I've been diving deep into the whole security budget issue for Bitcoin lately, and honestly, it seems to get overshadowed by price changes, ETFs, and institutional interest. What’s gonna happen when block rewards eventually hit zero?
Whenever I bring this topic up, the typical reply is, "No worries, the fee market will take over and miners will still be incentivized."
But does that really check out? I totally see the counterargument: as Bitcoin grows, block space gets super scarce, and the demand for settlements could drive transaction values high enough to keep miners happy. But here’s the kicker: the block subsidy keeps halving every four years. Right now, transaction fees are just a small part of what miners make during regular times. Most of their earnings still come from that dwindling subsidy.
What keeps bugging me is that every time we chat about the security budget, it boils down to guesses about future demand. We're being asked to predict how much users will pay for block space decades from now, and that feels like a way tougher problem than most folks acknowledge.
To make it even stranger, the whole ecosystem is pushing hard to shift activities off-chain to Layer 2s and sidechains. It’s like a total contradiction. For Bitcoin to scale on a global level, it needs L2s. But if those L2s do their job too well and condense millions of transactions into just a few on-chain settlements, they might inadvertently lower the fee pressure on the base layer.
No I don't think there is anymore you are missing. You probably just choose to live there you are after much the doubts about the mining incentives has been cleared that the transaction fees will be profer the service to reward miners and so on the Blockchain network will still be secured with miners proceeding to validate transactions and adding new blocks after verification to the Blockchain.
Is there something different from the opinion of the Pierre Rochard which you have become aware of?
Or maybe you are probably overreacting like the other people who feels worried over the Bitcoin Blockchain network security. Just know that due to the competitions amongst miners, security modernity tends to spontaneously shift with resilience just as Pierre has also revealed in his own opinion.
Bitcoin is barely even 15 years old. If I had to bet, I believe that fee market will develop further. We are still a long way from the block subsidy hitting zero.
However, at the end of the day, it comes down to a pure prediction, nothing else. It is a complete and total game theory gamble that the security of Bitcoin depends on. Anyone who tries to tell you that this has been solved is outright lying to make themselves feel better about their investments.
Bitcoin on-chain is very secured, the most secured blockchain, and if people want best security for their bitcoins and transactions, they will choose Bitcoin on chain for transactions and any business deals through Bitcoin blockchain.
Fortunately, during recent months, Bitcoin mempools have become very good for transactions with very low transaction fees, from 1 satoshi/vbyte to lower fee rates. For people who are not too technical, they can still enjoy 1 satoshi/vbyte fee rate but if they are ready to learn a little bit more technical steps, they can broadcast transactions with fee rates under 1 satoshi/vbyte.
How to make a bitcoin transaction and pay less than 1 sat/vByte
LoyceV's 0.1 sat/vbyte Electrum Server Adventure
DireWolfM14's Electrum SPV Server
You can discuss about current existence, development of Bitcoin side-chains in this topic Sidechain Observer - Bitcoin L2 Projects & current state of development.
I don't get the feeling, that the "ecosystem is aggressively pushing" second Layer solutions and sidechains. Some centralized crypto services are pushing sidechains and second Layer solutions, but there's nothing more than this. L2s are built on top of the Bitcoin Core blockchain transactions. L2s cannot impose pressure for reducing the transaction fees on the blockchain. If the amount of transactions on L2s is growing, the amount of transactions on the Bitcoin Core blockchain would also grow, which would push the transaction fees up.
What exactly do you mean by "security budget"? Can you elaborate more on this? I don't see any threats to Bitcoin's security right now.
AI and quantum computers are a future threat, not a current threat.
It depends on how Bitcoin evolves within the next 100+ years. I have thought about this before, and that made me read up a little bit about it. When all blocks have been mined, I believe that a lot of miners will shut down, especially the small, private ones. The publicly traded bitcoin mining companies will have other things that generate income and cover costs, as we've already seen some companies expand to AI.
Currently, the total average payment in transaction fees is about $200,000 to $240,000 with a daily trading volume of 20 billion dollars. This is relatively little money when shared across different mining pools in the world that confirm transactions daily, but we must remember that Bitcoin has these numbers in about 17 years. Also, trading fees have been between $0.30 to $0.6 lately. By 114 years time, when all blocks have been mined, and any mining firms have shut down, assuming there are 20-30 left, and with transaction fees around a dollar, the daily transaction fees can go up to 3-5 million dollars. If 30 miners share that among themselves daily, that won't be little money.
All these are just speculations. It could be worse than this, it could be better than this, but I believe people would always find a way to minimize cost and make money, and as long as there is an opportunity to make money, it will incentivize people. It's still over a century away, so there is a lot of time for it to be figured out.
One main reason for this is because the concerns are based on a false assumption. If you have a false assumption about something that you can conclude whatever you want and create all sorts of distortions. In the case of the security budget, the false assumption is that it has to always grow and that the industry will stay the same way forever. It was always supposed to be a dynamic thing, that is why the difficulty adjustment was created. But since Bitcoin has been growing so rapidly we have seen basically for most of its history an upward growth of the mining power, and because of that some people started falsely assuming that it has to be always this way. It is another case of humans finding wrong patterns in data and then drawing wrong conclusions.
Nobody can be sure about anything in stuff like this, but what is clear is that some people prefer to have anxiety and to share that anxiety with others. This is not a good thing. Watching the news in the Bitcoin and crypto sphere I see that many keep trying to create always some end of time story about Bitcoin. Before they said Segwit will be the end of it, lightning will kill Bitcoin, ETFs, OP RETURN, quantum computers, and many other things which didn't work so when all of those failed now they start another one about the security budget.