On bitcoin's very long term future without miner rewards

[ranochigo]

it doesn't seem optimal to depend wholly on price, as is the case with the large block size/low fee revenue model. as block rewards drop and drop, miners will become increasingly sensitive to price changes, potentially leading to large swings in hash rate.

There is a glimpse of hope that by the time we get to that phase, the market would've matured enough such that huge price movements would be less common. It would also signify that miners are just having a thin profit margin and shutting down the bulk of their equipment would be more worth than just keeping it running to earn a marginal profit.

this is the early adopter phase when the block subsidy is still relatively high. how about in......12 years or 16 years? then the issue of block size will be extremely important because fees will be the primary source of mining income.

I see block rewards as a way to distribute the coins but as the block subsidy decreases, the adoption rate would've increased. Currently, the main offchain scaling solution is LN. If the only time the on-chain transactions are needed is to open and close the channel, I would think that the total on-chain fees would increase while still having the same or even more utility.

For the fees to completely replace block rewards, assuming current levels should bring the fees about x6 more expensive and/or x6 increase in transactions/block. I would think that given time, the problem could be resolved. There is still a few years until block rewards would form a big bulk of the miner's profit.

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[tromp]

Actually the more important question is not about any of that, it is all about the price of bitcoin.

Not as much as you might think.
Both the cost of a 51% attack and the possible double spending gains scale linearly with Bitcoin price.
Security is about the mining reward being a sufficiently high fraction of circulating supply.

[pooya87]

to prevent that, fee revenue must rise to dampen the effect of the falling block subsidy. that means restricting block size, probably rather conservatively.

Again we can not predict the future but only see the past so far and extrapolate. There has never been any effects of falling block subsidy and it has gone from 50 all the way down to 6.25 (-87%) while the price and revenue has grown significantly more (380million%).

I have also disagreed with saying block size has to be restricted to force the fees to increase. The "fee revenue" doesn't have to be from the same number of transactions, it can be increased by taking it from more number of transactions (aka increasing capacity).

[thecodebear]

The mining reward will go down gradually, which is good, and the price should keep rising significantly over the next few halvings, allowing the falling mining reward to still offer a lot of $$. This will keep mining profit viable for a long time even when mining reward gets pretty small. But say by 2044, when the mining reward is less than 0.1 BTC, even if the price is $2 million (which it might reasonably be by then, but it might not), that reward is going to be less than it is now. Since the price by that time will be doing nothing close to doubling every four years, as Bitcoin will have long since matured into a slower growing more stable market, we run into a problem. And that problem will only get worse by a century later when price won't even matter because there will be no mining reward beyond tx fees.

Increasing the supply cap is not an option. Period. That will never happen. But of course there is a far more practical solution: increase the block size. The only reason to keep the block size stuck at its small size is to make it easier for people with slower internet to mine by not having to propagate large amounts of bytes around the network, and the worry this would hurt decentralization and therefore security. Storage is less a concern because storage gets cheap at a quick rate. Obviously by now network speeds have already increased since Bitcoin launched, and even then the block size limit was likely pretty conservative. It is entirely reasonable to say by like 2040 we could 10x the block size, letting in 10x as much tx fee to go to miners, not hurt decentralization at all, and allow more actual real world usage of bitcoin, 10-fold as much usage. And it is certainly reasonable to think that by 2140 we could 10x block size again (if not 100x it) to allow mining to be well worth it given tx fees, keep fees low, allow much more usage of Bitcoin.

Increasing block size is the only long term solution to the diminishing mining rewards. It would have been nice if this had been dealt with in 2017 when there was all the controversy over scaling upgrades, and before Bitcoin really achieved the global relevancy that it is on the verge of staring to get today, but instead all we got was a measly ~2x segwit upgrade. At some point Bitcoin developers will have to take this seriously and hard fork to a more future proof Bitcoin network that allows many times more transactions in order to keep mining profitable. The best way would just be too include a blocksize modifier that gets that gets activated in parallel with each halvening, so that every four years as block reward goes down tx fee reward goes up from more room from transactions, plus you only ever have to do one hard fork for this instead of multiple. So far there has been a complete failure from the community to seriously address this problem. It's just been religious-like bullshit between "small blockers" and "large blockers" which is just stupid.

[zbig001]

The amount of miners income from transaction fees is already quite high...
But the level of this income is quite variable, one might be concerned about whether this could form the basis of Bitcoin's security in the future.

However, there a factor that is usually completely overlooked in such discussions: merged mining (Satoshi's idea).
Merged mining is currently in use, with Elastos (main chain and PoW sidechains), Namecoin, Syscoin and a bunch of other coins.

As a rule, none of these coins compete with Bitcoin due to slightly lower (and Bitcoin dependent, of course) decentralization and security.

But aren't they great for contributing to Bitcoin's security in the future?

Merged mining seems to have growth potential.
Especially if someone understands the limitations of securing a coin only with a proof of stake.

[tromp]

Merged mining is currently in use, with Elastos (main chain and PoW sidechains), Namecoin, Syscoin and a bunch of other coins.

It looks like those coins combined account for less than 0.1% of Bitcoin's daily issuance, and thus have negligible contribution to Bitcoin security.

[zbig001]

Merged mining is currently in use, with Elastos (main chain and PoW sidechains), Namecoin, Syscoin and a bunch of other coins.

It looks like those coins combined account for less than 0.1% of Bitcoin's daily issuance, and thus have negligible contribution to Bitcoin security.

I presented this as a possible scenario of the distant future in which the Bitcoin security problem turns out to be purely academic.

As of today, merged mining is not relevant, obviously (maybe except for those responsible for running large mining pools).

[figmentofmyass]

to prevent that, fee revenue must rise to dampen the effect of the falling block subsidy. that means restricting block size, probably rather conservatively.

Again we can not predict the future but only see the past so far and extrapolate. There has never been any effects of falling block subsidy and it has gone from 50 all the way down to 6.25 (-87%) while the price and revenue has grown significantly more (380million%).

you can't just extrapolate into the future since the current primary component of the block reward (inflation) won't be there in the future. we can argue about how to properly account for that, but to assume the current price/hash rate dynamics will continue indefinitely as inflation is phased out---that's just not reasonable to me.

I have also disagreed with saying block size has to be restricted to force the fees to increase. The "fee revenue" doesn't have to be from the same number of transactions, it can be increased by taking it from more number of transactions (aka increasing capacity).

i'm not confident in that assumption. we need a deeper theoretical analysis of fee market dynamics before we can assume that. without fee pressure from restricted block size, fee revenue drops exponentially---that's all i know.

[philipma1957]

There are millions of frozen coins.

As time marches on I believe the old frozen coins will be lifted from inactive accounts.

2024  =  3.125
2028  =  1.5625
2032  =  0.78125
2036  =  0.390625
2040  =  0.1953125
2044  =  0.09765625
2048  =  0.048828125


I think there could be a call to unlock the 2009 frozen accounts in 2039 or later.

the 21mill are still intact. Just recycle the frozen ones.

Many banks remove stale accounts with notice.  If they do this the issue leaves. For a long time.

[figmentofmyass]

I think there could be a call to unlock the 2009 frozen accounts in 2039 or later.

the 21mill are still intact. Just recycle the frozen ones.

Many banks remove stale accounts with notice.  If they do this the issue leaves. For a long time.

interesting idea, but it sounds controversial and unlikely to gain consensus. lots of bitcoin users expressed dismay at the idea of burning unmoved coins in a hypothetical transition to a post-quantum signature algorithm: https://www.reddit.com/r/Bitcoin/comments/4isxjr/petition_to_protect_satoshis_coins/d30we6f/

this occurs to me as the same ethical dilemma---whether to deprive people of their coins in an effort to secure the system. it would be like charging a form of demurrage that users never agreed to in the first place.

[pooya87]

Merged mining is currently in use, with Elastos (main chain and PoW sidechains), Namecoin, Syscoin and a bunch of other coins.

It looks like those coins combined account for less than 0.1% of Bitcoin's daily issuance, and thus have negligible contribution to Bitcoin security.

I presented this as a possible scenario of the distant future in which the Bitcoin security problem turns out to be purely academic.

As of today, merged mining is not relevant, obviously (maybe except for those responsible for running large mining pools).

There are two problems with this idea. First is the fact that you are talking about altcoins and we can not rely on altcoins to even exist after a certain time let alone have enough value to be worth (merge)mining. Second is the fact that no proper cryptocurrency would ever rely on another cryptocurrency for its existence. They will always aim to be stand alone. The "parasitic altcoins" are always low quality useless ones.

i'm not confident in that assumption. we need a deeper theoretical analysis of fee market dynamics before we can assume that. without fee pressure from restricted block size, fee revenue drops exponentially---that's all i know.

That I could agree with. We need to reach a good balance where fees don't go high to unreasonable levels while making sure they don't fall down to zero either and at the same time ensure decentralized nature of bitcoin.

I think there could be a call to unlock the 2009 frozen accounts in 2039 or later.
the 21mill are still intact. Just recycle the frozen ones.
Many banks remove stale accounts with notice.  If they do this the issue leaves. For a long time.

Bitcoin is not a bank, there is no account, there is no frozen account/coins.
And nobody should ever have the power to move someone else's coins just because they weren't moved in X number of days/years.

[odolvlobo]

There are millions of frozen coins.
As time marches on I believe the old frozen coins will be lifted from inactive accounts.
I think there could be a call to unlock the 2009 frozen accounts in 2039 or later.
the 21mill are still intact. Just recycle the frozen ones.

There is no benefit.

[aliashraf]

I want to shed a different light on this issue:

From a pure theoretical perspective it is inappropriate for a monetary system to put a hard cap on the money inflation process because any such system has to incorporate/support user interactions that have nonzero error rate including fatal errors that lead to the loss of money, a continuous leak of the money to non-existence and reduction of the total supply, hence a currency with capped supply vanishes in some future, and a long time before it happens, it will become obsolete/antique because of its limited supply volume.

It is hard to tell that the above argument has any practical application for bitcoin because what is done, is done. But if I was to decide about it in the first day, unlike Satoshi, I'd never stop the supply completely.  I think he did it for some kind of marketing policy, telling people that bitcoin is a rare resource, blah, blah ... yet I think it was not the best Satoshi's decision ever because, all the coins we have in circulation today will be lost sometime, somehow by someone. Right? Unlike bitcoin that is designed to be a "rare resource", time is available enough in the universe, it wins every race.

[tromp]

all the coins we have in circulation today will be lost sometime, somehow by someone. Right?

Assuming a yearly 1% loss rate, it will take approximately 1375 years for supply to dwindle down from 21M BTC to 21 BTC.
If by that time, each satoshi has subdivided further into 10^6 subunits, then the system can keep functioning mostly as is.
Adding on average one decimal every 229 years should suffice.

[odolvlobo]

From a pure theoretical perspective it is inappropriate for a monetary system to put a hard cap on the money inflation process because any such system has to incorporate/support user interactions that have nonzero error rate including fatal errors that lead to the loss of money, a continuous leak of the money to non-existence and reduction of the total supply, hence a currency with capped supply vanishes in some future, and a long time before it happens, it will become obsolete/antique because of its limited supply volume.

There is a continuous leak, but it will not necessarily cause the currency to vanish or lead to a "limited supply volume" (if I am interpreting those words correctly).

Suppose 20 million of the 21 million bitcoins are lost forever. That still leaves 100,000,000,000,000 satoshis, each of which could be potentially be subdivided further into 2⁶⁴ "nakamotos", giving a total supply of about 2x10³³ nakamotos. We should be ok for a few more millennia with that.

[figmentofmyass]

There are millions of frozen coins.
As time marches on I believe the old frozen coins will be lifted from inactive accounts.
I think there could be a call to unlock the 2009 frozen accounts in 2039 or later.
the 21mill are still intact. Just recycle the frozen ones.

There is no benefit.

there's obviously a short term benefit if long term mining incentives turn out to be insufficient: kicking the can down the road. but given that it doesn't address the underlying problem---that miners would either need more inflation or more fee revenue to maintain adequate security---it just doesn't seem worth the ethical baggage of stealing peoples' coins.

i actually like the idea of a requirement to move coins every x blocks (could be years) and having that rule baked into the consensus system. it would make certain transitions (like dropping ECDSA for a quantum resistant signature) so much easier. it would also make for a much more predictable supply because it would be audited periodically (with non complying coins burned and/or recirculated), rather than having us perpetually ponder how many millions of lost coins there are.

ethically and re network consensus, it's much too late to do that sort of thing in bitcoin, but if i were to design a consensus system from scratch this is something i'd consider.

[aliashraf]

From a pure theoretical perspective it is inappropriate for a monetary system to put a hard cap on the money inflation process because any such system has to incorporate/support user interactions that have nonzero error rate including fatal errors that lead to the loss of money, a continuous leak of the money to non-existence and reduction of the total supply, hence a currency with capped supply vanishes in some future, and a long time before it happens, it will become obsolete/antique because of its limited supply volume.

There is a continuous leak, but it will not necessarily cause the currency to vanish or lead to a "limited supply volume" (if I am interpreting those words correctly).

Suppose 20 million of the 21 million bitcoins are lost forever. That still leaves 100,000,000,000,000 satoshis, each of which could be potentially be subdivided further into 2⁶⁴ "nakamotos", giving a total supply of about 2x10³³ nakamotos. We should be ok for a few more millennia with that.

You get it wrong just like @tromp, and Satoshi I suppose:
Inflation is a mechanism for "distributing" money to fresh actors but the mechanism that you propose, does not help with distribution. To understand the problem deeply, one needs to think in the edges and twilight when your hypothetical precision game is not kicked off and people are dealing with a monetary system's token that is not capable to be stored and exchanged smoothly because it is too rare/expensive and does not cover everyday business.

You suggest that in such a case some guy named Luke jr VI or Gregory Maxwell III shows up and proposes a soft fork for including new transaction formats and more precision points and everything becomes under control again, but it is not the case. Instead, by incremental reduction in availability of money, the economy gradually shifts to other devices, and it pushes the money to an even more antique status, demand decreases while the value preserves or even increases, and it makes everything worse in a positive feedback mechanism.

It is how things work in the real world and if we are arguing in a pure paradigm, there also my argument stands still that such a hard-capped supply ends to extinction. I mean, look at it again, it is so obvious that a system without input dies eventually. Right?


P.S.
I understand that such an antique situation for bitcoin is considered as a good status by some people, Actually we are hearing it over and over about bitcoin being rare and worthy because of this rareness. This is not a technical debate anymore when it comes to such wrong interpretations of bitcoin and I have zero interest to argue with people who believe in bitcoin as an antique article.

[tromp]

Instead, by incremental reduction in availability of money, the economy gradually shifts to other devices

You failed to provide any convincing arguments for this though.
Precision will be added simply as a result of a satoshi becoming too valuable to be a smallest unit,
not because too much bitcoin has been lost (which we'll never know except by vague guesses).

I understand the sentiment of your post, that you think a tail emission makes much more sense
than a capped supply (I am in that camp myself).

But Bitcoin, being the dominant player that it its, may be one of the very few PoW coins that can make a hard cap work in the long run. It just needs to maintain that backlog of high fee paying transactions.

[aliashraf]

Instead, by incremental reduction in availability of money, the economy gradually shifts to other devices

You failed to provide any convincing arguments for this though.

I don't need to, it is how things are working right now, and we have people that are endorsing it, as I said, they are talking about world reserve currency, digital gold, diamond, etc. it is the path.

Precision will be added simply as a result of a satoshi becoming too valuable to be a smallest unit,
not because too much bitcoin has been lost (which we'll never know except by vague guesses).

I've rebuked it already: precision doesn't change anything re-distribution and supply matters. In the Third World countries, central banks take a same approach in the opposite directions for their bloated fiat currencies by removing few zeros from the unit, ask any economist and he or she tells you that it has no significant outcome.

Statistically speaking, leaking occurs mainly in the most active parts of the network and should be addressed right there, miners are the best candidates available for this purpose

I understand the sentiment of your post, that you think a tail emission makes much more sense
than a capped supply (I am in that camp myself).

Good to know  

But Bitcoin, being the dominant player that it its, may be one of the very few PoW coins that can make a hard cap work in the long run. It just needs to maintain that backlog of high fee paying transactions.

It is not maintainable, at least there is no strong evidence that it holds in the long run, and now it is you who didn't provide any convincing argument.

[KIZILAGA]

From a pure theoretical perspective it is inappropriate for a monetary system to put a hard cap on the money inflation process because any such system has to incorporate/support user interactions that have nonzero error rate including fatal errors that lead to the loss of money, a continuous leak of the money to non-existence and reduction of the total supply, hence a currency with capped supply vanishes in some future, and a long time before it happens, it will become obsolete/antique because of its limited supply volume.

There is a continuous leak, but it will not necessarily cause the currency to vanish or lead to a "limited supply volume" (if I am interpreting those words correctly).

Suppose 20 million of the 21 million bitcoins are lost forever. That still leaves 100,000,000,000,000 satoshis, each of which could be potentially be subdivided further into 2⁶⁴ "nakamotos", giving a total supply of about 2x10³³ nakamotos. We should be ok for a few more millennia with that.

  Gold buried dozens of empire to the ground,it has no capped supply.Mined for thousand years continously. That is the unbreakable,undeniable money. Adopted all over the world.

Suppose that a few oligarchs or rich elite accumulated more than 10 million coins. The more and more centralized and manipulated,less network and loose power.

Defending a capped supply in money,or commodity is absurd.

Only capped supply valuable is time.24 Hour 60 minutes. Thats it.