how will the Bitcoin security hold up as miners' rewards decrease

[alex113115]

Hey! I've written an article on how low incentives to miners could leave the Bitcoin network without enough budget to secure transactions. There is an opinion that transaction fees alone are insufficient to motivate miners. I’d appreciate an expert opinion and comments from the community. I'd specifically appreciate your comments on these points:

-  What is the most likely outcome if the Bitcoin security budget does decrease? How do you envision Bitcoin’s long-term security holding up as mining rewards decline? What alternative incentive models could keep miners engaged? Increase in transaction fees? New use cases that drive transactions? Layer 2 solutions or sidechains?

I also wonder when the final halving technically occurs. How is it programmed? Is there a hard stop, or does it stop when the reward is less than two satoshi and no more halving is possible?

Here is the link to my article. Please let me know if you see any inaccuracies there: https://www.observers.com/who-will-drive-bitcoin-bus-without-miners/

[odolvlobo]

Hey! I've written an article on how low incentives to miners could leave the Bitcoin network without enough budget to secure transactions.

Try again when you have determined the minimum necessary block reward. Otherwise it's just FUD.

[ABCbits]

Does Bitcoin Need A Change?

The community and experts discuss various theoretical scenarios to address the issue. Those range from a complete rewriting of the Bitcoin concepts, such as the introduction of perpetual inflation (mining more bitcoin for rewards) and fixed nodes (centralization), to less radical ideas, such as higher transaction fees.

1. Increase total Bitcoin supply would violate principle of Bitcoin. See https://en.bitcoin.it/wiki/Principles_of_Bitcoin.
2. Bitcoin decentralized is major reason it's so successful. Otherwise, it'd be seized just like Liberty Reserve.
3. Default minrelaytxfee value haven't changed in decade, despite Bitcoin price have raised a lot since then. I doubt the community would agree to increase the default value.

[kotajikikox]

-  What is the most likely outcome if the Bitcoin security budget does decrease?

Some miners may not deem mining bitcoin profitable anymore therefore leaving the network. This would mame the network less secured of course but the network will still function with how much miners are still operating.

I also wonder when the final halving technically occurs. How is it programmed? Is there a hard stop, or does it stop when the reward is less than two satoshi and no more halving is possible?

The final halving will occur until it’s no longer possible to cut satoshi into half. Not two but if there is only less than 1 satoshi per block. After this there is no issuance of new bitcoins. New bitcoins entering the network anymore.

[alex113115]

Hey! I've written an article on how low incentives to miners could leave the Bitcoin network without enough budget to secure transactions.

Try again when you have determined the minimum necessary block reward. Otherwise it's just FUD.

It depends on the price of the computing power, which is hard to predict in the long term. Besides, this number can vary significantly for different miners. I'm rather trying to imagine what could keep miners engaged if the rewards become too small.

[Mia Chloe]

Miners rely on both transaction fees and block reward. However the problem is getting the block reward requires a lot of hash rate to increase your chances and probability of you getting the valid hash and hence the reward. But the problem is solo miners merely generate enough hash to even confirm transactions with good fees fast compared to bigger pools.

So because of this in rear sense solo miners actually depend more on transaction fees than the actual block reward because of the hash rate they generate. This is the reason why many of them join mining pools instead.

[odolvlobo]

Hey! I've written an article on how low incentives to miners could leave the Bitcoin network without enough budget to secure transactions.

Try again when you have determined the minimum necessary block reward. Otherwise it's just FUD.

It depends on the price of the computing power, which is hard to predict in the long term. Besides, this number can vary significantly for different miners. I'm rather trying to imagine what could keep miners engaged if the rewards become too small.

How much is too small? That is an important unknown. I don't think anyone has figured out the minimum necessary value or how to determine it.

But I guess we don't need to know the minimum value in order to think about what might happen if the block reward goes below it.

There are several examples of 51% attacks on other coins. In most cases of a sustained 51% attack, the coins died. However, there were multiple successful double-spends on Ethereum Classic, and that coin is still around. There was also a sustained 51% DOS attack on Bitcoin Cash and that coin has survived.

[mr.mister]

Even if mining becomes unprofitable at some point, miners have a strong incentive to continue—protecting the value of their own Bitcoin holdings. After all, many miners hold substantial amounts of Bitcoin, and if they all abandon mining, the entire network could collapse, rendering their assets worthless.

That being said, by the time the last Bitcoin is mined—roughly 115 years from now—the cost of mining will likely have dropped significantly due to major advancements in computing and electricity generation. If Bitcoin reaches a valuation of $1 billion per coin (yes, billion), the profitability equation shifts dramatically. Lower mining costs and immense value per Bitcoin would ensure that miners remain profitable while keeping the network highly secure.

[headingnorth]

You are forgetting that the value of each bitcoin rewarded tends to go much higher after every halving.

So even if the number of bitcoin that is rewarded to the miners is cut in half, the value of each bitcoin is worth at least twice as much than before,
so the miners aren't really losing anything. They are actually earning more as a result of the halving, due to this price appreciation.

Also, as adoption increases which naturally occurs as the price of bitcoin goes up, so does the volume of transactions and fees.
More people using the network means more fees collected by the miners.

[nakamura12]

So because of this in rear sense solo miners actually depend more on transaction fees than the actual block reward because of the hash rate they generate. This is the reason why many of them join mining pools instead.

In addition to this, some solo miners who didn't find the reward and transaction fees is they join a pool. It does need a powerful machine that has high hashrate. It would be different if a solo miner can generate good hashrate then they wouldn't be depending on the transaction fees alone but also the block reward. We know that if a miner have good hashrate means that the miner spend lots of money for the rig to generate the required hashrate.

[franky1]

I also wonder when the final halving technically occurs. How is it programmed? Is there a hard stop, or does it stop when the reward is less than two satoshi and no more halving is possible?

first lesson of bitcoin, there are NO BTC in the blockchain. no BTC in the block reward
all units of measure are hard coded as sats in the protocol.. and then using the app/explorers display to do math to display it in a nicer way in btc form

the initial reward of 2009 was 5000000000sats which for visual display, comfort of conversation and common money recognition is represented as 50btc. yep the 50btc reward is just GUI display of the wallet and not hard coded in the protocol

yep in the blockchain, you wont find the first 4 year cycle of rewards being 110010 (50)

this 5000000000 is actually in binary
100101010000001011111001000000000
to get to 2500000000 (25btc) in binary is simple. you just remove the suffix bit
10010101000000101111100100000000
to get to 1250000000 (12.5btc) in binary is simple. you just remove the suffix bit
1001010100000010111110010000000

yep each halving is just 1 bit less of the reward which the translates binary to decimal to a number you can recognise
the very last halving is where the final 1bit becomes 0

as for incentive for miners
miners do not pay their electric in sats. they pay electric bills in native countries fiat £$¥€
and so the market price exchange rate deflates(multiplies) the amount of fiat you get for a set amount of sats/btc

this market deflation aspect is ample to cater and look after miners for several decades without the need for transaction fee's to be significant bonus/replacement

however by the time several decades have passed the ignorant dev-politics of those governing the protocol would realise that technology capabilities grow, and they will allow there to be more utility of a block to add more transactions and thus more people making transactions at a reasonable fee each, to equate to a high enough total fee to be of significant replacement for the blockreward

but this kinda stuff is not something you need to worry about in your lifetime, but a interesting discussion you might want to make your great grandkids aware of for when they grow up

as for your bitcoin bus analogy of the article
right now the bitcoin bus is self funded by generating its own income(blockreward) later on the passengers(transactions) will buy bus tickets(fee) to ride the bus when the bus is not sufficiently self funding itself

.. i understand your a newbie so i wont rip apart your other errors i found in your article, but enjoy learning about bitcoin. there is much to learn

[cr1776]

"Currently, miners earn 6.25 BTC per mined block, which comes from supply inflation"

Really?  A simple fact like that is wrong?  And then saying the correct number later?  Makes one wonder about the rest of the accuracy.

[dzungmobile]

-  What is the most likely outcome if the Bitcoin security budget does decrease? How do you envision Bitcoin’s long-term security holding up as mining rewards decline? What alternative incentive models could keep miners engaged? Increase in transaction fees? New use cases that drive transactions? Layer 2 solutions or sidechains?

You have to know that Bitcoin miners' rewards have to sources: Bitcoin block subsidy, and Bitcoin transaction fee.

• Only thing we are sure is, Bitcoin block subsidy will become less with time, after every 210,000 blocks or about every 4 years.
• Bitcoin transaction fee, in average, for future Bitcoin blocks can be higher or smaller than now.

It's purely about rewards of Bitcoin miners in BTC, but is mining profitable for Bitcoin miners or not, it will depend on their input cost and output revenue that depends on Bitcoin price in future too.

• Controlled supply
• Equivalent network time
• To mine same 1 BTC, Bitcoin miners will have to spend more inputs in future because of Bitcoin block subsidy halvings, and more competitiveness among Bitcoin mining pools and Bitcoin miners.

[Darker45]

The point in which miners will only be receiving transaction fees will not happen within more than a hundred years. Let the future take care of it. For now, the correlation between Bitcoin's hashing power and block reward remains negative. While the reward is going down, the hashrate is also going up. The block reward has already been halved 4 times but the hashrate keeps on registering new ATHs.

I guess the price increase of Bitcoin and the increase of transactions as a result of the increase in adoption will sufficiently cover for the regular decline in mining rewards. Bitcoin's adoption is still low but it has already managed to surpass Visa and Mastercard's combined transaction volume. Notwithstanding, it still has so much room for growth. Until when this will be sustained, we can only guess. So far, however, the reward has already gone from 50BTC to 3.125BTC and yet Bitcoin's mining difficulty continued to increase.

[pooya87]

Tell me what will the price be by the end of today? How about by the end of this week or month? You can't, can you?

Similarly you can't really speculate on Bitcoin's security regarding miners. When bitcoin started, miners were earning 50 bitcoins per block but that was barely worth 50 bucks. Today they are earning 3 bitcoins per block (3.125 to be exact) but it is worth $300,000.

My point is that just like people back in 2009-2010 could neither foresee nor believe some day miners would be earning $300k with 3BTC reward, we can't really predict what things are going to be like 10 years from now when reward is smaller or 100 years from now when the reward is zero.

This is a problem for the future to solve because it depends on a lot of things. I personally believe by that time bitcoin has either will have ceased to exist or significantly changed and will not be anything like it is today.

[alex113115]

I also wonder when the final halving technically occurs. How is it programmed? Is there a hard stop, or does it stop when the reward is less than two satoshi and no more halving is possible?

yep each halving is just 1 bit less of the reward which the translates binary to decimal to a number you can recognise
the very last halving is where the final 1bit becomes 0


.. i understand your a newbie so i wont rip apart your other errors i found in your article, but enjoy learning about bitcoin. there is much to learn

And after 1 bit becomes 0 is the network programmed to stop 'dividing/cutting' it or will it forever divide 0 by 2 (only to get 0 again) every 210 000 blocks?

Well, I sincerely appreciate your mercy, but I would be grateful if you could rip them apart so I do not make them again...

[BlackBoss_]

Tell me what will the price be by the end of today? How about by the end of this week or month? You can't, can you?

If everyone can predict price of Bitcoin correctly, everyone would have become billionaires now, 16 years since Bitcoin Genesis Block in January 2009. The fact is not everyone are millionaires or billionaires from Bitcoin mining or investment since 2009, this means people mostly made bad and inaccurate price predictions.

They failed in the past, and will continue to fail in future with price predictions.

In financial market, as the saying goes "Don't time in the market" and it is applicable with Bitcoin market too as history proves it is good advice.

[hero_the_bossman]

Tell me what will the price be by the end of today? How about by the end of this week or month? You can't, can you?

If everyone can predict price of Bitcoin correctly, everyone would have become billionaires now, 16 years since Bitcoin Genesis Block in January 2009. The fact is not everyone are millionaires or billionaires from Bitcoin mining or investment since 2009, this means people mostly made bad and inaccurate price predictions.

They failed in the past, and will continue to fail in future with price predictions.

In financial market, as the saying goes "Don't time in the market" and it is applicable with Bitcoin market too as history proves it is good advice.

We know that the value of BTC will grow over time, in the long term.
We don't need to know the exact numbers because it wouldn't matter 

[odolvlobo]

That being said, by the time the last Bitcoin is mined—roughly 115 years from now—the cost of mining will likely have dropped significantly due to major advancements in computing and electricity generation.

The cost of mining is primarily determined by the value of the block reward (i.e. subsidy plus fees) because of the difficulty adjustment and the economics of mining. It is not related to technology or energy prices.

And after 1 bit becomes 0 is the network programmed to stop 'dividing/cutting' it or will it forever divide 0 by 2 (only to get 0 again) every 210 000 blocks?

That's an odd question. First, the network isn't programmed; each node in the network is programmed. Second, whether a node's software divides 0 by 2 to get 0 or it just says 0 is irrelevant because both agree that the correct amount is 0. BTW, Bitcoin Core for example, continues to divide 0 by 2 for many halvings and then at some point it stops and just says 0.

[Faisal2202]

-  What is the most likely outcome if the Bitcoin security budget does decrease? How do you envision Bitcoin’s long-term security holding up as mining rewards decline? What alternative incentive models could keep miners engaged? Increase in transaction fees? New use cases that drive transactions? Layer 2 solutions or sidechains?

I also wonder when the final halving technically occurs. How is it programmed? Is there a hard stop, or does it stop when the reward is less than two satoshi and no more halving is possible?

What does security budget means here I did not understand your point and what does Btc security holdings means in your opinion. This is just a pow network where users or miners cane earn money by transaction fee and block reward they can also earn money on holding those btc they earn. Earning alone is not that beneficial therefore mining in pool is advisable.

When all Btc will be mined there would be no block reward I assume and the reward for miners would be coming from transaction fee unless some new technology integrated into it. Till then tx fee is the only reward after 2140.