You were talking about the incentives with proof-of-work. Do you know when the block goes down to zero, that people will still mine at the same level? Will fees be the same as Visa transactions? The question was: based on the incentives that exist in the network, what happens when the reward for the generation of coins drops to zero, and the only reward is fees? Will miners keep mining? Will the network fees be reasonable? First of all, to give you some perspective, this happens gradually between now and 2140. By that time, people on Mars will have to decide if they want to go into mining with solar panels.
So, who knows . I hesitate to make predictions for Bitcoin three months . You’re asking me about 130 years , but I’ll try. The important thing to realize is this happens very gradually and in an environment where the reliance on seigniorage / drops. Presumably, the number of transactions and amount of activity rises, which means transaction fees rise. What it should do, if you look at it in a graph, is a kind of curved ‘x’ shape. Fees go up, reward goes down. Fees, , go up not because are getting more expensive, but because you have more transactions paying more or less the same fees.
If you imagine a block today, which has bitcoins in and maybe one tenth of a bitcoin fees, 1in favor of the seigniorage. Now let’s a block in 2141. What is the minimum reward? One satoshi. Let’s say this block has ten thousand transactions. I just pulled the number out of my head, it would probably have more, but let’s say ten thousand. What’s the minimum fee they can pay? One satoshi. If you have the minimum issuance and the minimum fees, you would have ten thousand satoshis in fees… and one satoshi from seigniorage.
Now the ratio of seigniorage to fees went from 1to 1:10,000. This doesn’t happen overnight. This happened over 140 years, in a gradual curve. Somewhere in there’s a crossover point, the day that is 1:1. Miners know, for the future, they’re going to focus more on fees. That happens way before you get to 2141. I’m not worried because it’s not going to be a surprise. This is the same kind of question the Halvening.
“What will happen when the halving happens?” We see this coming four years in advance. Everyone is prepared for it. Part of living within a deterministic is, we don’t have to wait for the Friday spokesperson from the Federal Reserve committee meeting… to come out and tell us what the interest rate is. Mining doesn’t stop. Will the fees be the same as Visa’s? If they are, we have failed badly.
the fees that are already above about $5, are still lower than Visa. We are getting better at optimization. If we introduce the Lightning Network and other technologies, we increase the block . If we do all of the other optimization and scaling things, we can do Visa. We can do much more than Visa. We can do it cheaper. I don’t think we’re going to have any problems. The capacity issue for Bitcoin will be a problem all the time, but it will be a problem that we will manage in a way that is not fatal, gradually make it better and better. Failing to scale, gracefully, for twenty-five years , is the goal.
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