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Author Topic: What happens when the coins dry up?  (Read 7103 times)
1l1l11ll1l
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April 10, 2012, 05:28:35 AM
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Been wondering. What happens when all the coins have been released? Does everyone just stop mining? Would that leave just people who want to contribute to the cause hashing to verify transactions? That seems like it would make it quite easy for someone to gather a modest amount of hardware and hit that 51% mark.

OR will there still be rewards for hasing? Such as the transaction fees being distributed?

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April 10, 2012, 05:32:35 AM
 #2

Been wondering. What happens when all the coins have been released? Does everyone just stop mining? Would that leave just people who want to contribute to the cause hashing to verify transactions? That seems like it would make it quite easy for someone to gather a modest amount of hardware and hit that 51% mark.

OR will there still be rewards for hasing? Such as the transaction fees being distributed?

Yes, bitcoin will get killed by attacks or alternatively by high fees when this happens unless the protocol is changed. Actually, death due to decreasing rewards will likely happen much sooner than when rewards drop to zero. Even with the current maximal reward we are already getting botnets and lone individuals who aspire or have some share of hashing power in the 10-30% range. This is known as the tragedy of the commons problem. Proof-of-stake is the solution.

https://en.bitcoin.it/wiki/Proof_of_Stake

Note that there is a strong desire among many of the bitcoin community to wish this problem away. Demand a logical argument providing an answer to your question. Don't let them get away with hand-waving.

 Ask what will happen to txn fees as well. Will the network be secure? Will txn fees be competitive with paypal? In my view, the current protocol can potentially give a yes answer to only one out of two of these questions (that is pick one). It is impossible to obtain yes answers to both under the current protocol.

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April 10, 2012, 05:33:41 AM
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Been wondering. What happens when all the coins have been released? Does everyone just stop mining? Would that leave just people who want to contribute to the cause hashing to verify transactions? That seems like it would make it quite easy for someone to gather a modest amount of hardware and hit that 51% mark.

OR will there still be rewards for hasing? Such as the transaction fees being distributed?

The hope is that transactions are enough of an incentive to keep the network happy. Currently, it wouldn't be, and that is proven by the fact that 1/3 of the blocks are purposely mined empty, to increase profitability.

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April 10, 2012, 07:22:02 AM
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OR will there still be rewards for hasing? Such as the transaction fees being distributed?
Yes, miners receive transaction fees in addition to the new coins being minted. As cunicula points out, there are doubts that transaction fees alone will be enough in the current system.

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April 10, 2012, 09:02:28 AM
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This same question has been getting asked quite a bit lately:

Transaction fees will need to replace the currency issuance in the block reward.

Quote
When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners will earn some profit from transaction fees. However unlike the block reward, there is no coupling between transaction fees and the need for security, so there is less of a guarantee that the amount of mining being performed will be sufficient to maintain the network's security.

 - http://en.bitcoin.it/wiki/Myths#After_21_million_coins_are_mined.2C_no_one_will_generate_new_blocks


 - https://bitcointalk.org/index.php?topic=71176.0
 - https://bitcointalk.org/index.php?topic=75138.0

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April 10, 2012, 02:56:54 PM
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Been wondering. What happens when all the coins have been released? Does everyone just stop mining? Would that leave just people who want to contribute to the cause hashing to verify transactions? That seems like it would make it quite easy for someone to gather a modest amount of hardware and hit that 51% mark.

OR will there still be rewards for hashing? Such as the transaction fees being distributed?

Yes, bitcoin will get killed by attacks when this happens unless the protocol is changed. Actually, death due to decreasing rewards will likely happen much sooner than when rewards drop to zero.
I seem to recall seeing something here about one of the alternate blockchains dying from inattention, someone posting something to the effect that several episodes of corruption and a need for recovery preceded the ultimate demise.

The "spinning plates" ( a reference to the stage show where dozens and dozens of spinning plates are balanced on sticks and kept spinning by the performer running from one to the next to keep them spinning ) model of bitcoin operation has always given me doubt. The state of the blockchain freezing completely is not so bothersome, but what happens if mining declines is. With all the hashing horsepower that has built up out there it seems rather likely that an attempt to seize control of the blockchain could be successfully executed. Unlike the alternative blockchains there is enough value locked in bitcoin to make it an attractive target.


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April 10, 2012, 03:50:00 PM
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Miners will continue to expect more and more value out of blocks. By completely removing block rewards and relying solely on transaction fees, the miners will eventually expect nearly infinite value out of blocks. When that is not possible mining will happen less often, leading to lower confirmations. It could happen soon after a block-reward-halving. In fact, I suspect that for at least this first block reward halving, we will see the price double or more than double to accommodate the eventual change.

Whichever are the governments of the world at some point in the future will inevitably step in and demand X% transaction fees. It will be a very low number at first and gradually rise. Miners that refuse to include transactions with these fees in their blocks will be punished, even if they are doing so out of protest of the government, at this point controlled by the subsidized miners who now funnel lobbying money into the government.

I mean, we're talking decades probably before this happens again, but like with all things, it will happen. I'm guessing maybe mid-century some stupid mining operation run by an incompetent fool (I insult them here for the sake of posterity) will purchase equipment prior to a block-reward-halving and expect to have it paid off as price rises, but the block reward will halve without a significant move in the price of coin and they will lobby the government to force every Bitcoin enterprise operation in whatever the biggest Bitcoin adopting country is (Japan or China?) at that point to increase or mandate fees.

Again, the idiotic populace (again, insulting for sake of posterity) will conform to these fees and willingly give them up in the name of equality or security or some other contortion of values that the power that be deem as necessary for the "good of man".

In reality, the only threat that happens when the coins dry up is that the difficulty drops to a low enough point that the cost-benefit-ratio for doing a 51% attack increases. That threat alone pretty much ensures that anyone who has a significant stake in Bitcoin (processes lots of transactions) purchases their own equipment instead of piggy-backing on the miners themselves.

So the answer to your question: "Does everyone stop mining?" is yes, people stop mining, and the transaction processors are the only ones still finding blocks. We have yet to discover who that will be. My guess is that the transaction processors will essentially be the governments' biggest lobbyists at the time, though.

Yes, I have a very pessimistic and dystopian outlook. In reality I'm hoping it's not that bad, with multiple alternative currencies to compete with Bitcoin that do not have some of the same flaws. I'm worried that rather than make a new currency, the developers will be under increased pressure (vis-a-vis the miners, perhaps?) to fork Bitcoin to always provide some form of block reward. I think I'd rather see an alternate crypto-currency than a fork of Bitcoin.

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April 10, 2012, 04:25:29 PM
 #8

How much is the typical transaction fee awarded when a block is found right now?

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April 10, 2012, 04:45:06 PM
 #9

How much is the typical transaction fee awarded when a block is found right now?

~0.04 BTC
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April 10, 2012, 04:49:15 PM
 #10

How much is the typical transaction fee awarded when a block is found right now?

Currently, cost per txn is about US$4-5. Of that, about US$0.000571428571 is txn fees [4 BTC per day in total fees/8000 txns per day; source blockchain.info]. The rest is block reward. That is txn fees make up about 0.01% of the funds supporting network security.

Currently, it would cost roughly $7-8 million to 51% the network. If the network was supported solely by these tiny fees, the cost of 51%-ing the network could be expected to drop to about US$700-800. A couple of 5970s would do the job nicely.


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April 10, 2012, 04:53:59 PM
 #11

Currently, cost per txn is about US$4-5.
That's the amortized cost. I hope nobody mistakes that for the marginal cost (which is close to 0).

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April 10, 2012, 07:23:41 PM
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The coins won't dry up for over 100 years.  And the last set of blocks before the "drying up" will be for  0.00000001 BTC per block.  And the before that period, the blocks will be worth  0.00000002 BTC each.

It's a very gradual process, and there will absolutely be a crossover point where transactions become the larger part of the block reward.

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April 10, 2012, 08:07:13 PM
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The coins won't dry up for over 100 years.  And the last set of blocks before the "drying up" will be for  0.00000001 BTC per block.  And the before that period, the blocks will be worth  0.00000002 BTC each.

It's a very gradual process, and there will absolutely be a crossover point where transactions become the larger part of the block reward.

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April 10, 2012, 09:34:24 PM
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The coins won't dry up for over 100 years.  And the last set of blocks before the "drying up" will be for  0.00000001 BTC per block.  And the before that period, the blocks will be worth  0.00000002 BTC each.

It's a very gradual process, and there will absolutely be a crossover point where transactions become the larger part of the block reward.

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April 10, 2012, 09:40:13 PM
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Whuuuua?
Problem?

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April 10, 2012, 09:42:18 PM
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1/10 because I replied.

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April 17, 2012, 04:01:11 PM
 #17

The idea is that in 2033 or whenever they do dry up, the reward would have halved so many times that we are used to the tiny payouts at that point and the value of a bitcoin (should) be dramatically higher than it is now, making mining profitable even at the end.

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April 18, 2012, 06:29:36 AM
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The idea is that in 2033 or whenever they do dry up, the reward would have halved so many times that we are used to the tiny payouts at that point and the value of a bitcoin (should) be dramatically higher than it is now, making mining profitable even at the end.

You'd be better off just letting the topic die. If you can't think of a convincing answer to your opponent, the best strategy is to ignore him.

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April 18, 2012, 06:36:57 AM
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This:


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April 18, 2012, 06:44:06 AM
 #20

FYI, transaction fees per day: (logarithmic scale)

https://blockchain.info/charts/transaction-fees?showDataPoints=false&show_header=true&daysAverageString=1&timespan=&scale=1&address=

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