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Author Topic: What if the fees aren't enough?  (Read 679 times)
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May 04, 2022, 12:43:48 AM
Merited by DdmrDdmr (3), bbc.reporter (1)
 #1

I know its heresy but I'd really like to entertain a discussion on both sides regarding a concern of mine. What if transaction fees aren't enough to incentivize the miners to secure the bitcoin network? I think this is a potential problem we may see in the next few decades as the halving continues on. My hope is that we will have enough people using the bitcoin network to have a healthy fee market, but if we have weak periods like now where there are several unfilled blocks, wont miners just turn off their equipment as they are unprofitable? What options or solutions are being discussed to help mitigate this?
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May 04, 2022, 12:58:31 AM
 #2

This is a topic that has been discussed several times on the forum and the general outcome is that no one can predict how the scenario would pan out.

I think this is a potential problem we may see in the next few decades as the halving continues on.
Over 99% of Bitcoin have been mined already and we can already catch a glimpse of how the network would pan out over the next two halvings where about an extra 5% would be added to the total supply.
The response to this situation cannot be determined now.

but if we have weak periods like now where there are several unfilled blocks, wont miners just turn off their equipment as they are unprofitable? What options or solutions are being discussed to help mitigate this?
Miners regularly shut down their rigs or equipments due to unprofitability, although not at a scale when there's a global situation, but if the current market is any indication, there would always be miners who would replace those who left.

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May 04, 2022, 01:08:20 AM
 #3

If mining isn't profitable then miners won't be running the miners but as far as I know the memepool is empty all the time because more miners are working which keeps the Bitcoin network from clogs and this is not happening only now, the situation remains same over a year so yes the fees are enough even with 1sat/byte and in the next halving the price of 1BTC may reach 100K so it can compensate the loss of rewards due to having and keep going on.

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May 04, 2022, 01:42:14 AM
Merited by buwaytress (1)
 #4

We are starting to see a new wave of miners that are designed to be run at home.

These are quiet miners that are not expensive to run.

Two examples of these are the GekkoScience Compac F, and the FutureBit Apollo BTC. Both can be run at home with minimal or no noise, and are very efficient.

Sure, each one of these devices contributes a tiny fraction of the hash power, but they do work, and are starting to get more and more popular. The overall distributed "home mining" hashrate has been increasing, and will continue to do so in the future.

And these home miners are as good as any industrial miner to find blocks! Proof of this is our own Sledge0001 who found a block with a USB miner, a Compac F. His total hash rate was around 3.65TH when he found it. That's similar to what the Apollo BTC can generate for example.

And if you look into the future, the new Intel Blockscale ASICS will provide a new generation of home miners, built by companies like Jack Dorsey's Block for example.

I can see that in the next few years more and more people will be running a quiet, efficient miner at home. My guess is that when the rewards are not worth any more for the industrial operators, then we will already have a massive distributed network of home miners running efficiently.
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May 04, 2022, 01:48:46 AM
 #5

It won't be until around the year 2140 when Bitcoin miners would only be rewarded solely with transaction fees. Until that time, Bitcoin miners would be rewarded mostly with newly minted coins. At least 99% of their income is coming from new coins. So I guess it wouldn't be much of a problem in the next decade or so. Whatever happens in the year 2140 and beyond, we can only guess. For now, it has been shown that despite the starting 50BTC reward per block mined decreasing into 25BTC and then into 12.5BTC and then 6.25BTC right now, miners are still increasing in numbers and difficulty is still registering new ATHs.

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May 04, 2022, 02:01:36 AM
 #6

If mining isn't profitable then miners won't be running the miners
That won't happen anytime soon though, soon as number of miners decrease the difficulty will decrease as well like every miners would like for lesser competition. Soon as it happen many people will enter again mining and this will be a cycle.
So it's easy to say that we will not experience like what others did that you can run mining even only on your PC.

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May 04, 2022, 02:16:19 AM
 #7

I know its heresy but I'd really like to entertain a discussion on both sides regarding a concern of mine. What if transaction fees aren't enough to incentivize the miners to secure the bitcoin network?
You misunderstood a key point. Bitcoin network created by Satoshi Nakamoto and the income of miners is mainly from their transaction confirmation, not from block rewards, by design.

Quote
I think this is a potential problem we may see in the next few decades as the halving continues on. My hope is that we will have enough people using the bitcoin network to have a healthy fee market, but if we have weak periods like now where there are several unfilled blocks, wont miners just turn off their equipment as they are unprofitable? What options or solutions are being discussed to help mitigate this?
Miners have two classes: big miners and small miners. Small miners are mostly weak hands and they will capitulate in bear market. It has happened in the past before last 3 halvings. It will repeat in future in my opinion.

In theory, with each halving, block reward halved and as consequence of it, Bitcoin price should increase (should double its price at least). How about miner transaction fee?

If the transaction fee (in satoshi) for each block remains the same, what do you think about income for miners (only take into account the part from transaction fee, not block reward)?

Let's see two possibilities
  • Total transaction fee in satoshi value: remains the same >> income should increase because BTC increases in value
  • Total transaction fee in satoshi value increases. Why? In future, I believe there will be more demand on Bitcoin transaction on the network, so people might join fee rate race that give miners better chances to confirm transactions paid by higher fee rate/ vbyte. Then, it will be multiplied by the increase of BTC price. Consequently, we should see a double-effect (positively) on miner income

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May 04, 2022, 02:40:53 AM
 #8

What if transaction fees aren't enough to incentivize the miners to secure the bitcoin network? I think this is a potential problem we may see in the next few decades as the halving continues on. My hope is that we will have enough people using the bitcoin network to have a healthy fee market, but if we have weak periods like now where there are several unfilled blocks, wont miners just turn off their equipment as they are unprofitable? What options or solutions are being discussed to help mitigate this?

The difficulty adjustment is designed so that mining is always profitable for the most efficient miners, regardless of the value of the block reward.

The real question is whether or not the block reward is high enough to make a 51% attack economically infeasible. One consideration is that if it is not, then perhaps it is because Bitcoin has failed and so it is not worth saving anyway.

In theory, with each halving, block reward halved and as consequence of it, Bitcoin price should increase (should double its price at least). How about miner transaction fee?

There is nothing to support that belief. The halving does not halve the supply.

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May 04, 2022, 03:41:33 AM
 #9

If mining isn't profitable then miners won't be running the miners
That won't happen anytime soon though, soon as number of miners decrease the difficulty will decrease as well like every miners would like for lesser competition. Soon as it happen many people will enter again mining and this will be a cycle.
So it's easy to say that we will not experience like what others did that you can run mining even only on your PC.
Mining BTC became more difficult so the only option is GPU with powerful hashrates then only the miners can able to make profits apart from electricity bills, etc. As of now we didn't see anyone who is mining complaining about their decline in profits so these all are just common speculation.

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May 04, 2022, 04:40:26 AM
 #10

If mining isn't profitable then miners won't be running the miners
That won't happen anytime soon though, soon as number of miners decrease the difficulty will decrease as well like every miners would like for lesser competition. Soon as it happen many people will enter again mining and this will be a cycle.
So it's easy to say that we will not experience like what others did that you can run mining even only on your PC.
Mining BTC became more difficult so the only option is GPU with powerful hashrates then only the miners can able to make profits apart from electricity bills, etc. As of now we didn't see anyone who is mining complaining about their decline in profits so these all are just common speculation.

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May 04, 2022, 04:48:23 AM
 #11

There’s this interesting take by Nic Carter(if I remember correctly) — whereas he said that if it’s the case that the fees wouldn’t be enough, it’s likely that entities (including governments) would be running their own miners even at a loss simply because they need the network to be running well.

^I’m paraphrasing but yea. Haven’t thought about it really well but it’s no doubt interesting.

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May 04, 2022, 05:19:54 AM
 #12

There’s this interesting take by Nic Carter(if I remember correctly) — whereas he said that if it’s the case that the fees wouldn’t be enough, it’s likely that entities (including governments) would be running their own miners even at a loss simply because they need the network to be running well.

^I’m paraphrasing but yea. Haven’t thought about it really well but it’s no doubt interesting.

However, wouldn't a change in bitcoin's monetary policy be a much more realistic solution than hoping for Nic Carter's take to occur in or is talking about this a heresy also? The developers and the community should begin to open their minds to any type of technical solution in case the fees might really not be enougn for miners to secure the network.

Grin's developers have been addressing this problem of bitcoin already.

https://docs.grin.mw/wiki/extra-documents/monetary-policy/

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May 04, 2022, 05:32:51 AM
 #13

Luckily for us, Satoshi built in the difficulty adjustment into the protocol so that it will make it easier for smaller miners to enter the scene, if the hashrate drop too much. So you will find that the large Bitcoin miners will shutdown their operations or some of their ASIC miners and the smaller "Home" miners will start their miners to cash in on the lower hashrate.

So there will always be someone wanting to feast on the bread crumbs, because their operational cost might be lower and the lower difficulty will make it ideal for them to mine with a profit.  Wink   (Some people mine illegal with stolen electricity, so they have virtually zero overheads)  Roll Eyes


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May 04, 2022, 06:33:59 AM
 #14

@Kakmakr. Are you implying a possibility that bitcoin might return to the hashrate levels before 2014? This should be a concern because would the institutional investors have a similar level of confidence in holding billions of dollars in bitcoin if that would happen? If the level of confidence in bitcoin drops, it might also have a negative effect on the price. Also, I might be mistaken, however, it was 2014 that the popularity of Asics began, wasn't it?

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May 04, 2022, 06:52:17 AM
 #15

I know its heresy but I'd really like to entertain a discussion on both sides regarding a concern of mine. What if transaction fees aren't enough to incentivize the miners to secure the bitcoin network? I think this is a potential problem we may see in the next few decades as the halving continues on. My hope is that we will have enough people using the bitcoin network to have a healthy fee market, but if we have weak periods like now where there are several unfilled blocks, wont miners just turn off their equipment as they are unprofitable? What options or solutions are being discussed to help mitigate this?
Yet mining hashrate as been increasing even in the recent bearish market, bitcoin mining hashrate still continue to increase and have reach ATH many times this year alone. Bitcoin mining hashrates reach ATH even recently like 3 days ago.



If miners are not having profit, they would have shot down operation and never mine but the hashrate rate continue to increase which means either more miners are joining and old miners are buying more mining equipments.

About the issue of if the transaction fee is never enough, this can happen if the mempool is congested, that is why it is good to use RBF in case of such time so that you can be able to increase the fee if such situation happen.

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May 04, 2022, 06:53:32 AM
 #16

I know its heresy but I'd really like to entertain a discussion on both sides regarding a concern of mine. What if transaction fees aren't enough to incentivize the miners to secure the bitcoin network? I think this is a potential problem we may see in the next few decades as the halving continues on. My hope is that we will have enough people using the bitcoin network to have a healthy fee market, but if we have weak periods like now where there are several unfilled blocks, wont miners just turn off their equipment as they are unprofitable? What options or solutions are being discussed to help mitigate this?

We can speculate, but we don't know. Unless you know a time traveler from the future, we don't have a definite answer.
However, getting to rely solely on tx fees happens gradually, which each new halving, so we can try to get an idea. On the other hand, the final step will be far in the future, hence you should not be that much concerned.

For now the things go well, so there's nothing to fix/mitigate. I hope that you agree on that.
Then yes, if it gets unprofitable, some miners will be stopped. It has happened before. The network does adjust in such cases and the mining will be more profitable for the rest.
Keep in mind that there are already miners that run using electricity they produce. This (after all the equipment is paid for) means pure profit, something that may work just fine even if the tx fees remain small. Then the others will turn off, these businesses will prevail, keeping Bitcoin network running.
Then, as already said, I expect that some entities that use Bitcoin as reserve asset (now big companies, in the future maybe countries too) will also mine Bitcoin, not for profit, instead simply to do their part in securing the network.

I will end with the price. Its evolution is hard to predict on short term, but on long term, with increased adoption, it should get much higher. Of course, the profitability for the miners also depends on how many they are (how big the difficulty is), but until now, in most cases, the price kept staying high enough to cover the mining costs.

So, at least in theory, the things don't look bad. And since the real problems (if they will exist) will probably not happen during my (or your) lifetime... let's just chill  Wink

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May 04, 2022, 02:26:51 PM
 #17

Now there are two types of miners in the industry:
1. Miners who are reliant on individual mining equipment
2. Mining Companies who do it for profit and their margins are quite high.

Now if the fee is not enough the individualized miners would off sell out their systems and would lose hash which would be gained by the big mining companies as well. This ultimately would lead to mining being a centralized activity, which the government is aiming for by participating in the whole thing and delaying the license up to 2 years in many countries.
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May 04, 2022, 02:41:55 PM
 #18

What if transaction fees aren't enough to incentivize the miners to secure the bitcoin network? I think this is a potential problem we may see in the next few decades as the halving continues on.
When btc mining started, you know how huge btc miners that solve the block will go home with?
The journey continued and the amount keeps reducing and till today.
How many pools do you think solves the block.
How many solo miners can solve a block?
Yet, miners are not reducing and transaction fees are not on the roof.
So, it can be said that miners are already living on transaction fees and bitcoin is still here.

 
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May 04, 2022, 02:58:33 PM
 #19

First, it is not miners that mine Bitcoin for the benefit that come from it because some are into the tech. I believe we have experienced a situation when mining is not profitable and it's only the solo miners that shut down their equipment because they can keep up.
We are also going to see the same event if the transaction fee isn't enough to incentivize the miners but most miners these days don't mine a single coin in other to prevent themselves from losing.

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May 04, 2022, 03:00:09 PM
 #20

Miners will keep mining as long as the market exists.
The continuous increase in hash rates will tell how hard to mine this time it takes longer to complete the transaction, and it accumulates more fees. I would think this is because of the low market supply or tough competition. Together with the massive increase in crypto adoption, miners have been also growing fast.

https://www.coindesk.com/tech/2021/02/05/what-does-hashrate-mean-and-why-does-it-matter/

I might be wrong but suspected having huge TRX fees in the future.

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