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Author Topic: What happens, when all bitcoins are mined?  (Read 2324 times)
MimiTheKid
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November 23, 2011, 03:45:38 PM
 #1

I know,  I already should know it by now,

However:
What happens  when all bitcoins are mined?
Mining is import for the system. Who will do it after the situation? Who will spend the energy?

Is there a restriction to the "size" of the coins?

Thanx
 
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November 23, 2011, 03:51:22 PM
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As the block reward shrinks and disappears, transaction fees will make up the bulk of the block reward.  By the time this happens, it's hoped that transaction volume and/or the value of bitcoins is high enough to make the transaction fees enough to make it attractive for many miners to continue to secure the network.

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November 23, 2011, 06:28:54 PM
 #3

Only when the last bitcoin has been mined, the last fish caught, the last river poisoned... ah well

http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be


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November 23, 2011, 06:44:31 PM
 #4

Mining =/= block rewards.
Mining will continue forever (as long as the block chain exists).
Block rewards will decrease to zero.

A better name for block rewards is "block subsidy" because they pay for the network instead of fees. As subsidies decline to have the same network strength fees will need to rise.  The strength of the network will be determined by how much is paid to miners.

Another way to look at it.
Imagine today that Bitcoin had Paypal level transaction volume.  Roughly 100 transactions per second.  That is 100*60*10 roughly 60,000 transactions per block.  If each transaction paid just 0.001 BTC each it would be fees of ~60 BTC per block.  Tada the network is "self paid for".

So Bitcoin can have a powerful network supported by fees @ Paypal level transaction volume.  With modestly higher fee per transaction (say 0.01) you could have the same 60 BTC per block in fees w/ roughly only 1/10th transaction volume.

However today the network only has ~50 transactions per block (~0.1 tps). To support current payments to miners without block subsidies would require a transaction fee of roughly 1 BTC each.  Obviously too high.  Volume is too low making fees too high.

The block subsidies are simply a solution to two problems:
a) how do you distribute the money so it can begin circulating.
b) how do you support a strong network with minimal fees (w/o strong network who will use Bitcoin i.e. chicken & egg scenario).

MoonShadow
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November 23, 2011, 06:48:53 PM
 #5

I know,  I already should know it by now,

However:
What happens  when all bitcoins are mined?
Mining is import for the system. Who will do it after the situation? Who will spend the energy?

Over the course of the years, as the bitcoin economy grows, there will develop a premium on near-term transaction processing.  People who desire to have their transactions processed quickly will pay a transaction fee over the average rate, in order to incentize miners to include that transaction over one with a lower or zero fee.  Long before the last new bitcoin is created, the block reward will be so vanishingly small as to be insignificant.  If the bitcoin economy isn't large enough by 2025 or so, it never will be.  The last bitcoin won't be created until around 2130.

Quote

Is there a restriction to the "size" of the coins?


There is a common misconseption here, I think.  A bitcoin is simply a unit, it doesn't actually exist even as a digital artifact; like an email or an mp3 file.  There is only the transaction entries in the blockchain.  The blockchain functions as a massive, collective ledger system.  Amounts are deducted from an existing address in the blockchain and added to another (new or existing) address in the blockchain.  There is a size limit on a block, but that is a agreed convention between miners who all use the 'conventional' codebase.  That limit can be raised, or removed altogether.  Standard clients have no size limitations on blocks or wallet.dat files.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
MimiTheKid
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November 24, 2011, 08:00:43 AM
 #6

A better name for block rewards is "block subsidy" because they pay for the network instead of fees. As subsidies decline to have the same network strength fees will need to rise.  The strength of the network will be determined by how much is paid to miners.

How are the "fees" paid?

and which miner gets the fee?

Gabi
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November 24, 2011, 04:32:26 PM
 #7

A better name for block rewards is "block subsidy" because they pay for the network instead of fees. As subsidies decline to have the same network strength fees will need to rise.  The strength of the network will be determined by how much is paid to miners.

How are the "fees" paid?

and which miner gets the fee?


The one who find the block of course. You find it and you receive 50btc+fees
Reznorist
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November 25, 2011, 05:37:23 AM
 #8

I know,  I already should know it by now,

However:
What happens  when all bitcoins are mined?
Mining is import for the system. Who will do it after the situation? Who will spend the energy?

Is there a restriction to the "size" of the coins?

Thanx
 

I seriously thought you were kidding when you wrote that. XD

New to it all, but I had heard the term bitcoin mining.

IPs are changing in size to accommodate new hordes of people in the world using computers so maybe in place of transaction fees you will get a larger coin size.
MimiTheKid
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November 25, 2011, 10:25:59 AM
 #9

The one who find the block of course. You find it and you receive 50btc+fees

I thought, that the one who wants to do a transaktion fixes the amount of coins. And how are the coins transvered to the finder (technical)?
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Gerald Davis


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November 25, 2011, 01:51:20 PM
 #10

The one who find the block of course. You find it and you receive 50btc+fees

I thought, that the one who wants to do a transaktion fixes the amount of coins. And how are the coins transvered to the finder (technical)?

Not sure what you mean by "fixes the amount of coins".

If you mean a sender SET the transaction fee then yes thats right.

The protocol sets the subsidy.
Senders set their transaction fee.
Miners choose which transactions to include in a block (they can reject free or low fee transactions).


The miner sets his Bitcoin address in the coinbase transaction.  The miner adds up all the inputs & output.  The difference is fees.  In the coinbase transaction the subsidy + fees are transferred to miner's address.
StraT2131
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November 28, 2011, 04:07:14 AM
 #11

Also Im having trouble with the same point.


They say that transaction fees will grow to run the system.
And that the fee structure is flexible.

I.e. higher fees, faster transaction time.

But I dont see how this is possible.

Once someone finds a block the hardwork is done, the oppurtunity cost of accepting any fee is 0.

Thus it makes sense that a rational miner with a block, will accept all transaction fees regardless of size.

Thus the transaction time for a 1btc fee and 1000 btc fee would be equal?

is there something im missing? The only way this would change is if miners could somehow pick which transactions they want to go after. But that seems incompatible with the current network?
MoonShadow
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November 28, 2011, 04:46:01 AM
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is there something im missing? The only way this would change is if miners could somehow pick which transactions they want to go after. But that seems incompatible with the current network?

That is not at all incompatible with the current network, that is exactly how it was designed.  There is a limit to the "free" space in a block allocated transactions with a fee of less than the minimum standard, which I believe is currently 15Kb.  Any miner that includes more than that limit of free (low fee) transactions will get his block rejected, but a miner that refuses free (or low fee) transactions will not.  There is an increasing scale of minimum fees to unlock increasing size limits on the block, up to the hard max limit.  So as the size of the network grows, and transaction rates across the network increase, the average time for a transaction to get included into a block will increase due to the scarcity in blockspace.  Increasing the fee above the market median would incentivize miners to include your transaction over another with a lower fee, thus transactions that need rapid confirmations will command a higher fee while free transactions could take some time to get included.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
DeathAndTaxes
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Gerald Davis


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November 28, 2011, 04:52:34 AM
 #13

Also Im having trouble with the same point.


They say that transaction fees will grow to run the system.
And that the fee structure is flexible.

I.e. higher fees, faster transaction time.

But I dont see how this is possible.

Once someone finds a block the hardwork is done, the oppurtunity cost of accepting any fee is 0.

Thus it makes sense that a rational miner with a block, will accept all transaction fees regardless of size.

Thus the transaction time for a 1btc fee and 1000 btc fee would be equal?

is there something im missing? The only way this would change is if miners could somehow pick which transactions they want to go after. But that seems incompatible with the current network?

One option is to let market forces prevail.  While you are right it is easy to include any transactions it is just as easy to EXCLUDE them.  Technically one could mine a block w/ 0 transactions other than the coinbase (miner reward) transaction.  You may see certain pools start to exclude free transactions as the economics of mining change w/ declining block reward.

Personally I think the "rules" for transaction fees will need to change.  Currently there is no reason to exclude any transaction w/ a fee (no matter how small).  The protocol rules could be changed so that if one includes a transaction fee it must be a certain size (no 1 satoshi fees) or the transaction is considered invalid by other clients and blocks w/ that transaction are considered invalid.

More info on transaction fees and future of Bitcoin:
http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be

IIRC the developers have indicated the transaction fee structure will need to change and changes are planned.  Currently fees aren't structured to generate revenue as much as they are to prevent "free" attacks against the network.  Block subsidies are high, there is plenty of space in the block, and transaction volume is low.  As such the fees exist merely to prevent attacks (such as creation 1 billion 1 satoshi transactions to fill blocks).  Obviously as the block reward declines that will need to change.

extor
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December 04, 2011, 01:33:22 PM
 #14

The amount of processing power to generate a block is also becoming cheaper and cheaper though, is it not? So the cost of maintaining the system should go down drastically as time progresses since it doesn't rely on paying salaries or renting real estate and the system lives entirely on personal computers which are one of the few commodities in life that continue getting cheaper each month.
Gabi
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December 04, 2011, 03:43:36 PM
 #15

The amount of processing power to generate a block is also becoming cheaper and cheaper though, is it not? So the cost of maintaining the system should go down drastically as time progresses since it doesn't rely on paying salaries or renting real estate and the system lives entirely on personal computers which are one of the few commodities in life that continue getting cheaper each month.
This doesn't make sense.

A block is generated on average every 10 minutes regardless the processing power. If there is too many processing power and blocks are created too fast, then Difficulty rise. If the processing power drop, and blocks are created too slowly, difficulty decrease.

If you mine, each "share" you mine would be a block at Difficulty 1.


Another flaw of your logic is that high processing power is required to keep the blockchain safe. If it's too cheap, then anyone could make a 51% attack.
MoonShadow
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December 04, 2011, 11:27:09 PM
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Another flaw of your logic is that high processing power is required to keep the blockchain safe. If it's too cheap, then anyone could make a 51% attack.

It doesn't matter how cheap the hardware is, for whatever the attacker can buy the honest nodes can buy.  The difficulty simply adjusts to whatever is being used.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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