Who maintains the post-mining Bitcoin network and why?

[Giulio Prisco]

Who will maintain the post-mining Bitcoin network and why?

It is often said that, once all bitcoins have been mined, the miners who maintain the Bitcoin network will be compensated with transaction fees. But that will kill one of the main competitive advantages of Bitcoin, which is very low transaction fees.

OK the day when all bitcoins have been mined won't come for decades. But in a certain sense we are already in the post-mining phase, because mining is no longer profitable enough for most individual users. So I think we are beginning to have this problem now - no miners = no Bitcoin, mining not profitable = no miners.

Of course a new altcoin can be created to make mining (of the new altcoin) profitable again and thus provide incentives to new miners, but the new miners would be maintaining the new blockchain, not the Bitcoin blockchain.

Any new thoughts and perspectives on these related issue?

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[Lethn]

The thing you need to realise is, if we actually manage to hit 21 million coins, chances are Bitcoin will be so popular that the transaction fees despite being so small will probably make the miners more money than if they were mining blocks because of the amount of trade volume we have, think about it, exchanges and the like can operate on 2% or so transaction fees so when you have less than the on an entire cryptocurrency network that can still equal a massive amount of coin for miners.

The reason being because instead of it being about generating currency, it will just be about finishing peoples transactions which will theoretically have no real limit beyond the coins in circulation in how much miners could profit from it so owning a miner with the maximum amount of coins generated would be like owning shares on an exchange.

[turvarya]

We are not in the post-mining phase, we are just in the phase, where mining just got more professionalized, as foretold by Satoshi.
I don't want to talk about Satoshi like of a prophet, but as far as I know, everything is going according to his plan.

The fee-system has to be figured, but I am pretty sure, there will be just different fees about how fast it goes into the blockchain. Also think about how many transaction there might be in the year 2100, when everyone is just paying a small fee, it still sums up to a large amount.

[Giulio Prisco]

We are not in the post-mining phase, we are just in the phase, where mining just got more professionalized

OK but doesn't that mean that mining is out of reach of the normal folks? I mean, I don't mine because the little (if any) profit that can be made mining today isn't worth the time and effort, and I guess most Bitcoin users would agree.

I pay money to run a full Bitcoin node on a server to contribute to keeping the blockchain working and public, but how many people do that? We as a society have a very poor record when it comes to maintaining the commons, Bitcoin would never have taken off without monetary incentives.

[turvarya]

We are not in the post-mining phase, we are just in the phase, where mining just got more professionalized

OK but doesn't that mean that mining is out of reach of the normal folks? I mean, I don't mine because the little (if any) profit that can be made mining today isn't worth the time and effort, and I guess most Bitcoin users would agree.

I pay money to run a full Bitcoin node on a server to contribute to keeping the blockchain working and public, but how many people do that? We as a society have a very poor record when it comes to maintaining the commons, Bitcoin would never have taken off without monetary incentives.

I'd say everybody with some capital on the side, could open an ASIC-farm.
That might not be the average Joe, but there are still a lot of candidates, who could do that.

[Soros Shorts]

OK but doesn't that mean that mining is out of reach of the normal folks? I mean, I don't mine because the little (if any) profit that can be made mining today isn't worth the time and effort, and I guess most Bitcoin users would agree.

I am sure people who live in areas with 2 cent electricity would still find it profitable to mine with the current versions of ASICs available to the public. It is starting to depend a lot on where you are located.

[Giulio Prisco]

So basically you guys are saying that those with enough money to open an ASIC farm, and those who live in places with very low electricity costs, will be able to make money mining. OK, but doesn't that confirm my point that mining is a useless waste of time and effort for the rest of us?

I am persuaded that the rise of Bitcoin was mostly due to a large network of smalltime users running the full Bitcoin software and generating coins, and I am afraid that there is no incentive anymore.

As far as the other argument is concerned - that once the Bitcoin economy is huge there will be enough of an incentive to maintain the network even if the transactions fee remain low - I think that's plausible, but we must get there first, and how do we get there if the system collapses for lack of individual maintainers?

[Furio]

So basically you guys are saying that those with enough money to open an ASIC farm, and those who live in places with very low electricity costs, will be able to make money mining. OK, but doesn't that confirm my point that mining is a useless waste of time and effort for the rest of us?

I am persuaded that the rise of Bitcoin was mostly due to a large network of smalltime users running the full Bitcoin software and generating coins, and I am afraid that there is no incentive anymore.

As far as the other argument is concerned - that once the Bitcoin economy is huge there will be enough of an incentive to maintain the network even if the transactions fee remain low - I think that's plausible, but we must get there first, and how do we get there if the system collapses for lack of individual maintainers?

You're right when you speak about people in it stricly for profit. But the original bitcoiners are in it for the protocol and the decentralization and movement it brings us, so for most people you're right, but for the core community, you're wrong

[Soros Shorts]

OK, but doesn't that confirm my point that mining is a useless waste of time and effort for the rest of us?

Yes, but that does not mean that there will be nobody maintaining the network. Mining is supposed to be marginally profitable as a whole. The difficulty will adjust dynamically such that in the long run it will always be profitable for somebody somewhere to mine.

[Flashman]

Just because it's not "easy money" any more doesn't mean that someone won't do it. 10% return on a capital investment per annum is still considered good.

But anyway in 25 years time, we might be at 50-100MB block sizes with hundreds of thousands of transactions, and that's probably gonna be 1 or 2 bitcoins, where the block reward has dropped below one. $10,000 - $20,000 per block seems to be enough to incentivise a "decent" amount of mining power to remain on the network, so if bitcoins are worth at least $5000 each by then, then we have no worries.

It's like worrying about what happens to blob of wax in the lava lamp "OMG it's gonna keep rising, break the lamp, break the ceiling, break the sky!!!!" no, just... no... it's all self balancing.

[DannyHamilton]

So basically you guys are saying that those with enough money to open an ASIC farm, and those who live in places with very low electricity costs, will be able to make money mining. OK, but doesn't that confirm my point that mining is a useless waste of time and effort for the rest of us?

Yes.  Mining is a competitive business.  As such, it will only be profitable for those who have access to the most affordable necessary resources. Others may mine at a loss as a hobby, but as a source of income it will be a waste of time and effort to those who don't ahve access to competitively priced resources.

I am persuaded that the rise of Bitcoin was mostly due to a large network of smalltime users running the full Bitcoin software and generating coins, and I am afraid that there is no incentive anymore.

There are many incentives for bitcoin use beyond mining for cheap profits.  The fact that it is an electronic form of payment with no counter-party risk is a huge incentive for merchants. The fact that you can create backups of your money is an incentive for users.  There are several other incentives as well.

As far as the other argument is concerned - that once the Bitcoin economy is huge there will be enough of an incentive to maintain the network even if the transactions fee remain low - I think that's plausible, but we must get there first, and how do we get there if the system collapses for lack of individual maintainers?

It won't collapse.  If total global hashing power is reduced then the difficulty will be reduced which will result in mining becoming more profitable for others.  As profits increase, more people will start mining again which will result in difficulty increasing again.  Eventually a mining equilibrium will be reached.

[Giulio Prisco]

There are many incentives for bitcoin use beyond mining for cheap profits.  The fact that it is an electronic form of payment with no counter-party risk is a huge incentive for merchants. The fact that you can create backups of your money is an incentive for users.  There are several other incentives as well.

Those are incentive to USE Bitcoin, not to MINE Bitcoin. You can still benefit from all that if you only do off-chain transactions with Circle or something like that.

[Giulio Prisco]

You're right when you speak about people in it stricly for profit. But the original bitcoiners are in it for the protocol and the decentralization and movement it brings us, so for most people you're right, but for the core community, you're wrong

You and I are part of the core community, but how much % of the total number of users does the core community represent? 0.1 % or less I guess, perhaps much less. We could never maintain the Bitcoin network without the unwashed masses that are in strictly for the money.

[spazzdla]

We are not in the post-mining phase, we are just in the phase, where mining just got more professionalized

OK but doesn't that mean that mining is out of reach of the normal folks? I mean, I don't mine because the little (if any) profit that can be made mining today isn't worth the time and effort, and I guess most Bitcoin users would agree.

I pay money to run a full Bitcoin node on a server to contribute to keeping the blockchain working and public, but how many people do that? We as a society have a very poor record when it comes to maintaining the commons, Bitcoin would never have taken off without monetary incentives.

This IMO is why BTC needed a minimum payout block like Joulecoin.

[DannyHamilton]

There are many incentives for bitcoin use beyond mining for cheap profits.  The fact that it is an electronic form of payment with no counter-party risk is a huge incentive for merchants. The fact that you can create backups of your money is an incentive for users.  There are several other incentives as well.

Those are incentive to USE Bitcoin, not to MINE Bitcoin.

Correct.  You were stating that "the rise of Bitcoin" was due to profits from mining.  I'm pointing out that there are still incentives to encourage the rise of bitcoin USE.

If you are specifically asking about the incentives for mining, then mining is currently supported through a subsidy of 25 BTC every block (with blocks occurring on average every 10 minutes).  That subsidy will be cut in half every 4 years.  As the subsidy shrinks over time, the transaction fees will become a larger percentage of the incentive.  Difficulty is adjusted to maintain an average 10 minute interval between blocks.  If there isn't enough incentive to  profitably support the total hashing power available, then some hashing power will go away and difficulty will be reduced.  This will increase the profitability of the remaining hash power.  An equilibrium will be reached where the total available block reward (subsidy + fees) is just slightly profitable for the total supplied hash power.

We don't need everyone to be involved in mining.  We only need enough mining to maintain the security of the system.  Everyone else gets to be users without needing to be involved in mining.  This was always the intended design and was described as such by Satoshi when he was talking about the design of Bitcoin.

The current system where every user is a network node is not the intended configuration for large scale.  That would be like every Usenet user runs their own NNTP server.  The design supports letting users just be users.  The more burden it is to run a node, the fewer nodes there will be.  Those few nodes will be big server farms.  The rest will be client nodes that only do transactions and don't generate.

You can still benefit from all that if you only do off-chain transactions with Circle or something like that.

No, you can not.

[Flashman]

Off chain, you don't have bitcoins, you have gift vouchers. If the issuer goes out of business or refuses to accept at face value any more or applies annual fee or negative interest, you're SOL...

Holders of "bitcoin vouchers" in MtGox were attempting to sell them for as little as 5% of nominal face value earlier this year.

But I'm sure none of that worries you, they're just as good right?

[Giulio Prisco]

We don't need everyone to be involved in mining.  We only need enough mining to maintain the security of the system. Everyone else gets to be users without needing to be involved in mining.  This was always the intended design and was described as such by Satoshi when he was talking about the design of Bitcoin.

Good point, and thanks for posting the quote from Satoshi in 2010. Yet I am still concerned about "enough mining to maintain the security of the system." If mining is only done by a handful of very large operators, what prevents them from pooling resources and launch 51% attacks to disrupt the network and grab others' money? Please don't answer "government regulation" - we can't eat the cake and still have it.

I would be interested in hearing new ideas about how to make the mining system just a tiny bit more public, open and sustainable. Of course Satoshi's wisdom is legendary, but I guess he is just a person like us. Smarter, but he still puts his pants on one leg at a time.

[Flashman]

OMG Apple has 100%-ed the iPhone market, what's to prevent them from selling you a solid, inanimate, lump of plastic and telling you it's an iPhone?

I mean they are in 100% control of what an iPhone is, they could make it anything!

Yah well, they'd be out of business next week.

According to the worriers or FUD rakers, this is a rock solid guaranteed to profit scenario and sound business plan for anyone that goes over 50% of bitcoin hashpower.

[RodeoX]

Supply and demand. The fee will always be about the lowest amount that can sustain the network. If the fee is "high" then someone will come in and process transactions more cheaply. If the fees are to "low" then a transaction may not get processed.
This system will always out compete a for profit business because they have many more mouths to feed. Bitcoin is not free because the world is not free. The bitcoin protocol is cheaper because it eliminates middle men and opens up competition that anyone can participate in.    

[DannyHamilton]

Good point, and thanks for posting the quote from Satoshi in 2010. Yet I am still concerned about "enough mining to maintain the security of the system." If mining is only done by a handful of very large operators, what prevents them from pooling resources and launch 51% attacks to disrupt the network and grab others' money? Please don't answer "government regulation" - we can't eat the cake and still have it.

Pooling resources doesn't allow miners to "grab others' money".  It only allows them to choose which transaction get confirmed.  Large operators will have a large financial investment in their operation.  It would be counter productive to damage the reputation of the bitcoin confirmation process as they wouldn't be able to earn enough to cover their costs.  Additionally any large merchant that chooses to accept bitcoin will have a direct financial interest in its stability.  This incentive is likely to result in large merchants setting up their own mining operations (perhaps even mining at a slight loss) to protect their interests.

Bitcoin is an experiment.  It is very difficult (impossible?) to predict what will happen in a decade or two when the subsidy gets small.  We can anly let the experiment play out and see if the incentives are properly balanced, and adjust them in the future if necessary.

Of course Satoshi's wisdom is legendary, but I guess he is just a person like us. Smarter, but he still puts his pants on one leg at a time.

Legendary would be a good description.  He was a mediocre programmer that happened to come up with a really good idea on how to handle distributed consensus.  Any amazing intelligence or wisdom assigned to him beyond that is nothing but stories.