Can bitcoin sustain itself on fees alone?

[CryptoBry]

Is Raphael Auer's paper fact or fud?

It will be a fact if bitcoin today will the bitcoin until the last coins were minted. I think the developers know that, but it's way too early to be bothered with it, there are more important things to be done first. But some FUDs came from facts anyways, but were only solved that's why they became a fud afterwards.

Luckily we'll be dead or in nappies before this becomes a major problem.

Quite right. Let the people living on that time solve that and let us, the early bitcoin users, rest in peace. 

I have been wondering the same thing though on a non-technical level since I am not good in deciphering many technical matters related to Bitcoin or cryptocurrency. Yeah, right, by the time this can be a big challenge all of us who are here in this era of Bitcoin would already be resting underground or if you believe in the Christian religion then we can be already in the Kingdom come. As always with anything in this world, as long as there is a market for that something then any problem can be given solutions as long as there can be rewards on doing so. Let's hope then that Bitcoin can be able to survive into those years.

[1714784218]

1714784218

[1714784218]

1714784218

[1714784218]

1714784218

[1714784218]

1714784218

[bbc.reporter]

The introduction of the Lightning Network have open up a new source of income to these miners. They can host LN nodes and generate additional income from that and it can supplement their income from Bitcoin miners fees in the future.

I also think more second layer applications will be added to the Blockchain network in the future and running nodes for this will also help to cover their expenses.

Miners will have to adapt to survive.  

That might be a solution hehehe. However, there is a more natural solution for miners and Asic manufacturers. To diversify and mine altcoins.

[Wind_FURY]

people DO NOT need to pay high fee's to make bitcoin mining functional. here is why

1. having an increased transaction count per block can offset this.
    EG 2000 tx of 25cents doesn't mean 2000 tx of 50cents after a halving. instead 4000 tx of 25cents offers the same solution
    this is not a point where the usual snake charmers shout out "gigabytes by midnight" or "blockchains cant scale".
    reality is they can scale. and it doesnt need to be jumping extra large real fast. but progressively over time

Are you finally admitting that the block size increase in Segwit was the right decision at the right time?

You know there are trade-offs in block size increases, and that the Core developers need to make conservative design decisions to avoid breaking the network. It's not as easy as you make everyone believe.

[Pursuer]

people DO NOT need to pay high fee's to make bitcoin mining functional. here is why

1. having an increased transaction count per block can offset this.
    EG 2000 tx of 25cents doesn't mean 2000 tx of 50cents after a halving. instead 4000 tx of 25cents offers the same solution
    this is not a point where the usual snake charmers shout out "gigabytes by midnight" or "blockchains cant scale".
    reality is they can scale. and it doesnt need to be jumping extra large real fast. but progressively over time

Are you finally admitting that the block size increase in Segwit was the right decision at the right time?

no, he is still saying the same thing as ever. to increase the block size itself with a hard fork but instead of jumping to a ridiculous number like 32 byte, go at it with a slower pace like increase to 2 MB first then maybe a couple of years later to 3 or something like that.
although I still don't understand why he is denying SegWit's scaling that happened already!

[r1s2g3]

I have this question earlier also and somebody suggested that LN will be able to solve the problem.  If bitcoin cost is high, major transaction will be done on LN and when the channel is closed it will written in blockchain and miner will get good fees for that transaction. But user will not mind it because they have transacted multiple times in LN channel so cost per transaction is still small for user.

Sorry: It is all from my memory as I recall, might be some facts get distorted.

[Pursuer]

I have this question earlier also and somebody suggested that LN will be able to solve the problem.  If bitcoin cost is high, major transaction will be done on LN and when the channel is closed it will written in blockchain and miner will get good fees for that transaction. But user will not mind it because they have transacted multiple times in LN channel so cost per transaction is still small for user.

Sorry: It is all from my memory as I recall, might be some facts get distorted.

the only way that LN can help miners earn some additional income is if they also run a Lightning Node alongside their Bitcoin Node that they have to run to be able to get transactions to include in their blocks. so they can earn additional income.
what you said doesn't make sense because in the end they are still making one transaction on-chain and that transaction has the usual fee like any other transaction so there is no additional income for the miners.

[r1s2g3]

because in the end they are still making one transaction on-chain and that transaction has the usual fee like any other transaction so there is no additional income for the miners.

I am saying at that time that single transaction will not be costing a few cents, instead it will be costing some dollars for each transaction. User will be doing most of transaction in LN, so they will not  mind paying the high fees in blockchain when they will close channel.

[Pursuer]

because in the end they are still making one transaction on-chain and that transaction has the usual fee like any other transaction so there is no additional income for the miners.

I am saying at that time that single transaction will not be costing a few cents, instead it will be costing some dollars for each transaction. User will be doing most of transaction in LN, so they will not  mind paying the high fees in blockchain when they will close channel.

people would still mind if the fees were high and remained high. no matter if they made thousands of transactions over at Lightning Network or if it is their one time transaction on-chain from their  wallet to another wallet. besides LN is not supposed to do everything, it is supposed to be the "second layer" and to perform seamlessly the "first layer" which is on-chain has to perform as it should meaning no huge backlogs and no unreasonable high fees.

[squatter]

The paper states that “proof-of-work can only achieve payment security if mining income is high, but the transaction market cannot generate an adequate level of income.”

Auer argues that because the block rewards are decreasing with time, the security of payments decreases and transaction fees become more important to guarantee finality. He says that “the economic design of the transaction market fails to generate high enough fees.”

He's not accounting for the transitional phase as we shift from inflation to fee market. It's possible that in these early years, speculation largely fuels mining security -- investors and miners are speculating on future transaction growth. He's not really allowing for the possibility that this transaction growth actually comes to fruition.

As long as scarcity of block space exists, transaction demand -- if sufficient to fill blocks -- should create a fee market. As fees rise, miner revenue increases. As fees fall, miner revenue decreases. Hopefully in the latter case, it would happen slowly enough that difficulty can adjust downward in an orderly fashion to allow continued mining profitability.

[xWolfx]

IMO That's horrible idea because :
1. Not all users make lots of transaction on LN which makes fee to open/close expensive to users
2. Few users still prefer on-chain transaction, especially if both party can't found route path or/and sure they only make one transaction
3. Few users use bitcoin to avoid high fees on banks or wire transfer

For now. The truth is that in the future those scenarios will be a lot more likely to happen and widely utilize with mass adoption. Think of a bank, what makes fees so powerful for them? Precisely the volume of costumers they handle for one part even when that is not their only revenue source.

The truth is that the market is still changing and adapting. In the future we will barely recognize what we are seeing right now in the sense of the way we do things and what we recognize or not.

[allthingsluxury]

Bitcoin and Cryptos in general are going to continue to evolve and adapt to continue to remain profitable and survive. Fees will be play a strong part in this.

[bbc.reporter]

I have this question earlier also and somebody suggested that LN will be able to solve the problem.  If bitcoin cost is high, major transaction will be done on LN and when the channel is closed it will written in blockchain and miner will get good fees for that transaction. But user will not mind it because they have transacted multiple times in LN channel so cost per transaction is still small for user.

Sorry: It is all from my memory as I recall, might be some facts get distorted.

the only way that LN can help miners earn some additional income is if they also run a Lightning Node alongside their Bitcoin Node that they have to run to be able to get transactions to include in their blocks. so they can earn additional income.
what you said doesn't make sense because in the end they are still making one transaction on-chain and that transaction has the usual fee like any other transaction so there is no additional income for the miners.

Is that the best solution you can give? Miners to run Lightning nodes to earn additional income?? Miners would rather mine another coin, I reckon hehehe.

[superstarbtc]

once the bitcoin lightening network gets implemented then we can see fees may get reduce all is in market conjunction and fast transactions

[squatter]

people would still mind if the fees were high and remained high. no matter if they made thousands of transactions over at Lightning Network or if it is their one time transaction on-chain from their  wallet to another wallet. besides LN is not supposed to do everything, it is supposed to be the "second layer" and to perform seamlessly the "first layer" which is on-chain has to perform as it should meaning no huge backlogs and no unreasonable high fees.

This comes back to the age-old question: What are "high fees?" Shouldn't we expect fees to rise over time, since they must replace the block subsidy? That was the original design, as I understand it.

Let's imagine a future decades from now, where speculation and block subsidy have much less influence on price. In the long run, shouldn't there be a strong relationship between transaction fees and the actual cost to mine transactions?

Right now, miners are effectively subsidizing that cost through speculation. They're willing to mine transactions for pennies on the dollar because they're in an arms race to mine the block subsidy. Many halvings out, that incentive will disappear. If we want similar or better security, we'll need to pay for it as users -- as fees.

[Ayoofe]

After all the BTC are mined, I see it becoming  an asset more than a means for daily transaction. The reason been that the value is going to increase tremendously and ever investor will tend to hoard the BTC in there pocket so the transaction fee may sustain BTCas an asset not for daily transacting currency.

[bbc.reporter]

@squatter. However, there are also these age old questions. Will cryptocoin users begin looking for other coins to use for cheaper transactions?

Yes, bitcoin has been slowly losing dominance.

Will the miners leave bitcoin and mine coins with better incentives?

Maybe, however I speculate the answer might be a yes[/] in a few years.

[Pursuer]

I have this question earlier also and somebody suggested that LN will be able to solve the problem.  If bitcoin cost is high, major transaction will be done on LN and when the channel is closed it will written in blockchain and miner will get good fees for that transaction. But user will not mind it because they have transacted multiple times in LN channel so cost per transaction is still small for user.

Sorry: It is all from my memory as I recall, might be some facts get distorted.

the only way that LN can help miners earn some additional income is if they also run a Lightning Node alongside their Bitcoin Node that they have to run to be able to get transactions to include in their blocks. so they can earn additional income.
what you said doesn't make sense because in the end they are still making one transaction on-chain and that transaction has the usual fee like any other transaction so there is no additional income for the miners.

Is that the best solution you can give? Miners to run Lightning nodes to earn additional income?? Miners would rather mine another coin, I reckon hehehe.

I didn't say it is a solution, I said it is an option and it is not meant for miners to earn money that way. I was explaining to r1s2g3 that this is the only way they can benefit from LN not the way he explained it.

people would still mind if the fees were high and remained high. no matter if they made thousands of transactions over at Lightning Network or if it is their one time transaction on-chain from their  wallet to another wallet. besides LN is not supposed to do everything, it is supposed to be the "second layer" and to perform seamlessly the "first layer" which is on-chain has to perform as it should meaning no huge backlogs and no unreasonable high fees.

This comes back to the age-old question: What are "high fees?" Shouldn't we expect fees to rise over time, since they must replace the block subsidy? That was the original design, as I understand it.

Let's imagine a future decades from now, where speculation and block subsidy have much less influence on price. In the long run, shouldn't there be a strong relationship between transaction fees and the actual cost to mine transactions?

Right now, miners are effectively subsidizing that cost through speculation. They're willing to mine transactions for pennies on the dollar because they're in an arms race to mine the block subsidy. Many halvings out, that incentive will disappear. If we want similar or better security, we'll need to pay for it as users -- as fees.

not when there is competition. nobody is going to even use bitcoin if the fees go up to something small like $10 when there can be an altcoin copy of bitcoin or even better implementation using newer innovative ideas (like DAG for instance) with 0 fees. they may be shitty shitcoins today but we are talking about a future when a couple of halvings happened and block reward is smaller, I think it is safe to assume in 20+ years there will be better altcoins!

[Natalim]

Yes, bitcoin has been slowly losing dominance.

Dominance in no. of transaction yes, but no with volume because bitcoin is still the most used coins in the crypto space.

Will the miners leave bitcoin and mine coins with better incentives?

Some will leave but majority will still continue to mine BTC.... the big miners that were here in the early stage are investors as well
so they will likely support BTC.

Maybe, however I speculate the answer might be a yes[/] in a few years.

In few years maybe if bitcoin will loss its popularity, but so far as bitcoin dictates everything, it's still the best coin to mine, for long term.

[figmentofmyass]

Will cryptocoin users begin looking for other coins to use for cheaper transactions?

Yes, bitcoin has been slowly losing dominance.

are you sure about that?

first, you're probably mistaking altcoin speculation for actual usage. "cheaper transactions" has been an effective marketing ploy for many altcoins but their rise in price doesn't necessarily indicate people are using them for cheap fees. people are probably just speculating that cheap fees will be important for future utility. that doesn't make these speculators correct that bitcoin will be cannibalized by coins with lower transaction fees. the market will decide that.

second, as more and more coins are launched (with higher and higher circulating supplies), "bitcoin dominance" as a function of market cap should continue dropping. that really doesn't indicate that bitcoin has lost its dominance over the market. no altcoin comes anywhere near dethroning bitcoin in price, liquidity, usage, value transferred, etc and i think that will continue to be true.

[Wind_FURY]

My theory.

I believe that there will be a small group of people in the community who will FUD a narrative that the block rewards should not be halved.

After the next having of 2020, some miner, maximalist, developer, or Bitcoin oligarch will call for a change in the consensus rules to maintain the 6.25 block rewards on 2024, but without inflating the supply to "save Bitcoin".

I know it sounds preposterous now, but just watch.