Topic: When we hit 21million and all the miners leave, who will confirm transactions? (Read 2757 times)

Basically, lower difficulty.

I will also keep mining after the 21M limit.

Yes, I plan to be alive when we hit it

Yeah you do realize that the current cost of the network is about 1.6% of transaction value and that is dropping with time (as transaction volume rises).  By true cost I mean including the subsidy (all fees + all block subsidies)/(value transfered).  If the network could today operate with no subsidy and a 2% fee why would you think in a hundred years (without potentially thousands of times as much transaction volume) fees would be 10% to 50%?

http://blockchain.info/charts/cost-per-transaction-percent?showDataPoints=false×pan=&show_header=true&daysAverageString=7&scale=0&address=

If BTC becomes very popular than transaction volume will be very high. Thus even with 0.1% fee a node can make worthwhile income. Also nodes of the future will process many more transactions, because they will be more powerful and sitting on wider pipes.

Transaction fee% will evolve in a truly free market, I suspect it will never reach current bank fees of 3+% because if it does more smaller nodes can enter the market and become profitable. So TRUE competition will keep fees low and good for the users.

Bitcoin was designed for stable growth leading to sustainable future. Everyone wins!

I meant 10-50% of the entire transaction amount, not of the block reward. Does it matter how many coins one transfers per transfer? Im imagining this like credit card fees, where they collect a percentage of the transaction amount.

Why would fees becoming 10-50% effectively kill the system?
I guess you mixed up something there.

Let's just say, the average fee in 1 block is 0.5BTC.
While the reward per block was 50BTC, those 0.5BTC fee added 1% to that reward for the miners.
Now the reward per block is 25BTC, 0.5BTC in fees add 2% to that reward for the miners,
when the reward per block halves again in about 4years to 12.5BTC, 0.5BTC fees add 4%,
4more years, block reward halves, 0.5BTC fees add 8%,
4more years, block reward halves, 0.5BTC fees add 16%,
4more years, block reward halves, 0.5BTC fees add 32%,
...

As you can see, even if the average fees per block don't change, the percentage they add to the block-reward will rise (they probably will change though, it's a free market, supply and demand of transaction-storage-space will drive fees up or down).

Fees will be higher than the actual reward by newly generated coins long before we reach the 21million.

Part of the brilliance of bitcoin is the decreasing block reward component.

I think of the block reward as the bootstrapping of bitcoin. It will reward those individuals cognizant of the information asymmetry that exists between a crypto currency and a fiat currency.

Said another way, the early adopters get the benefit of cheap bitcoins. However, as bitcoin progresses, a wider adoption will occur. With wider adoption comes an increase in transactions.

Currently we have a 25 btc per block reward. That's 3600 btc per day available to miners (1440 minutes per day / 10 minutes per block = 144 blocks per day - 144 blocks per day * 25 btc = 3600 btc / day - generated by the network).

Imagine bitcoin in 2040.... Perhaps there are 1,000 transactions per second. Perhaps. That's 86,400,000 transactions per day. If each transaction included a .0001 btc transaction fee then there would b 8,640 btc available to miners.

What's more attractive to miners 3600 btc / day for the network or 8,640 btc / day for the network?

You can debate / substitute your own numbers, but the point is that miners are counting on an increasing number of transactions in the future. The increase in transactions will offset the decrease block reward and will provide the motivation needed to keep mining and to keep the bitcoin network functioning.

Cheers!

So eventually as the block reward goes down our transactions fees will increase, until transaction fees are 10-50%, effectively killing the system.

You've hit on the crux of the matter. If Bitcoin is allowed to grow it's almost certain the business model for mining will change.

Some people think (including me) think we should strive to make Bitcoin as successful as possible, up to and including replacing state-issued money. If we start to get close to that level of success there will be a lot more stakeholders involved with Bitcoin and mining. McDonalds and Walmart will have an interest in mining as a form of transaction processing, but their business perspective will be broader than just maximizing fee revenue. For their purposes it might make sense for them to mine (or hire another company to mine) and include all transactions regardless of fee.

If enough players like that get involved it's unlikely the current business model for mining will survive unchanged. It's understandable, if equally short sighted, that the established players don't like this possibility. Record companies didn't want to change their business model when the market changed either when the market evolved.

Some people might not be involved in mining, but they fear letting Bitcoin get large enough that new stakeholders appear who might not agree with them, or who might want to destroy Bitcoin. For those people keeping the blocksize deliberately restricted is an attempt to maintain control over the project to ensure its survival.

Transaction 'fees' are really just bids that people offer when they want to buy block-space. Miners are basically auctioning off a limited amount of new block-space and they don't have to accept low fees if they don't want to. Thus there's a market with buyers and sellers.

It sounds very crappy at the moment with very limited ability to find out what the "going rate" is apart from trying it out repeatedly, until one day your transaction requests start going through. However, now that more people are figuring out how it works, the process should start getting better.

Incidentally, this is partly why there is so much commotion regarding block size. Some people think (including me) that if block capacity is expanded without regard for 'scarcity', the miners won't be able to sell it. Imagine this: if there is "excess" capacity and miners can't reduce it, all it takes is one rogue miner giving away 1000s of free transactions for the whole system to fall apart.

Very true, we will never hit 21million, the bitcoin-network might get close someday, but we're probably all dead by then.

First off this is something that will not happen in our lifetimes. The new bitcoin creation will effectiveley stop around 2140, slowing step by step. Like we saw happen last december when the block reward halved from 50 to 25 bitcoins. Effectiveley then the revenue miners generate from transaction fees rose from (and these are rough numbers off the top of my head) 0.25-1.25% to 1-2.5%. This development will continue as transaction amounts grow and as the block reward keeps halving. If mining is less profitable less will mine and the difficulty will go down, thus making mining more profitable and effectivly solving the problem. It's a beautiful well designed system.

 

Someone else can probably answer this better than me.  The first question, assumes bitcoin is worth enough to make mining worth it, which all depends where Bitcoin sits by the time every coin has been minted.  If it's not profitable, many miners will stop, leaving more reward for those who keep going, until it becomes profitable again.

But the transaction fees are practically nothing, how will this validate the massive energy requirement need to validate a transaction? And dont transactions require more resources to validate as the blockchain grows longer?

This is correct.

I believe the miners still get bitcoins from the transaction fees, even if they're not minting anymore.

The miners get rewarded for validating transactions, but once we hit 21million they will have no incentive to stick around, so who will confirm our transactions and what is their incentive?