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

[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?

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...

divide binary 0 by 2?? you have no clue .. there is nothing to divide.. you cant divide a single binary bit..  learn math and computer science and physics
if a binary bit is 1 it "switches" to 0.. and so (in integer/human form..) zero block reward from the native supply. so that its just tx fee total that becomes the payment to miners

also i will tell you again.. each halving is not "divide by 2" at protocol level, its only divide by 2 conversationally at human simplified level.. its instead remove a binary bit at the suffix end
its only conversationally for easy understanding at the display level of the human eye of a computer screen. translated into jargon of things like 'BTC divide by 2'
(and also lamely done as 'integer or decimal divided by 2' in code of bad programmed apps that cant be bothered to program their app cleanly)
(apps that do integer or decimal divide by 2 can bug out and error out)
(so something some lazy programmed apps have 120 years to bug fix)


other conversational/display misunderstandings of bitcoin
much like the real rule that every 2016th block, the protocol retargets the difficulty to try to keep miners mining 2016 blocks at around 1209600 unix time seconds (a fortnight timescale..) the rule is not "ten min blocks" but it for conversation and display purpose is simplified to "10 min block"

[alex113115]

-  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.

It is all clear. The question is how to attract miners when there is no block reward (or it becomes too small after several halvings) and the transaction fees are not high enough to engage them in mining so that they are in profit (currently they are relatively small).

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?

divide binary 0 by 2?? you have no clue .. there is nothing to divide.. you cant divide a single binary bit..  learn math and computer science and physics
if a binary bit is 1 it "switches" to 0.. and so (in integer/human form..) zero block reward from the native supply. so that its just tx fee total that becomes the payment to miners

I do understand the binary math; probably, I haven't correctly expressed myself. The question was whether (1) the networks eternally continue trying to remove another bit and distribute zero reward or (2) it has some condition like "if after halving procedure block reward=0 then stop sending block reward and stop halving procedure"?

[moderator's note: consecutive posts merged]

[franky1]

It is all clear. The question is how to attract miners when there is no block reward (or it becomes too small after several halvings) and the transaction fees are not high enough to engage them in mining so that they are in profit (currently they are relatively small).

there will still be a "reward" (payment to miners)
but not from the protocols native supply creation..

the "reward" is an amount of coin in the first transaction of a block that goes to an address set by a mining pool manager.
the reward(payment to miners) however is a combination of the "block reward" of supply creation protocol + total fee's

conversationally when the "block reward" word is used, people are commonly speaking in a simplified way of the supply creation.. and not the "total reward for mining pool" which includes the fee "reward"   ('reward' vs 'block reward' word jargon difference)
.. yes its confusing in human speak, but its a throw-back to the early days when blockreward was 100% supply creation with no fee's, so comonly spoken of as jsut the supply creation protocol amount

but when the supply creation becomes zero the 'total reward for miners' that is the total amount that goes into the address of the first transaction of a block would be 100% fee's +  zero supply creation amount

in the future(2140+) the common speak of "blockreward" will be of the fees alone

as for "transaction fees not enough" question
bitcoin will either be highly popular with lots of transactions paying reasonable fee's each, to combine to a sufficient total for lots of miners to collectively work in a mining pool, or it has lost popularity and doesnt need as much miners mining to secure a unpopular network (should some other network or monetary system become popular in the world)

yep if the total amount of payment to miners is not enough, less miners will compete. meaning the hashrate would change with less miners mining

also the market rate of exchange to fiat also caters and changes to make a set of sats worthy or not to mine

I do understand the binary math; probably, I haven't correctly expressed myself. The question was whether (1) the networks eternally continue trying to remove another bit and distribute zero reward or (2) it has some condition like "if after halving procedure block reward=0 then stop sending block reward and stop halving procedure"?

imagine it more like this in conversational form


where by currently protocol supply creation is 312500000sat
where by currently lets say total fee is 2000tx paying ~250sats each,  total fee is 500000sat
first transaction(block reward) destination amount = protocol supply creation(312,500,000sat) + total fee(500,000sat)
first transaction(block reward) destination amount = 31300000sat


in 120 years
first transaction(block reward) destination amount = protocol supply creation(0sat) + total fee(lets say 30,000,000sat)
first transaction(block reward) destination amount = 30000000sat

which the market rate of exchange to fiat would see 2140's: 30000000sat being worth more $$ than 2025's: 31300000sat

..
after 2140the developers of the time can then update the node/software people use to no longer do any sanity check of the supply creation protocol(no longer required code) and just have pure fee total calculation check code for what goes into the first transaction of a block

[kryptqnick]

First, it is indeed a problem none of us are likely to live long enough to see. Secondly, Bitcoin price tends to grow over time, so even a very 'small' reward in BTC can be high in fiat. And let's not forget that transaction fees will still be there. I see the arguments the op put in the article, but to me, it seems that if the issue is that people aren't using BTC for transactions enough, then who knows, maybe in 100 years they actually will use it more often.
So I don't think there will necessarily be a problem here, especially since, due to halving, there will be decades of easing into it, when the mining rewards will be 'very small' (we don't know how much they'll be worth in fiat, but I hope you get what I mean).

[Dunamisx]

How does the bitcoin security tied on miners reward, this is not so, even after the entire bitcoin has been mined, miners will solely depend on the amount charged on transaction fees which I even see it's more better by then for them than now, whereby they may not have to mine bitcoin again and still make their earnings upon every block confirmation reward.

[Mia Chloe]

How does the bitcoin security tied on miners reward, this is not so, even after the entire bitcoin has been mined, miners will solely depend on the amount charged on transaction fees which I even see it's more better by then for them than now, whereby they may not have to mine bitcoin again and still make their earnings upon every block confirmation reward.

You actually do have a point and that's because it's not directly related to security but it is indirectly when you begin to actually consider selfish mining but in reality it's almost impossible. The problem , which is actually a good thing is that no one actually wants to take advantage of the 51% rule and that's because even when they have enough hash rate they'll consider it stupid.

Hash rates are very valuable in bitcoin mining especially with the rate of increase in difficulty and the current difficulty too.

[stwenhao]

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?

https://github.com/bitcoin/bips/blob/master/bip-0042.mediawiki

Code:

int64_t nSubsidy = 50 * COIN;
// Subsidy is cut in half every 210,000 blocks
// which will occur approximately every 4 years.
nSubsidy >>= (nHeight / 210000);

See? Originally, it was divided "forever", but to make it identical on all machines, the code was changed, to make it always zero, if you try to shift it by more than 64 bits (to not start from 50 BTC again after 64th halving, but use zero instead).

Code changes: https://github.com/bitcoin/bitcoin/pull/3842/files

The question is how to attract miners when there is no block reward (or it becomes too small after several halvings) and the transaction fees are not high enough to engage them in mining so that they are in profit (currently they are relatively small).

Transaction fees will always be enough, or even more than enough, as long as other important network parameters will remain unchanged. Which means, that even today, in testnet3, after 18 halvings, when the basic block reward is 0.00019073 tBTC, and everything else comes from fees, then still, even in that worthless test network, you can get a few tBTC per block from fees.

So, if the current rules are sufficient to keep test network alive, do you really think, that they will not be sufficient for mainnet? Why?

It is more than likely, that people will want to notarize a lot of things on-chain. They already made Ordinals, Runes, NameCoin-like features, OpenTimestamps, and so on, and so forth. Do you really think, that people in the future will just completely stop using the chain? Why should they? Every time, when Bitcoin network can confirm transactions with minimal fees, some users switch back from altcoins to Bitcoin, because suddenly, it is again more profitable to make regular on-chain transactions, than use potentially cheaper altcoin, which will have worse price stability, and where you will pay fees indirectly, by having worse crypto-fiat exchange rates.

Also, if you assume, that blocks will always be full, and that 1 sat/vB limit will be left unchanged, then it means, that miners will keep getting at least 0.01 BTC from fees per block. And it is quite likely, that people will not change 1 sat/vB into for example 0.1 sat/vB, because it is a de-facto rule, which was not touched for a long time, and changing it would lift that "0.01 BTC guaranteed, when blocks are full", so it would open unnecessary discussions about tail supply.

[alex113115]

How does the bitcoin security tied on miners reward, this is not so, even after the entire bitcoin has been mined, miners will solely depend on the amount charged on transaction fees which I even see it's more better by then for them than now, whereby they may not have to mine bitcoin again and still make their earnings upon every block confirmation reward.

My take was that if transaction fees are too small (now they comprise only around 1% of miners’ revenue) and there is no more block reward (by 2140 or so), the miners will not be motivated enough (in terms of money) to validate the blocks. In this case, the network security will decrease alongside the amount of miners. So, I opened up the discussion to talk about possible outcomes for the network if this happens.

[FortuneFollower]

How does the bitcoin security tied on miners reward, this is not so, even after the entire bitcoin has been mined, miners will solely depend on the amount charged on transaction fees which I even see it's more better by then for them than now, whereby they may not have to mine bitcoin again and still make their earnings upon every block confirmation reward.

My take was that if transaction fees are too small (now they comprise only around 1% of miners’ revenue) and there is no more block reward (by 2140 or so), the miners will not be motivated enough (in terms of money) to validate the blocks. In this case, the network security will decrease alongside the amount of miners. So, I opened up the discussion to talk about possible outcomes for the network if this happens.

They will grow naturally to be valid for being rewards, don't worry.

[mr.mister]

 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.

I think bitcoin is here to stay indefinitely. The tools to interact with it will go through a major transformation.