Topic: bitcoin mining without the coinbase block reward (Read 249 times)

in 2012 we had people doing orders of 1btc min to 1000 per order line, where a "wall" order was 10,000
now if you look at the market order book the orders are more in decimals where a "wall" order is a few btc

now follow that rational forward a few decades.. and people will be trading in smaller decimals, no one would be trading whole bitcoin per orderline

oh.. and by the way.. hedge funds do manipulate the markets, it happens
heres a quick screenshot of binance whilst writing this
notice the sell side of orders of under $6

i'm not understanding this logic. If it only takes a few sats to move the market than hedge funds would be able to easily manipulate the market for huge profits.


Marketcap = price*supply but since supply is fixed to 21million market cap is effectively the price of bitcoin. so calling the market cap meaningless is the same as calling the price meaningless.

the market HAS millions which then needs millions on the other side to move the market(for every buyer there is a seller, for every seller there is a buyer.. thats how markets work). so adoption is already here.. but in the "needs adoption" of graphites scenario, where there was only a few people it only requires a few people to move the market.

people dont need to buy whole units of bitcoin to move a market. people can by a few sats. and counter sell a few sats to move markets up or down with little cost

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the market cap is meaningless.. there is no actual $trillion held anywhere that are at risk
the market cap is just math.. not money.. its just the bitcoin price NUMBER multiplied
and as said previously the bitcoin price is not based on millions of people buying whole bitcoins. smaller amount of people can buy small decimal amounts and move the market cheaply

run some scenarios, learn the economics

a 51% attack does not attack the market cap..  it at worse re-orgs which transactions got confirmed in recent blocks. thus risks the value spend(moved) within said blocks. so its about the btc within transactions of a block. not the market cap
also a malicious pool doing a 51% does not gain ownership of all btc of transactions in a block so its not like the (todays stats) $28bill of value moved today ends up in some pools pockets.. it just means all people of bitcoin that received coin that day see the confirmed tx get undone and funds seen back in the sender.. coins are not destroyed or stolen, transactions are just reversed back to the sender, who can just send them again or the receiver can re broadcast the tx to get them again.. but the pool in the end does not get the coin.. so the profitability of doing an attack is not even as high as the coin daily movements. and definitely not a market cap win

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and that slowdown of the reward amount is not something to be scared of in 2024.. run some scenarios of how many halvings need to cycle before people stop caring about the reward vs spot. and instead need to think about fees as a more important income stream.. and if you think rationally you will realise its not this year or this market/halving cycle

eventually but not now the reward will be insufficient. hence why you should learn about all the different economics at play to then run scenarios properly and rationally instead of guessing and exaggerating. play out some scenarios over 10, 20,50,100 years

bitcoin does not need expensive fes per tx now nor anytime soon. bitcoin does not need to leap to millions of transactions a second this month either..
learn scaling learn rational economics and play out some scenarios

Spot market definitely needs millions in volume to move it. The markets have millions on the books within a 1% spread. It would take millions to eat up those orders and move the market only 1%.


If the network is attacked the market cap is at risk not just the value of blocked transactions. If the network was for example blocked for a year or so the price of bitcoin would plummet.

Regardless of the bitcoin price prediction the coinbase will not be suffocate at some point which could lead to security risk. If the block reward stays the same the security of the network will stagnate. People/nation states will be less interested in using bitcoin if a single country could stop it with 1% of its GDP.

past numbers seen 100x (2011  $0.30 -> $30)
past numbers seen 40x (2011-2013 $30-> $1.2k)
past numbers seen 16x (2013-2017 $1.2k-> $20k)
past numbers seen 3.5x (2017-2021 $20k-> $70k)

we have not yet even got down to 2x yet.. emphasis we are not even tapered down to 2x yet

(ill now repeat myself in different ways just to get the point across)
i was completely LOWBALLING to show how rational $2m is by using numbers we have yet to even reach as lowball numbers

i was low balling(using smal numbers we have yet to experience)
yes it will taper off we wont see 100x again.. and thats why i was low balling
yes we will see low numbers like 3.5x 3x 2.5x . but again i low balled it to show its rationally possible

also spot market price is not the same as "adoption numbers"
even one person spending just $7.00 to buy 0.0001 bitcoin = 1btc $70,000
even one person spending just $7.01 to buy 0.0001 bitcoin = 1btc $70,100
yep one person spending an extra 1 cent can move the spot price by $100 and thats just trades of 2 people where one spends ONE CENT extra
yep one person spending one extra cent can move market cap 1.3776trill -> 1.379568trill an increase of market cap of $1.968billion.. for 1 cent spent

dont assume the spot market needs millions of people paying thousands of dollars to move the spot market

the market cap is not the same as the amount of sats that are in a tx on the blockchain moved each day
the market cap for instance you show.. has no baring on the amount of sats moved per block

you mention $1.4trill cap.. but thats not what is moved per day in blocks
rationally today
average value moved per tx 0.8912 BTC
transactions per day 453,840
404,462btc value moved per day ($28,030,519,920($28b))

yep $28billion.. not $1.4trill block attack risk

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the main reason i am pointing out the many different categories of economics involved in bitcoin, things like:
spot market deflation
reward halving cycles
minimum fee's per tx (instead of max fee of stupidly high $$ amount)
minimum fee's per block as base start points to rationall grow from (instead of max fee of stupidly high $$ amount)

transactions that can be leaner to fit more in 'stuck block size'
transactions that can be cleaner to fit more in 'stuck block size'
rational scaling of blocksize to allow more transactions in scaling blocksize

so you can put all these different things into running a scenario of rational growth (not extremes) to show we dont need to leap in fee's or transaction amounts in months. but instead if you take things rationally over years, decades.. things are not as feared as some stories i think the OP read and feared or does not understand

Past market data doesn't prove future market data. Adoption for bitcoin will tapper off. We probably wont see 2x gains every 4 years like we did in the past. Gold has been around for thousands of years and for a new currency to take its place in a matter of 25 years is optimistic in my opinion.

There needs to be time for bitcoin to be adopted and distributed across the population before it can reach the market cap of gold but i do think bitcoin will reach those numbers but maybe in 50 years not 20.

You also have to consider the ratio of total value of the network vs security. Based on your numbers the block reward stays the same but the total value of the network increases making it a larger target with the same security as the network today.

- today:         $1.4 trillion market cap with 63mil a day 51% attack threshold
- 2040-2044: $42  trillion market cap with 63mil a day 51% attack threshold

$2mm is not about now. nor 2140
lets use the $70k ATH of the currently ending market halving cycle (2020-2024)
2024-2028 (low rational 2x) $140k (3.125btc reward * 140k=$437.5k fiat block reward)
2028-2032 (low rational 2x) $280k (1.5625btc reward * 280k=$437.5k fiat block reward)
2032-2036 (low rational 2x) $560k (0.78125btc reward * 560k=$437.5k fiat block reward)
2036-2040 (low rational 2x) $1.02m (0.390625btc reward * 1.02m=$437.5k fiat block reward)
2040-2044 (low rational 2x) $2.04m (0.1953125btc reward * 2.04m=$437.5k fiat block reward)
so $2m in 20 years time(way under the 120 year) is easily rational.. where we can start to suggest that fee's become a bit more important as a bonus
(i am not saying the spot market only needs to 2x.. it can 3x, 4x.. i only used 2 X as a low ball rational easy optimism)
we can speculate on the 3x 4x of spot market futures. and how that affect mining rewards of the next 20 years, let alone the hundred years after that

but you said $2m is too optimistic and i simply responded with rational maths to say it is rational
for now.. but once project Artemis is gold mining asteroids, bringing back 100tonnes of gold per payload(multiple trips per year), then we will see the gold market grow too, enjoy that thought in the next 20 years


i am not talking about now's fee total capacity when fee''s are not essential. i suggested using these as base points, to then use as scaling progresses over the years.. for future dates where by you then have to play out the need for fee's not now, not in a decade but in many decades when the block reward declines to give more importance to fee's need
noting, and for emphasis: that not now but in the future more transactions per block will bump up the fee total via number of transactions

so play it out where the transactions per block increase at a rational scaling over years. to the point in the future of many decades

EG if in 20 years where 1btc is $2m and if.. blocks were stuck for 20 years at 16k tx per block even if lean and clean block of 4mb remained.. then yes $80k for 1sat/byte is small..
but thats using the base number assumption of a block stuck at 4mb and just made leaner and cleaner..
now do some scaling assumptions and other rational movements over the years

$2mm bitcoin seems too optimistic. That would mean the market cap of bitcoin would be 42 trillion USD. For reference gold is only 14 trillion.

Even still $80k per a block is still way to cheap to secure the global reserve currency. A country like Russia or China would have no problem taking bitcoin offline for just $11mm a day


I agree we do have a lot of time. This is just an interesting subject to me.

I don't believe tech will continue at that rate. Because of the laws of physics we are hitting the limits on data storage and internet speed. we cant store data in smaller units than atoms and we cant go faster than the speed of light.

before even increasing the blocksize.. we actually clean up the code to decludge the apartheid/segregation* campaign
and actually allow 4mb of true transaction byte counting, by cleaning up the code of the cludge that allowed miscounting and ignoring of bytes of a tx

so now imagine we have 4mb of full utility clean lean tx use, properly accounted and validated and purposeful and all transaction formats having freedom to utilise the full 4mb blockspace equally
*legacy only at the front quarter of the bus, miscounted metadata at the back 3/4 of the block (hope you get the tongue in cheek metaphors)


a lean tx can be less that 250byte, even less than 200byte.. heck there are ways to be under 150byte
but lets go with 250byte average instead of the old 1kb average

thats 16,000 tx instead of 4000tx

we dont need to force users to pay $60 $600 $1600 per tx

because the blockspace between now and the year 2140 shouldnt stay at low 4mb
now run scenarios based on the next 100 years, not of leaping to extremes within months. but progressive growth..
and not having to hinder growth to force fee increases

if 1btc was $2m (spot market only 2x for a few halvings until peaking to $2m/btc and that became stable price(volatility slowed down))
then 1 sat is $0.02
and a 226byte tx is $4.52 at 1sat/byte (legacy = real byte counting and a 2in-2out tx)
(or average tx of 250byte is 250sat=$5/tx)

thats a minimum of $80k at 1sat/byte with 16,000 tx
by moving to say 6mb thats then $120k minimum

emphasis
we dont need to force fee's any time soon.. the blockreward and the spot price deflation can cover miners for many more halvings.

play out 100 years, in a rational scenario
remember hard drives grew from 4gb to 4tb in 20 years
remember internet grew from 0.5mb to 500mb in 20 years
remember spot price deflation will look after miners for many more halvings(decades) so calm down of "fee war" requirement anytime soon

play out 100 years, in a rational scenario

Yeah thats what i was suggesting. Something similar to hash difficulty adjustment so that the block rate remains 1 block every 10 minutes. For example if fees go above some arbitrary threshold then increase block size and if it drops below then decrease block size.

Im actually not sure if increasing or decreasing block size will increase miner payout. Because if block size increases fees will drop and if block size decreases fees go up. I wonder if it would be linear in practice like if block size increases by 2x would transaction fees drop by 2x? or would fees drop even further leading to less payout for miners?

I just checked bchmempool.cash as a comparison for if blocksize were to increase and it looks like the total fees are only 0.08% of the coinbase subsidy and on mempool.space the total fees are 3% of the coinbase subsidy. However most blocks on bitcoin cash aren't filled so if we assume the blocks are full then this should bring the total fees up to 1.5%-2% of the coinbase subsidy. So based on this it looks to be a linear adjustment. Maybe slightly worse payout for miners but hard to tell since its based on bitcoin cash

a dynamic size that has upper and lower limits that adjust..
um going down in size is harder to control as you then have to do silly mile stones of accept 4mb upto X blocknumber(height) then only accept 3mb upto x block number if you want the size lower limit..

its much easier to just SCALE(slowly progress) in a upward way not a constant yo-yo up and down.. and when i say scale(slowly progress) in a upward way.. no its not leaping to millions of megabytes in a month... and no its not move to a small increase once a decade

but it doees mean doing things like each difficulty retarget.. where every Xfew months, year or halving move forward based on high % fill per block over X blocks as the decision maker where code sets the blocksize target growth.. not dev politics of having to code and adjust milestones every so often manually
EG if 52500 blocks(1 year) =X gb(of Y gb(95%)) then increase blocksize by Z%
whereby current would be x=200 y=210
where the code itself keeps the variables re-targetting/updated and not need devs to manually dictate/decide the next adjustment next year

My math was just rough estimates based on the data from mempool.space. But from my understanding you use vBytes not actual bytes to determine fees. Blocks are on average a little over 1 mega vByte.

Based on my math the fees/transaction at 650sats/vB would be around $685/transaction. Either way I still agree with you, people will leave if transaction fees are too high but nonetheless if that fee rate is not achieved then the hashrate/power consumption of the network will stagnate.


I agree with this method as a solution. I think having a dynamic block size with an upper and lower limit that adjusts based on fee rate would be the best answer I can think of.

as for your math

a 4mb block is 4000000bytes
if fees are 25sat/b = 100,000,000sat (1btc)
if 1btc=$250k then a block gets $250k not $62k
which over a day(144 blocks)=$36m not $9m

you also say 25sat/byte
where currently there is a average of 4000tx per block (1kb/tx)
so individuals pay 25,000sat per tx, which assuming your demo of 1btc=$250k 25,000sat = $62.50 per tx average
if fees go to 650sat/b so individuals pay 650,000sat per tx,  = $1625 per tx average
people just wont want to use bitcoin if tx fee were $62.50 each minimum with your assumed tx fee increase to $1625

I can't agree with you and everyone who follows this idea. Bitcoin can function without block rewards in the future. Let's assume that Bitcoin survives and will still be the mainstream currency in 100 years, when there will be no reward collected from mined blocks. If we assume this, then it automatically means that Bitcoin is a very popular currency, used by millions of people every day. If it's used by millions of people, we should also assume that Bitcoin's block size is way higher than just 4MB, it will probably be 64MB or something like that, or even flexible. So, now imagine, instead of 4K transaction per block, we have 200K transactions per block (don't forget that Bitcoin is popular and adopted). This automatically means that fees collected from blocks will be profitable for mining companies and on top of that, fees will remain low for users.

fees (amount of sats) per transaction DOES NOT need to increase. they actually need to decrease

reasons:
a. the spot price per sat can increase to pay miners bills
b. the amount of transactions per block should and can and need to increase

by having more transactions and a better spot price per sat will incentivise miners, without making bitcoiners stop using bitcoin
by having more transactions per block means people individually can pay less, thus about to stay active, whilst giving a total tx income per block a boost
however
by having individual bitcoiners pay more and have less ability to transact will cause more centralisation due to lack of use of bitcoin due to limited transactions and costly transactions

miners are not paid per transaction. they are paid by total per block. so allowing more transactions is a better solution rather than enforcing individuals pay more and limiting how many transactions can be made, further pushing those remaining active to pay even more

analogy:
a rail-train operator does not increase profits, efficiency of passenger transport by removing economy seating of 60 chairs per carriage. replacing it for 6 business class chairs that are only reserved for the furry/cosplay convention
instead they extend the carriages to have more seating to allow more passengers to frequent the trains and get more income via the popularity of passenger transport(their purpose) via lower priced tickets individually but benefits by higher total income per carriage due to it

..
and please dont be idiots to respond that bitcoin then needs to suddenly jump or leap to millions of transactions a second.. thats just a stupid extreme fearmongering absurdity of huge numbers that dont even mean anything.. said just to ignore rational scaling.. (scaling does not mean sudden massive leaps)

This is a misconcpetion,as ranochigo said.
You can have 10 million in reward, that would mean miners will be able to spend no more than 10 million each day on power, the efficiency will not matter at all, it could be 3 million s19 or  million s21, or 4 millions s27, the attacker will still need the same amount of power and roughly the same amount in gear price!

If you go back in time and look at the consumption of the gear used you will see that despite the hashrate being 1000 times less the security was not that lower.
So now you have a 1.4 trillion ecosystem protected by 15 billion of gear, back then you had a 12 billion bitcoin network protected by roughly 100 million! 

This is not true. The fee market and the demand curve will always have a point of saturation where additional fees and demands doesn't increase the total revenue. Lightning network is absolutely needed to offload some of it on the second layer while still maintaining on-chain settlement.

The cost is related of the revenue of Bitcoin mining, and thereby if your revenue of the miner drops, then the cost to attain X% of the hashrate decreases proportionally. The simple logical way of thinking is that miners won't mine at a loss and a drop in revenue equates to either a scaledown in operation or a slower growth. Even if your efficiency of ASIC gets ridiculously high, the cost of them would be a key factor in whether Bitcoin gets attacked or not.

In addition, we go through this so-called renewal of ASICs when newer ASICs are released. Miners will not purchase them unless it makes sense, ROI is better than the current ASICs and that all of the scrap and cost overheads are accounted for.

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Block size increase, increased in demand for blockspace, etc. These are the key factors to consider. If Bitcoin doesn't go mainstream by the time coinbase rewards goes to negligible, then it would be an issue.

It help indirectly because with less input cost for mining, Bitcoin miners will install more rigs, add more hashrate to the network, that makes the network more secured. It improves security.

I agree with you rigs are definitely getting more efficient with energy consumption but that efficiency gain doesn't help secure the network by itself. In theory if an attacker had the same hardware it would boil down to who has more available energy, the attacker or the network.

Mining hardwares, rigs improved with time by Mining Producers. Without stricter regulations aim at more Environmental friendly, Bitcoin Mining Rig Producers do their works to improve products and efficiency.

Bitcoin Mining History
Bitcoin electricity consumption: an improved assessment .

Network hashrate increased with time, we witnessed it and I believe even improvements in technology, energy consumption are not quickly developed, network hash rate will still increase. Reality is we have both, network hash rate increase, mining rig efficiency increase but power/ energy consumption increase too but energy is consumed more efficient by better ASICs.

More hashrate, more security and if decentralization is better, more security.

Im not sure but I believe this is a good question. back then bitcoins market cap was probably only a few million so making an attack wouldn't be worth the effort. but now the market cap is 2 trillion, which is probably a million times higher which means the hashrate would need to be a million times higher to have the same security to value ratio as 10 years ago.

So security of the network should be proportional to the total value of it or the total market cap of bitcoin.

Also I think It would be better to look at the energy consumption of the mining network instead of the total hashrate because the hashrate increases from more miners and improvements to mining hardware. So looking at energy consumption cancels out the hardware improvement factor and would give a better estimate of difficultly to pull off a 51% attack.

If energy consumption of the network remained the same hashrate would still go up giving an illusion of increased network security.

Bitcoin network security is from total hash rate and decentralization of hash rate. Lower hash rate, higher risk of 51% attacks. Less decentralization, higher risk of 51% attack.

Your thinking is wrong as you can see Bitcoin network hash rate does not go upward with a straight line but it has rises and decreases with time. Bitcoin transaction fee goes to miners each block increases or decreases too, it comes from demands of Bitcoin users and hypes on this blockchain.

Latest hypes are from Ordinals, BRC20 tokens and Bitcoin miners got a lot of bitcoins in transaction fees, it's their extra profit in 2023. Recent months, the hype cools down but do you see any worse security on Bitcoin network, to prove your thinking is right?

Inscriptions, Mempools and Miners

The real question is how much security we need? Bitcoin was less secure 10 years ago when hashrate was a fraction of what it is now, yet it didn't get attacked. It could be true that transaction fee rewards are sufficient to secure the network.

Also, there's another variable that almost everyone overlooks. Number of confirmations. If the network is more likely to get 51% attacked, then those who who accept transaction can just require higher number of confirmations. Today we used to treat 1 confirmations or 3 confirmations as secure, in the future it might be 10 or 20. No one is going to pay for coffee with on-chain BTC anyway.

These concerns have  been the talk of the community for a long time now but we are still talking about hypothetical scenarios. So, let’s also consider hypothetical solutions.

We are hoping to see some technological advancement in the next couple of hears through the lightning network that could reduce the pressure from the main chain. This would benefit us investors as well and could maybe lead to us using bitcoin as a payment method.

Another hypothetical solution is if miners were to be enticed by a different kind of reward mechanism this time. Maybe there would be some protocol change that could incentivize miners.

This question always comes up during halving period and the answer is always let’s wait till then. Many have worried in the past that at a reduction like this it wouldn’t be profitable but still we have miners. What will happen is miners who finds out that the process isn’t beneficial or profitable to them again will definitely quit, should it be large computational power that comes down then the difficulty target also reduces thereby inviting more miners too again.

As for the concern of whether the network will be decentralized I think yes the only concern will be if the mining nodes each decide to censor transactions they pick but maybe a node will try to harm the network carry out an illegal transaction? It will not happen because there would still be need for consensus

Space in blocks is limited you can't have twice as many transactions every time the rewards halves unless you increase the blocksize!
So, you either increase the blocksize each time by two and somehow force people to fill it up or you acknowledge that the maximum security the network can get will also come down by half each for years when expressed in the amount of $ it takes to attack it.


Some, for the rest...


And that's the math for 6cents/kwh, raise it to 10 cents and you will need free gear!

It's a well-known problem and there's no good solution as far as I know.
And it gets worse with solutions like the Lightning Network, which are helpful indeed in terms of sending txs at a very low fee, but (if successful) they would reduce demand for on-chain transactions.
Having a permanent bottleneck is also not a fix to the problem, as it would mean that sending bitcoins on-chain is unreliable as you wouldn't have guarantee that your tx will get confirmed in a timely manner even if the fee is high.
I believe the original idea was that there were meant to be many transactions with affordable fees, but that concept didn't quite account for the blockchain size issues.

Anyhow, I wouldn't worry about that too much as we still have a lot of time to sort that out. In a worst case scenario, we could change the algorithm, or hope that bitcoin related businesses will take on mining on themselves, as they have vested interest in keeping the network alive.

TBH, I don't think mining alone is a profitable business, but if you are farming with others then profit will still be made. Miners are already making good profits. Let's break it down a little, they make a profit from block reward which currently is 6.25 right? After halving they will make 3.125. Considering the inflation rate, and other devaluation of fiat and BTC price. We can deduce miners are going to make a lose.

But I don't think they only have to depend on Blockreward or fee reward, they can make an equal amount of money if the adoption is doubled. If 2x people will start to use the BTC network, then there will be more tx in blocks waiting for to get processed. More miners will be in the network. Plus the price of one BTC is going to increase as well, if 2x people will adopt BTC than now. An increment in the BTC price and an increment in the adoption rate will still give them healthy rewards. Plus BRC-20 and ordinals are still functional, and according to some miners and CEOs of bitcoin.org miners are not in favor of stopping ordinal's functioning.

This wall of  text is terrible to read. Learn to break lines please.

You can't predict what the price of bitcoin will be next month, how can you predict 50 years? 100 years?

You can't know how much miners will receive when fee is the only reward. Probably, it will be enough. Miners are making a lot of money now, there is nothing to worry about them for now.

In theory as the bitcoin block reward keeps dropping transaction fees would take the place as payment to miners but If the fees don't increase miners would not be profitable and the hashrate would drop drastically.

The fees from transactions pay for the miners so more fees equals more miners therefore the network security is directly proportional to transaction fees. So in theory having a bottleneck on the network via the block size/block rate creates competition for block space and increasing fees which also increases security. If this bottleneck is not sufficient, fees will be low and based on the current fee rate once the coinbase is gone the hashrate will drop to 1-5% of its current hash rate. granted by that time I'm sure competition for block space will increase but fees might still be so low that the hashrate will be a fraction of the current day. For the hashrate to remain the same without the coinbase block reward, transaction fees would have to be ~650 sats/vB.

If for example transaction fees remained ~25 sats/vB in the future and bitcoin is 250k USD then there would be an average block reward from fees of 62k USD which would require 9mil USD a day to take over the network. If fees do get up to 650 sats/vB it would cost 234mil USD a day. 65mil USD a day is required to do the same thing in current day.

My concern is if the fee rate doesn't eventually replace the coinbase then the network will become less secure. What would be the solution if fees don't increase? Should we reduce the block size/block rate? or flatline the coinbase at some point so there will always be a small amount for miners to gain?