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Author Topic: What if the fees aren't enough?  (Read 522 times)
Questat
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May 04, 2022, 03:00:09 PM
 #21

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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May 04, 2022, 03:01:44 PM
 #22

Not so much a case of heresy but a convenient ignorance of reality. Block rewards themselves are enough incentive for miners at the moment, and will continue to be so for the foreseeable 3 or 4 halvings (provided Bitcoin value also follows trends).

Fees per block, just looking over the last 20 or so are 2-6k, and that's at most txs using minimum fee.

The frequency of not-full blocks are also proof of this (sample) and just over 7 hours ago we had a near empty block when there certainly were mempool txs waiting.

@nullama, great share too and I also believe this will be more of the case during the next couple of halvings.

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May 04, 2022, 03:08:12 PM
 #23

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.
Aye, but currently we are operating on block rewards, eventually (a long bloody time) block rewards won't be around, and therefore they will be operating on the fees that the users include. Unfortunately the only answer that seems plausible is that fees either increase so much that it justifies mining or the amount of miners drops massively, and therefore the difficulty. So, only a few miners would be needed to process the transactions. Obviously, this is all so hard to predict, because by the time this becomes a reality, we don't know how popular Bitcoin is going to become. If Bitcoin becomes one of the mainstream currencies, being used every day by millions or dare I say it; billions of people then I don't think miner incentive is going to be a problem, we'll likely have far more greater problems though.

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May 04, 2022, 03:21:47 PM
 #24

Well, it is simple if you use an extremely low fee it can result in an unconfirmed transaction, and mining in this era is a highly profitable venture, and as long as their get rewarded for every block mined so low fee transactions will definitely get mined but it may just be got a little delayed because of the fees.

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May 04, 2022, 05:07:42 PM
 #25

Well, it is simple if you use an extremely low fee it can result in an unconfirmed transaction, and mining in this era is a highly profitable venture, and as long as their get rewarded for every block mined so low fee transactions will definitely get mined but it may just be got a little delayed because of the fees.
They won't get block rewards in terms of new Bitcoin being introduced into the circulation, at least eventually, which I do believe is the question of this discussion. Fees probably won't always remain low, unless the volume of transactions is high enough to justify low fees, which probably means that there will be less competition than there's today in mining.

Although, like I touched upon above the answer isn't actually straight forward, since we're too far away to know where Bitcoin will be at in terms of adoption, and the amount of people actually using it as a every day currency, rather than a reserve currency. That's if Bitcoin will still be alive, and kicking that far in the future.

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May 04, 2022, 06:08:21 PM
 #26

If the fees users pay aren't enough to incentivize miners to secure the network, then this may indicate that the network has gone the wrong path, and it is time to change something in what determines the fee market. Generally, the fee rate depends on how strong users' desire is to get into the next block. In other words, the higher demand for a block space is, the higher the fees. To address the problem of not-enough fees, we should artificially increase the demand for a block space either by increasing the number of active users who would want to place their transaction into a block or by decreasing the size of a block. If we assume that bitcoin has grown to such an extent that there is no way to find new active users, then we should make bitcoin blocks smaller. Make it 256 kByte or lower? But wait, how can bitcoin blocks be empty if almost everyone uses bitcoin? Maybe bitcoin is used only for rare final settlements, and all the activity occurs on second layer chains like Lightning Network? If yes, then we should change a second layer in such a way that all users will have an incentive to settle their payments more frequently so that the demand for a block space can be relatively stable and miners can be profitable. Shut down Lightning Network completely to save the base layer?

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May 04, 2022, 09:12:06 PM
 #27

To address the problem of not-enough fees, we should artificially increase the demand for a block space either by increasing the number of active users who would want to place their transaction into a block or by decreasing the size of a block.
Increase in the block vitual size or decrease in the block  virtual size? There can be better ways than to increase the block size, this may only lead to hard fork.

Do you think Schnorr signature can not go to the extent of making 2 or 3 or more inputs and outputs to counts as 1 but not included because of it can not help miners make money more on transaction. But there are ways transaction virtual size can be reduced.

Lightning network is helping but I wonder why exchanges like Binance, Coinbase, FTX and many top exchanges are not supporting it yet. See how people using lightning network increased just when Paxful, CashApp and few exchanges support it.


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May 04, 2022, 09:14:09 PM
 #28

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?
Satoshi left the solution to the free markets, if bitcoin reaches a massive level of adoption relatively quickly then this is not going to be too much of a problem and the miners will be able to depend almost exclusively on the fees they get from each block they mine.

Now if adoption is slower than that then miners will have to either shutdown their equipment, mine other coins or become more efficient, and if I am perfectly honest I do not see what is the problem with this scenario.

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May 05, 2022, 02:33:08 AM
 #29

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
Small miners are weak hands and they capitulate in bear market? Why would they continue if they make no profit? Makes no sense at all. Instead they could just bitcoin and hold it. Make more profit. I don't think there is anything such as weak hand or strong hand in mining. No one is going to maintain the network if there is no profit from it.

So the two possibilities favor the miners only. No more cheap fees. Wasn't bitcoin supposed to be better because it offers the cheapest fee for cross border transaction? Small transaction will no longer be feasible. People will start using it as a store of value (like they already do right now).

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May 05, 2022, 04:51:04 AM
 #30

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.

It's likely miner with less efficient ASIC or more expensive operational cost (e.g. cooling and electricity fee) will shutdown their activity. And after next difficulty adjustment, other miner (who have more  efficient ASIC and cheaper expensive operational cost) could continue mining not at loss. It's also possible some miner continue mining at loss (at current exchange rate), but speculating BTC price will rise so they can turn loss into profit.

However, for how long can they continue? Will they loan some money to use for their cashflow? It will certainly not be sustainable if there are no assurances of a stable reward at every block mined. Asic manufacturers might also begin to think twice about their own business because of the insufficient assurances on the profitability of their customers.

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May 05, 2022, 05:41:38 AM
 #31

We are talking about a century later and we can't expect what prices btc will be at or even survive that time or not so we can't make any assumptions for that much time period.I would say miners will be willing to keep it safe due to normal rewards only as it would be scarce and prices will be high enough for them to accumulate whatever they can which I think but can't say exactly what will happen.

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May 05, 2022, 05:50:06 AM
 #32

It's silly trying to predict what will happen after so long since it's very difficult to predict stuff that will happen in the next hour. We shouldn't really be worrying about fees and miners for now since they are in a good place at the moment.

Instead, we should focus on more pressing matters like mainstream adoption of popular cryptocurrencies like BTC, ETH, LTC etc at present.

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May 05, 2022, 05:50:13 AM
 #33

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?

If the miners shut down,because the fees are unprofitable,the hashrate/mining difficulty will get adjusted,which means that mining will become easier,which means that it will become profitable again.
On the other hand,most of the miners are hoarding Bitcoins,which means that they are expecting more ATH prices in the future,which means that even if BTC mining isn't profitable all the time,a future BTC price above 100K USD might make it extremely profitable.
Even if BTC mining is unprofitable for a long period of time,many miners could switch of altcoin mining,by choosing altcoins that have profitable mining.  




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May 05, 2022, 09:22:13 AM
 #34

Instead, we should focus on more pressing matters like mainstream adoption of popular cryptocurrencies like BTC, ETH, LTC etc at present.
This is bitcoin discussion which is one of the bitcoin boards on this forum, not altcoin board. Ether, Litecoin and other cryptocurrencies that are not bitcoin are altcoins. Altcoins are not perfectly decentralized like bitcoin. If we should talk about adoption, it would be better to talk about bitcoin adoption.

If the miners shut down,because the fees are unprofitable,the hashrate/mining difficulty will get adjusted,which means that mining will become easier,which means that it will become profitable again.
It would become profitable again but the mining hashrate reduce which means bitcoin blockchain will become less stronger and more susceptible to 51% attack. The hashrate may not be reduced to the extent 51% attack will be possible, but I want to indicate the disadvantage of a reducing mining hashrates.

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May 05, 2022, 10:09:17 AM
 #35

--snip--

It's also possible some miner continue mining at loss (at current exchange rate), but speculating BTC price will rise so they can turn loss into profit.

However, for how long can they continue? Will they loan some money to use for their cashflow? It will certainly not be sustainable if there are no assurances of a stable reward at every block mined. Asic manufacturers might also begin to think twice about their own business because of the insufficient assurances on the profitability of their customers.

We don't know, it heavily depends on how much risk they're willing to take or amount of reserved money. Hopefully those miner don't meet same fate with Chia's miner[1].

[1] https://www.guru3d.com/news-story/chia-cryptocurrency-miners-ditch-their-ssds-and-sell-them-at-loss,1.html

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May 05, 2022, 12:33:13 PM
 #36

That wont happen. Do you realise the final year of mining? 2140? So many things will happen during this much period and who knows bitcoin may or may not exist and moreover new tech could be injected by that time. Let's assume if nothing happens and we have bitcoin only option then imagine the value per bitcoin that will be during this period? Could be hundred to five hundred thousand a bitcoin which will easily compensate the mining profitability. Moreover, this is the main reason why we see increased prices of bitcoin after halving process is compensated.

The only way I see it, if miners are to be turned of forever, bitcoin will need to switch from PoW to PoS that too after 2140 since it would be impossible to switch to another tech at this time.

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May 05, 2022, 12:40:41 PM
 #37

What you said is true in the case if bitcoin price was stable but since the bitcoin price is in an upward movement since its creation then the miners will always be profitable.
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May 06, 2022, 01:13:09 AM
 #38

The miners depend exclusively on the price of bitcoin, the more demand there is for this currency, the more production profits these industries would have, so the concern they bring is understandable, although as they well know, especially those who have been in this job for a long time, the bitcoin will never have stable values, so in a moment it can reach extremely low levels as well as rise and surprise with a quite significant value. Supply and demand is the key for everything to work together and as I have observed, bitcoin this year is breaking its barriers and is reaching more people, which it seems to me at some point will begin its rise and cryptominers will be able to overcome the losses caused in your past. So you could wait or start looking for more advanced technologies, I recently viewed and commented on a news story providing alternatives to overcome this stage of low profit, which explained that the moment more bitcoin miners will upgrade to the new inventions, would have more opportunity to deal with this type of events since these are being presented in an accessible and economical way, which would reduce the costs per team.
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May 06, 2022, 01:23:46 AM
 #39

It's silly trying to predict what will happen after so long since it's very difficult to predict stuff that will happen in the next hour. We shouldn't really be worrying about fees and miners for now since they are in a good place at the moment.

Instead, we should focus on more pressing matters like mainstream adoption of popular cryptocurrencies like BTC, ETH, LTC etc at present.

What a head shaking comment from you hehehe. It should be something that this community should start being aware on. However, similar to what @LongTimeAgo said when he started this thread, it might be heresy. Why is it heresy? Is it because the question will threaten to stop bitcoin from pumping? I am very skeptical on the attitude of such people.

In any case, there is an increasing number of people who are beginning to be familiar on this question. The answer might be something they might not like.

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May 06, 2022, 08:16:02 PM
 #40

If the miners shut down,because the fees are unprofitable,the hashrate/mining difficulty will get adjusted,which means that mining will become easier,which means that it will become profitable again.
On the other hand,most of the miners are hoarding Bitcoins,which means that they are expecting more ATH prices in the future,which means that even if BTC mining isn't profitable all the time,a future BTC price above 100K USD might make it extremely profitable.
Even if BTC mining is unprofitable for a long period of time,many miners could switch of altcoin mining,by choosing altcoins that have profitable mining.  
This is why it is rarely ever unprofitable to mine, if it ever becomes unprofitable then people stop and difficulty drop and it becomes profitable yet again. It is a system that arranges itself and makes sure that people profit.

It would be very hard for it to be unprofitable though, considering how much transaction fees are spent every single day. We need to realize that the volume is huge on bitcoin, this may not work for some other coins which doesn't have this kind of transaction fees or volume but it definitely works amazingly for bitcoin. As long as people end up using bitcoin then they will spend fees and that will be more than enough for sure.

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