Topic: Bitcoin Issue That I Can't Wrap My Head Around - page 2. (Read 232 times)

TLDR: Bitcoin will reach is cap of 21 Mil. Miners will have to resort to transaction fees as incentive for mining. Bitcoin community will ultimately agree to raise Bitcoin cap and inflation will become normalized for Bitcoin. This will solve high transaction fee issue but will lead to a slippery slope.

Recently, I’ve been researching other block chains, particularly how they are able to reward miners and users. I came across Steemit, which is in the STEEM blockchain. Steemit is interesting because they reward users for posting and curating content that receive a lot of support (upvotes, comments, etc…). They are able to pay the users the participate by inflating their own token.

This got me thinking about Bitcoin and what will happen when Bitcoin inflates to its limit of 21 million. When it reaches its supply limit, miners will stop receiving block rewards for mining transaction blocks which is their main incentive for mining and keeping the validity of the blockchain. Instead of block rewards, miners will mostly rely on transaction fees.

This is when I believe we run into a problem. This is because historically humans have a strong distaste for fees especially with simple actions on the Internet. If we want Bitcoin to become a global currency that is used for primarily every transaction, having fees is an easy way to deter new people from adopting Bitcoin as their main currency.

I think instinctively, adopters of Bitcoin will immediately turn to raising Bitcoins supply cap (probably by 2x) to solve this issue. Which will decrease the value of Bitcoin in circulation, but will increase incentives for miners and increase transactions since there will be less or no fees. Ultimately, this creates a new precedent that the infrastructure of Bitcoin can be changed whenever a problem arises, especially in regards to inflation. Additionally, this puts us in a similar situation as the US Government as they make efforts to inflate their own fiat currency without seeing any issue with it. I believe this will be a slippery slope if this occurs and eventually Bitcoin’s principles that made it appealing in the first place will erode.

One solution to this problem will be to make the amount of power used to mine blocks significantly lower as that will incentivize miners to mine blocks with lowers transaction fees.

I would love to hear you guys opinion about this issue because we should be prepared for when this happens.