Bitcoin's Future: What Happens When the Block Reward is Lower Than Fees?

[Sr.Urbanist]

I was lucky enough to be around Bitcoin mining when the rewards were sky-high and the competition wasn't as fierce. But as time has passed and the difficulty has skyrocketed. It's become almost impossible to turn a profit with mining. I still remember when I first got my S9 and it was bringing in a cool $25-$100 per day, but those days are long gone and the rewards just aren't what they used to be.

I've been thinking a lot about what will happen when the block reward subsidy drops below 2 BTC in a little over 5 years. According to the original white paper, the goal was for fees to eventually overtake the subsidy, but there was no specific timeline given. If the price of Bitcoin is high enough to make up for the lower subsidy with miner fees, it could cost an exorbitant amount to send Bitcoin. This could put pressure toward using centralized services like exchanges and WatchTowers on the Lightning Network for using Bitcoin. If the cost of sending Bitcoin remains low, mining will become more and more reliant on cheap electricity.

It's hard to predict exactly what will happen, but I'm curious to hear what others think. What do you think will happen when the block reward subsidy is 1.5625 BTC in a little over 5 years?

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[BitDane]

Economically, it isn't hard to predict what would be the action of miners.  If the mining become not profitable, those who are mining just for profit will definitely stop.  Those left would be miners who take Bitcoin mining as hobby and does not take importance of profit. 

I believe Satoshi had a vision that in due time, transaction fee will overtake the reward of Bitcoin in hopes that adoption will do well that miners won't mind getting a fraction of Bitcoin in every block reward because Bitcoin transaction fee is there to compensate .

So the Bitcoin mining future depends on the adoption and usage of BTC.  If these (adoptions and usage) sector fail, it is inevitable that Bitcoin mining sector will suffer greatly and if it does, we can possibly see a huge decline of hashing power securing the Bitcoin network.

It's hard to predict exactly what will happen, but I'm curious to hear what others think. What do you think will happen when the block reward subsidy is 1.5625 BTC in a little over 5 years?

As long as the bitcoin price doesn't tank, recover and records another ATH, I think 1.5625 BTC is still sufficient for the miners to sustain their activity.

[altair_tech]

My take is a bit controversial in some circles, but I'd post it here because I really believe in it.
Satoshi probably intended the block reward as a temporary subsidy to bootstrap the network and pay the miners until there was enough economic activity that miners have sufficient compensation from transaction fees.
So, shrinking block rewards isn't a problem, even if BTC prices don't rise much from here. Just my 2 cents.

[fennic]

I was lucky enough to be around Bitcoin mining when the rewards were sky-high and the competition wasn't as fierce. But as time has passed and the difficulty has skyrocketed. It's become almost impossible to turn a profit with mining. I still remember when I first got my S9 and it was bringing in a cool $25-$100 per day, but those days are long gone and the rewards just aren't what they used to be.

I've been thinking a lot about what will happen when the block reward subsidy drops below 2 BTC in a little over 5 years. According to the original white paper, the goal was for fees to eventually overtake the subsidy, but there was no specific timeline given. If the price of Bitcoin is high enough to make up for the lower subsidy with miner fees, it could cost an exorbitant amount to send Bitcoin. This could put pressure toward using centralized services like exchanges and WatchTowers on the Lightning Network for using Bitcoin. If the cost of sending Bitcoin remains low, mining will become more and more reliant on cheap electricity.

It's hard to predict exactly what will happen, but I'm curious to hear what others think. What do you think will happen when the block reward subsidy is 1.5625 BTC in a little over 5 years?

So in my opinion if Bitcoin Mining fee is more than block reward in terms Of Price The Price will be much higher. My mean that if Bitcoin mining fee is 0.01 BTC per block and reward is 0.01 Btc Per block than Prices of Bitcoin will be skyhigh cause there will be no Bitcoin to mine and there will be no pressure of selling and also bad News regarding Bitcoin. Currently we have been listening to the China Mining Fud and eventually it will be gone by the time.

[NeuroticFish]

What do you think will happen when the block reward subsidy is 1.5625 BTC

The fact bitcoin will be so difficult to earn should make the price go significantly higher.
The fact LN and maybe similar solutions will be used on a larger scale may make tx fees even go lower.

So imho comparing the block reward with the tx fees is useless/counterproductive. I think that block reward + tx fees should be compared with the fiat cost of mining a block, and then we would see how much one Bitcoin worth.
Of course, various modifiers have to be taken into account, from the more performant machines by then to many more using very cheap energy from the sun. Also don't forget the inflation of fiat.
But that's all. I don't understand why you've tried to overcomplicate the equation, but I see no problem with block reward going lower than the tx fees, even though I expect that happen significantly later than your predicted time frame.

[LDL]

It's hard to predict exactly what will happen, but I'm curious to hear what others think. What do you think will happen when the block reward subsidy is 1.5625 BTC in a little over 5 years?

Next halving 2024
Block rewards: 3.12



When bitcoin halved in 2009 the block reward was now 50 btc every 10 minutes.  In the evolution of this time, it will decrease by 2024 and stand at 3.25 BTC every 10 minutes.  So you can easily imagine that in the near future if the price of Bitcoin does not increase, the block reward will gradually decrease to almost zero.  In this situation, the mining cost will increase a lot by combining the power consumption, electricity bill, space consumption etc.  As a result, you have to face losses while mining.

Mining future if blocked rewards lower than fees: https://www.investopedia.com/tech/what-happens-bitcoin-after-21-million-mined/

[FP91G]

In fact, the problem of electricity shortage is not all over the world. There are huge surpluses of electricity in many countries, and mining will develop further. Even now, when mining is unprofitable, the hash rate chart shows a reverse trend.

[philipma1957]

Doge will thrive and BTC will falter.

LN really hurts BTC in the not so distant future.

That is why I mine both DOGE and BTC

[ABCbits]

What do you think will happen when the block reward subsidy is 1.5625 BTC in a little over 5 years?

Just like previous halving, some miner will stop their mining activity and sell hardware they no longer use while other's will continue mining with lower profit.

LN really hurts BTC in the not so distant future.

I think you're overestimating LN as scaling solution. People who rarely make transaction (usually investor and holder) wouldn't bother use LN, unless they're willing to "lock" their Bitcoin on LN channel.

[kano]

Doge will thrive and BTC will falter.

LN really hurts BTC in the not so distant future.

That is why I mine both DOGE and BTC

Quoted for when it doesn't happen

[joniboini]

Satoshi probably intended the block reward as a temporary subsidy to bootstrap the network and pay the miners until there was enough economic activity that miners have sufficient compensation from transaction fees.
So, shrinking block rewards isn't a problem, even if BTC prices don't rise much from here. Just my 2 cents.

I also think this is the case. Lots of systems implement these "early" incentives for users to make sure they get a lot of users on their platform, and then gradually remove them. As long as their service/activity stays the same, the user will generally still use their product. So, I believe as long as the network is still valuable for people (whether they classify BTC as money or an asset/store of value) it will continue to survive.

OP, you might want to search for other threads that discuss this topic. I don't remember which one is it, but I'm sure there are several discussions surrounding this topic in the past. The consensus doesn't change that much afaik, but there might be some info that you might find interesting from the previous threads.

[LDL]

The halvings of the past gave the same amount of bitcoin rewards with bitcoin mining, excluding mining costs, electricity bills, transaction fees, etc.  In case of next halving, the Bitcoin reward goes after the fraction i.e. almost reaches zero, in which case it is very difficult to predict how much it will be reasonable / profitable to mine with electricity bills, transaction fees, mining maintenance costs.  If the Bitcoin market goes down then mining will stop altogether.  Especially after 2040 it is only a matter of time whether Bitcoin mining will survive.

[DaveF]

Just like previous halving, some miner will stop their mining activity and sell hardware they no longer use while other's will continue mining with lower profit.

In theory, at a certain point difficulty will drop and mining will go back to being more home miner friendly, but that is decades in the future.

I think you're overestimating LN as scaling solution. People who rarely make transaction (usually investor and holder) wouldn't bother use LN, unless they're willing to "lock" their Bitcoin on LN channel.

Possibly, or more people are going to keep their funds in their own wallets and then put them into massive LN routing services and use their wallets. Knowing they are not secure but neither is the cash in your wallet. So you keep your cold funds cold and your hot funds in a very insecure way, but not enough to matter.

Once again time will tell.

As others have said this topic keeps coming around, but rehashing it now and then might not be the worst.

I also see other coins imploding messily as their only reason to exist is for people to mine, make a quick profit and dump and leave. As more of those go away I can see some people running a 'low power low noise' miner at home to make a few dollars.

-Dave

[philipma1957]

Doge will thrive and BTC will falter.

LN really hurts BTC in the not so distant future.

That is why I mine both DOGE and BTC

Quoted for when it doesn't happen

I will bite quoted for when it does happen " circa 2056 "

 I will be 99 


 Merry Christmas

[BitDane]

The halvings of the past gave the same amount of bitcoin rewards with bitcoin mining, excluding mining costs, electricity bills, transaction fees, etc.  In case of next halving, the Bitcoin reward goes after the fraction i.e. almost reaches zero, in which case it is very difficult to predict how much it will be reasonable / profitable to mine with electricity bills, transaction fees, mining maintenance costs.  If the Bitcoin market goes down then mining will stop altogether.  Especially after 2040 it is only a matter of time whether Bitcoin mining will survive.

It is not a secret that the survivability of Bitcoin mining depends on the two factor.

1.  Bitcoin adoption
2.  Mining machine development

Adoption gives more profit to miner( via increased price and increase number of transaction increasing transaction fee input to the network) while mining machine development reduces the energy consumption and at the same time produces more hashing power (cheaper electrical charges plus higher hashing power output).

So if these two factors goes well, I do not think miner will face any difficulty in the future(except if the government push their ideology that Bitcoin miners greatly contribute to greenhouse effect), this will ensure the survivability of Bitcoin mining in the future.

[LDL]

1.  Bitcoin adoption
2.  Mining machine development

So if these two factors goes well, I do not think miner will face any difficulty in the future(except if the government push their ideology that Bitcoin miners greatly contribute to greenhouse effect), this will ensure the survivability of Bitcoin mining in the future.

Happy Christmas ceremony.
You are absolutely right.  However, one thing that seems very complicated to me is that if the price of Bitcoin does not increase in subsequent halvings and electricity bills, machinery system, and maintenance costs increase over time, mining costs will automatically increase.  In this case the mining system will face losses.  But what I understand is that Bitcoin goes through a cyclical system and after a certain period of time the market increases and during that time Bitcoin price decrease does not affect the mining system.

[ABCbits]

If the Bitcoin market goes down then mining will stop altogether.

I disagree. The difficulty will simply drop low enough for few miner able to continue mining at profit. Besides, i expect some Bitcoin enthusiast will start/continue mining to keep the network alive.

I think you're overestimating LN as scaling solution. People who rarely make transaction (usually investor and holder) wouldn't bother use LN, unless they're willing to "lock" their Bitcoin on LN channel.

Possibly, or more people are going to keep their funds in their own wallets and then put them into massive LN routing services and use their wallets. Knowing they are not secure but neither is the cash in your wallet. So you keep your cold funds cold and your hot funds in a very insecure way, but not enough to matter.

The idea of LN routing service is interesting. But looking at current condition where routing fee is very low, IMO it's not attractive enough for many people.

[LDL]

@ETFbitcoin
@BitDane
Attention please , just I asked for learning.

Assuming we are in 2072 where blocked rewards 0.0007629  BTC per every 10 minutes. And Halving BTC mined in cycle 160.2172 BTC

How can mining be commercially profitable in this situation seems very difficult to me.
Assuming that mining power consumption, electricity costs, and maintenance costs will be lower in a tech-driven economy, what will be the condition of the BTC market if BTC mining blocked mined cycle approach zero?

[philipma1957]

@ETFbitcoin
@BitDane
Attention please , just I asked for learning.

Assuming we are in 2072 where blocked rewards 0.0007629  BTC per every 10 minutes. And Halving BTC mined in cycle 160.2172 BTC

How can mining be commercially profitable in this situation seems very difficult to me.
Assuming that mining power consumption, electricity costs, and maintenance costs will be lower in a tech-driven economy, what will be the condition of the BTC market if BTC mining blocked mined cycle approach zero?

As I have said I do not look past 2056 I will be 99 and very likely dead or I simply won't care if BTC is working.

I see a lot of problems with BTC and current scaling issues and a shift to LTC/DOGE as a more likely solution than BTC continuing to work well.

UI have also made a case for BTC to still give out 21 million coins but to slow the ½ pace to 8 years vs 4 years.

this means 20 minutes for blocks
this means 144 blocks a day slows to 72 blocks
It means the remaining 2,000,000 coins are given out slower.
It means more incentive to use LN since the blockchain will be slower.

I have a thread on it.

https://bitcointalk.org/index.php?topic=5427871.msg61428479#msg61428479

[BitDane]

Assuming we are in 2072 where blocked rewards 0.0007629  BTC per every 10 minutes. And Halving BTC mined in cycle 160.2172 BTC

How can mining be commercially profitable in this situation seems very difficult to me.
Assuming that mining power consumption, electricity costs, and maintenance costs will be lower in a tech-driven economy, what will be the condition of the BTC market if BTC mining blocked mined cycle approach zero?

As i said earlier, difficulty adjustment will make mining remain profitable where only miner with efficient ASIC and low operational can survive. For example, if all other variable remain same (same Bitcoin price, ASIC type, etc.), the difficulty will be adjusted to only 1/2^13 of current difficulty.

In addition Satoshi design that halving in hopes that in due time adoption is already proliferated that the tx fee can give more than enough reward to miners.  Aside from technological advancement, difficulty adjustment, I believe adoption is the key factor for the Bitcoin economy to survive, after all the market relies on supply and demand.

Assuming that the block mined is nearly zero and Bitcoin demand keeps coming in, it only means that the supply is already near to exhaustion, and with the proliferating demand, there is only one way for BTC market and that is to uptrend.

The increase in difficulty and halving of reward can be offset by adoption and technological advancement.  In a case where supply is already exhausted but the demand keeps on piling up, this will make Bitcoin more valuable and expensive that can compensate to the halving of the block reward.

And if the reward isn't enough that makes miner discouraged to continue, Bitcoin developer had addressed that problem by difficulty adjustment depending on the hash power solving the block, the only problem is the last block to mine before the difficulty adjustment kicked in but after it will be a breeze for miners.  I do not think the difficulty adjustment is created for the profitability of miners but instead to secure that the network will continue to flow regardless of the hash power being pointed to the network. Profitability is probably just the side effect of the difficulty adjustment because miners can then use lesser hash power to mine Bitcoin/BTC tx fee, which reduced their cost in solving  a block.