OP, first off, why are you assuming transaction volume would be low??
Blocks are already full and have been full for years even though it is barely ever used for payments right now. You seem to be saying "what if transactions become less frequent", but obviously that won't happen. Blocks will stay full as Bitcoin becomes more popular of course. And transaction fees will go up.
Now hopefully there will be further improvements to make transactions a bit more efficient, or at least certain types of transactions more efficient, and maybe even ways to cram more data in, like the way Segwit did.
Also it's not like this will suddenly happen one day. The whole last halving cycle before Bitcoin hits its supply limit the block rewards will only be 1 satoshi. The block reward will be negligible for decades before it finally stops. And starting from now it will take decades for that block reward to become negligible. If you think about the block rewards halving vs the increase in price, by around 2050 the halvings will likely have outpaced the price appreciation starting from now, so by around 2050 it's likely that miners will be receiving less money (in terms of USD) than they do today. So it'll take a bunch of years until the halvings even start to effect the mining industry, and it'll be like 90 years from that point until there are no more satoshis being rewarded, and all during this time the tx fees will have to gradually make up the difference. So it's not like one day mining will be fine and the next day there will be a huge issue. This means if this does cause a problem there will literally be decades to deal with it.
Realize that the Bitcoin network already has global-level security and is the most secure network in human history. So it's not like we NEED the mining network to keep growing, we just need it to stay decentralized. Also realize that mining machines grow more efficient over time, so hash rate will continue to increase even without more energy (cost of mining) used. Also Bitcoin mining is still a very new industry and in the coming decades as it becomes accepted more and matures it will naturally go to the most efficient places (like running on unused power at renewable power stations) or running at purpose-built renewable power stations where they are generating energy at nearly zero cost after initial startup costs, rather than like paying on-grid prices like most miners do today.
Also the most obvious point - mining difficulty can adjust down for any negative chance in hash power going into mining, so even if hash rate peaks at some point and goes down after that until settling at a tx-fee-only equilibrium, the system will adjust for that and it'll just mean the most efficient miners stay in business. Only thing that matters is it stays decentralized among those most efficient miners, which seems pretty likely since you can mine from anywhere in the world as long as you have access to cheap power.
In summary:
1. Blocks will obviously stay full so its not like there will be fewer transactions or less competition for getting transactions in blocks
2. Potential for further improvements in the bitcoin protocol in the coming decades to allow more transactions to be crammed into blocks
3. Transaction fees will go up as bitcoin use grows
4. The effects of the mining reward becoming negligible will happen over decades, not all at once, so if there is a problem it can be dealt with over decades
5. Mining machines will become more efficient to use less power and naturally miners will settle towards using only the cheapest electricity, bringing down the cost of mining per unit hash rate
6. Hash rate doesn't need to go up forever, Bitcoin is already the most secure network in human history, we should certainly expect at some point in the next few decades hash rate will peak (my guess would be sometime in the mid-to-late 2040s) and then settle somewhere at a long term equilibrium, the halvings will eventually cause hash rate to peak and the difficulty adjustment will allow it to settle at equilibrium somewhere lower than that peak once the block rewards of new bitcoin are a negligible part of the miners income
7. This is all perfectly fine, the only thing that matters is that mining stays decentralized once this equilibrium is hit when miners are making their income just from tx fees.
These were some very nice elaborations, exactly what I was hoping for.
Let me clarify a little bit, I didn't really assume tx-volume would be low by then, I was mostly playing "devils-advocate" (more like friend-of-mine advocate), because he was wondering what would happen in that specific case (low tx due to BTC just being a store of value).
Have a great weekend!
Alright, buddy, let me break it down for you – if Bitcoin's still kicking in a century, we'll probably be coexisting with a robotic-alien hybrid society.
No joke, though, the query about incentivizing Bitcoin mining in the future is legit. As the network expands and transforms, so must the rewards that fuel it.
From alternative proof-of-work schemes to fusion-driven mining beasts (no kidding!), the potential is vast. Even if Bitcoin morphs into a digital gold reserve, its intrinsic value will continue to attract believers. And where faith exists, power resides. So let's not fret over the distant future. We've got more immediate concerns, like surviving the robot-alien extravaganza.
Haha, I feel ya. Yes, obviously there are an enormous amount of challanges to overcome. I still enjoy to talk about some very hypothetical things, especially in this case, where, as long as there is no major hardfork, things on the Bitcoin side are very deterministic and thus allow for this sort of discussion without it turning into a total cloud-castle.
Nothing in the halvings is unpredictable. We know at exactly every block number what the mining reward will be. There is no unpredictable jump.