Maybe we could afford for it to be a selling point years ago when transaction demand was very low and the block subsidy was very high. Cheap transactions didn't hurt miner incentives when block rewards were 50+ BTC. That's changing. In 5 years, the block subsidy will only be ~ 3 BTC. Shouldn't fee revenue be rising to compensate miners? How long can miners be expected to subsidize users with cheap fees?
I think Satoshi was naive with some of his economic assumptions.
I probably don't know enough about the subject, so please be patient with me.
I'm not defending Satoshi, but maybe he thought that BTC's rising value (it is deflationary by design after all) would offset the loss in mining revenue of the decreasing block rewards? I mean, I'd bet that 3 BTC 5 years from now would still be a lot more valuable than 50 BTC from a few years ago. I understand that mining costs are also increasing, but isn't that what the difficulty adjustment is for? It ensures that there will always be financial incentive for miners, regardless of transaction fee revenue.
Fee revenue is essential if there is a hard cap on supply. That was the whole design -- subsidize mining early on to bootstrap the network, then eventually fees will replace the subsidy. Otherwise, network security is utterly dependent on an ever-increasing price, since speculation would be required to incentivize miners. We can't simply assume that price will keep rising forever and that
that is a sustainable incentive for miners. We have to consider a future where the design is more self-sufficient.
Consider a context where price is crashing for years and years rather than rising. Difficulty will adjust downwards but if block rewards are also steadily dropping (due to lack of fee revenue), we could see downspiraling hash rates to the point where the network becomes insecure and loses its Byzantine fault tolerance.
I concede that transaction fees will have to rise, and that micro transactions won't be plausible at some point anymore (nor would it indicate failure). My concern is that it still has to be cheap enough as to not be detrimental to adoption. My views may be a little too naive though (like how Satoshi's may be lol), so I would appreciate any insight.
This is all a big experiment. The whole idea of "cryptoeconomics" is brand new, and the whole field of economics isn't scientific. We all have different opinions about how things might work out in the future.
My primary emphasis is on the mining incentive, because it's the supreme building block of the entire system. From my perspective, we can't plan on never-ending price increases nor exponentially increasing adoption. But we can ensure that strong mining incentives remain -- at least relative to the system's native currency, if not fiat currency value -- by ensuring that increased transaction demand nets higher block rewards.
If we let mining incentives bleed away to nothing by increasing block sizes -- while still retaining a hard cap on supply -- I don't see a bright future for Bitcoin.
