Your posts about bitcoin prompted me to deep dive with it. I read the white paper a few times. I setup a node on one of my machines. I wrote some code to fetch a block template from my local nodes RPC service and generate some block generations for mining. I ran some basic cpu mining, etc. I feel like I have a better grasp of it all now. One thing I am struggling with is the incentive for miners once there are no more Coinbase/generation transactions. If the POW is maximally hard (energy intensive) then transaction fees will need to be high for miners to have ROI. If transactions fees are that high, then consumers are going to spend a lot to initiate transactions. This doesn’t seem like a win win to me. How is it going to play out once all coins are mined? Reduce the complexity of POW for post Coinbase txns? The security of the network is still there due to the amount of computation in the block chain up until the mine is dry. What are your thoughts on this?
We’ve already witnessed transaction fees exceed the reward (see block 494045). I wouldn’t be surprised if that’s happened again during the past 3 days when getting into the next block cost 500 sat/byte.
The solution for BTC appears to be off-chain scaling, such as Lightning Network.
The end of mining rewards is beyond our lifetimes, but I wouldn’t be too surprised if there’s a successful hard fork to continue the final 1 Satoshi reward indefinitely.
That's my favorite part of Bitcoin, the fact that it can evolve over time.
If it's found that deflationary really won't work, and it's genuinely hurting the usage and adoption of the currency, and it's in the current users of bitcoin's best interest to do so, it can be turned into an inflationary asset.
Flaws can and are fixed in it, and because those changes can't be pushed through by some appointed authority without overwhelming majority from all involved parties, you don't need to worry about this ability to drastically change being unfairly pushed upon you.
> "How is it going to play out once all coins are mined?"
Difficulty, transaction costs, competition with other coins (and off-chain networks/sidechains), and the market price of bitcoin will all hopefully & probably settle around an equilibrium that is sufficient to incentivize enough miners necessary to maintain the security of the network.
> If the POW is maximally hard (energy intensive) then transaction fees will need to be high for miners to have ROI.
If the transaction fees aren't high enough to support the current level of mining them some (but not all) miners will drop out (and the "difficulty" will adjust to compensate).
The result is transactions will continue to be processed, but the overall security of the network will be lower.
Transaction costs are already a significant portion of mining income. I suspect even by the time of the next halving they will already be a greater proportion of miner income than block rewards.
Lightning transactions will change all of this. By the time we are talking about large lightning transaction commits, we'll be talking about 3rd layer solutions. Bitcoin could be at a reserve currency level, where individual transactions are significant.
