Okay I have been trying to educate myself on the inner workings of bitcoin but this is a question I haven't seen answered.
As far as I understand the reward for discovering an answer/mining a block is 12 BTC. And because this is a good value it incentivises mining which is a forward driving force for the blockchain as I understand it. But I feel like Im missing something or some form of compensation; because I also understand that there will eventually be a final bitcoin mined. So what incentivizes mining and solving the 'math problems' that keeps the blockchain moving along at that point?
Please excuse my poor terminology and whatnot; I realize it must really be tough to read for those of you that are experts by this point, but I am really desperate to understand this as opposed to just trading it to try and make money.
As far as I understand the reward for discovering an answer/mining a block is 12 BTC. And because this is a good value it incentivises mining which is a forward driving force for the blockchain as I understand it. But I feel like Im missing something or some form of compensation; because I also understand that there will eventually be a final bitcoin mined. So what incentivizes mining and solving the 'math problems' that keeps the blockchain moving along at that point?
Please excuse my poor terminology and whatnot; I realize it must really be tough to read for those of you that are experts by this point, but I am really desperate to understand this as opposed to just trading it to try and make money.
Transaction fees.
Oh wow... Okay so when I send BTC somewhere and have to pay the fees (that everyone complains about) that BTC fee paid isn't being burned/destroyed or paid to the exchange, but its going to the Miners? So there's a double reward for solving a block, the 12 BTC and the transaction fee?
If so, isn't the current push from everyone to lower the tx fees (I have heard of something called lightning and Segwit) at odds with the end of BTCs life? I mean, if we drive down tx fees to next to nothing, will it really be incentive to mine in the future? Or are TX fees themselves also tied to some sort of inflating system that will ensure that they rise over time?
Yes, the fees go to the miners. Fees don't go to any exchange. Exchanges are literally what they are, a way of exchanging cryptocurrencies; just like foreign exchanges, but for cryptocurrencies in general.
Bitcoin is capped at 21 million. So there can only be a total of 21million bitcoin is circulation(as of 9/3/2017, we currently only have 16,540,275BTC in circulation). Also, as more bitcoins are being created, the mining difficulty significantly increases, hence, lower and lower amounts of bitcoin are being mined as time goes by. So yes, bitcoin is deflationary and will most likely continue to go up in the future due to limited supply:demand.
Or are TX fees themselves also tied to some sort of inflating system that will ensure that they rise over time?
Yes. As bitcoin becomes more popular, more people will want to include transactions in a limited block, so the fee will rise.
That is, unless bitcoin is forked again to increase block size, in which case transaction fees will not go up as fast.
Ok these two posts help me understand a lot. Thanks a ton. I feel much more confident in its future now. I was having trouble explaining and understand myself what kept the entire thing from just vanishing into thin air.
