevent future Nakamotos from creating bitcoin substitutes—say, bytecoin, or botcoin. If merchants are willing to accept bitcoins, they will be willing to accept the substitutes, especially as bitcoins become scarce and consumers scramble for substitutes. Nakamoto must have realized this because there are not enough bitcoins to substitute for the currencies around the world. The currency can only succeed if it is expanded or supplemented. But if there are no constraints on substitute digital currencies—and there aren’t—then the value of bitcoins will plummet as the subs begin to circulate. And once it becomes clear that there is no limit, people will realize that their holdings could become worthless at any moment, and demand for bitcoins and the other currencies will collapse, ending the experiment.

You can read the entire thing here:
http://www.slate.com/articles/news_and_politics/view_from_chicago/2013/04/bitcoin_is_a_ponzi_scheme_the_internet_currency_will_collapse.html

https://bitcointalk.org/index.php?topic=174205.0

[schnuber]

Thanks for your replies.
I want to give my opinion here.

I think a good way to circumvent this problem is to not to limit the amount of BTC to 21M. Instead it should have a deterministic inflation rate of let's say 1%. This would have 2 benefits:
First the concept of mining as it works today could go on for ever. Secondly, deflationary forces such as loss of BTC, could be compensated for.

I general inflation as it is today is not a good thing cuz it takes monex from the savers to the speculaters, but if the inflation rate is small and deterministic it would be a good compromise.

What do you think of that?

[webchris]

Thanks for your replies.
I want to give my opinion here.

I think a good way to circumvent this problem is to not to limit the amount of BTC to 21M. Instead it should have a deterministic inflation rate of let's say 1%. This would have 2 benefits:
First the concept of mining as it works today could go on for ever. Secondly, deflationary forces such as loss of BTC, could be compensated for.

I general inflation as it is today is not a good thing cuz it takes monex from the savers to the speculaters, but if the inflation rate is small and deterministic it would be a good compromise.

What do you think of that?

I think that's a great idea. Energy and computing power will continue to fall in price, so in theory BTC could always survive even with tiny rewards for mining, but BTC deleting/accidental loss will be the thing that would really hurt in the long run, IMO. I think having some plan for that where the total of BTC can rise eventually is a solid one, though like others have said, we may not need to worry about this for some time.

[creativex]

Thanks for your replies.
I want to give my opinion here.

I think a good way to circumvent this problem is to not to limit the amount of BTC to 21M. Instead it should have a deterministic inflation rate of let's say 1%. This would have 2 benefits:
First the concept of mining as it works today could go on for ever. Secondly, deflationary forces such as loss of BTC, could be compensated for.

I general inflation as it is today is not a good thing cuz it takes monex from the savers to the speculaters, but if the inflation rate is small and deterministic it would be a good compromise.

What do you think of that?

History shows that flexible inflation rates have a nasty habit of changing regularly. This is generally done for the benefit of one group and at the expense of another. Bitcoin has a model and that model should be adhered to. There are altchains available with different philosophies at their cores, if one of those is seen as superior then free market forces should cause it to rise to prominence.

[anonymous_hero]

Thanks for your replies.
I want to give my opinion here.

I think a good way to circumvent this problem is to not to limit the amount of BTC to 21M. Instead it should have a deterministic inflation rate of let's say 1%. This would have 2 benefits:
First the concept of mining as it works today could go on for ever. Secondly, deflationary forces such as loss of BTC, could be compensated for.

I general inflation as it is today is not a good thing cuz it takes monex from the savers to the speculaters, but if the inflation rate is small and deterministic it would be a good compromise.

What do you think of that?

I'm a newb as well, but I have thought something along similar lines before.  A small, steady amount of inflation as you suggest seems like a good thing.  From my understanding, I think only deflation or inflation are possibilities; it's either one or the other.  I'm not sure about that, but since coins will inevitably be lost, and more and more people use Bitcoin, right now it's set up to be deflationary, and the only other way to counteract that is to make it inflationary in some way.  I suppose that you could try to make it result in 0% inflation, but that would be difficult.

I suppose another way to do it would be to have the limit of Bitcoins indexed to population somehow.  That is, assuming all the world was using only one currency and population was increasing, then with a fixed limit it would be deflationary, since more and more people would be using it as more and more people participated in the economy.  0% inflation could theoretically be achieved by adding the same number of Bitcoins (somehow) for every person participating in the economy.  I'm just talking off the top of my head here, though.

As for the possibilities of other currencies supplementing Bitcoin, that's certainly a possible solution, but for the sake of convenience (which is huge in terms of getting everyday people to adopt it), I think having Bitcoin be slightly inflationary is a better solution.

creativex makes a good point, too; I highly doubt Bitcoin will be changed, but if there is or will be a better model, hopefully it would be adopted as a replacement.

[DannyHamilton]

- snip -
When that time comes nodes will no longer mine

That depends by what you mean by "mine".  New blocks will still be created.  Perhaps we just won't call those who are creating the new blocks "miners".  Maybe we'll call them "processors" or "confirmers" instead.

but will be a free market of transactors, competing to offer the lowest fees.

Yes, the block subsidy slowly gets smaller and smaller (being cut in half approximately every 4 years).  Meanwhile, the value of the transaction fees slowly increases ad bitcoin gains popularity.  The number of transactions available for each block increases.  The percentage of people voluntarily paying a transaction fee for fast inclusion in a block increases. As such, eventually the transaction fees will be a larger portion of the block reward than the block subsidy.

• few transactions going on with high transaction fees, this would be the death of bitcoin.

There is no reason that this has to mean the death of bitcoin.  It is entirely possible that technology and services are developed that provide opportunity of bitcoin backed transactions to occur off the blockchain.  Then the blockchain transactions can be used by those technologies and services to "settle" the balances on regular intervals.

[webchris]

History shows that flexible inflation rates have a nasty habit of changing regularly. This is generally done for the benefit of one group and at the expense of another. Bitcoin has a model and that model should be adhered to. There are altchains available with different philosophies at their cores, if one of those is seen as superior then free market forces should cause it to rise to prominence.

I don't think he was proposing a flexible inflation rate, but a fixed rate of around 1%. The fact is that every time someone accidentally deletes or loses their wallet, or someone passes away and no one uses their coins, or people abandon wallets with small fractions of coins that they consider worthless, that is all coins coming out of the system. When coins stops being added (again, not that we have to worry about this anytime soon), it could eventually reduce the amount of coins enough that the value of the remaining coins would be too high for average or below average consumers.

[DannyHamilton]

Wow I didn't expect an answer of this kind. So you are saying we should not care whether the Bitcoin concept is sustainable since if it implodes in 130 years or so we are all dead anyway. Do you have children?

Do you expect your children to still be alive 130 years from now?

Most specifically, do you really think any of us have any chance of predicting what technology will be like and how today's technological innovations will be used 130 years from now?

Did anyone in 1883 have any chance at all of predicting what leading edge technology would be like in 2013?

Bitcoin was designed to be supported by transaction fees.  It was designed to allow those fees to be voluntary while providing an incentive for people to pay them.  Right now, the block subsidy is significantly larger than the fees.  That won't always be true.  I don't see a reason to worry about it.

[DannyHamilton]

I admit, I'm no expert, but I've lurked around reading every thread I could in the speculation forum and it sounds to me like the development of bitcoin isn't quite finished yet.

Clearly not.  Bitcoin is still very much in its infancy.

Many of the problems that have occurred in just the last week will just repeat themselves over and over again, so something needs to change.

What problems?  I'm not aware of any bitcoin problems in the last week.