Miner incentives in a post-2140 world without Bitcoin rewards

So there's this interesting theory going around about what might happen after 2140 when there won’t be any new Bitcoin being created anymore. Some folks think this could come way sooner because of the low inflation rate we’re seeing. Anyway, it raises a big question: how will miners keep making money if there aren’t any block rewards? Some argue that transaction fees will be sufficient, while others believe that the price of Bitcoin will rise so high that there won’t be enough transactions to keep miners busy. But if fees are high, wouldn’t that still be a good reason for miners to stick around? What if the fees fall short or the transaction volume isn’t enough? Could non-monetary uses like Ordinal inscriptions come to the rescue? I’m thinking that in the future, blocks could be packed with tons of second-layer transactions, turning the main network into a settlement layer. With high fees, maybe the combination of regular transactions and these other uses could keep miners incentivized? I’ve been mulling over whether ordinals and similar non-monetary stuff are just a waste of time and resources, or if they could actually bolster the incentives for miners. For sure, monetary transactions should always take priority, but if that’s not cutting it, maybe non-monetary transactions could fill the gap. It could be worth considering a protocol tweak where monetary transactions get processed first and non-monetary ones follow up with lower priority.

Look at testnet3, and try to use your CPU to mine something there. Then, you will find your answer. They are enough on testnet3. Why wouldn't the same situation repeat on mainnet? Those networks are very similar, just 20 minute rule is one of the main difference between them, other things are pretty much the same (which is also the reason, why test coins got some value, even though they shouldn't, and why they often behave better than some altcoins). You cannot take all of your coins to the grave. Sooner or later, people would need to spend their coins, because if their plan is to never move them, then sending all of that to OP_RETURN will achieve the same outcome. Then, people will abuse 21 million coins limit even further than today, and that would "solve" the problem. Because note that even though we have altcoins, they are not all pegged into existing coins. They usually create additional supply, which abuses the system. If you have 21 million BTC, but if BTC has only 50% domination, then the situation is the same, as it would be with 100% BTC domination, and 42 million coins. No, they would create the problem instead, for example by raising fees sooner, than they should, and taking down regular payments. It is not only about the incentive they bring to the miners. It is also about the incentive they removed, by discouraging people to transact, when they saw some mempool stats, and switched into other payment methods.

Assuming bitcoin is still used in 2140 and there is no mining rewards your question is whether miners can sustain only with the fees from transactions right? It should be or miners will stop then the difficulty reduced but still the blockchain will just go on, and ordinals are non-monetary is a 'subjective' word because there is no difference between ordinals or an actual transaction, it's someone willing to spend high fees due to hype up the network but you can look at the mempool they are not capable of doing that forever cause they are simply burning their money for some shit which just gained attention in short term and in my opinion it won't even be there for another next 5 years.

Then mining difficulty will drop, until remaining miner can mine at profit with lower difficulty. No, unless block usually isn't full. With current way of Bitcoin protocol, miner can choose any transaction they want to include in a block. In practice, miner usually include as much as transaction as they can starting from transaction with highest fee rate. Forcing miner to prioritize certain transaction would be difficult for various reason, such as each node have slightly different mempool.

Well, first let's see the current blocks (post-2024 halving), and see if we already can draw some conclusions. If we take out the fee spike near the halving and the OKX spike, then most of the time the fees are hovering around 10% of the total block reward in both waves when Runes cluttered the network (including subsidy and fees), and 5% in low-fee phases (when no such event occurred). Source: bitbo (blockchain.info charts currently don't work for me) That means that if block subsidy was cut off completely, then the hashrate would probably drop by 90 to 95%, from currently around 600 Eh/s to perhaps 50-70 Eh/s. You may say that's dramatic, but that is approximately the hashrate Bitcoin had in 2018/19 (see this chart), and Bitcoin was considered safe at this time too. This would be basically the situation in 2140 if the Bitcoin price was the same than today (65-70k) and the transaction activity was the same too. @vjudeu's comments about testnet would indicate something very similar: even on testnet there's a significant hashrate even if there's no real block reward. However I think there is perhaps a problem: mining difficulty could become more volatile, because in bear markets usually transaction rate drops and thus the fees drop too. What I think will happen is however what already today happens when there's an upcoming halving: miners diversify their operations, for example offering services to AI and cloud companies, and server colocation.So miners would find a way to survive - and take into account this is a very gradual process. Hashrate would probably however then get lower in bear markets. But the hope is of course that Bitcoin's volatility will be much lower at that time, as it will be an established financial asset. I believe in the future merged-mined sidechain rewards could become a significant income for miners. That's also what some people like Paul Sztorc (who proposed Drivechain, an interesting sidechain mechanism) wrote. As for tokens like Ordinals/Runes I think other blockchains will be more attractive. Take into account that Ordinals/Runes were/are mostly a fad phenomenon, at least on Bitcoin - they came from the idea to "have an NFT on the OG blockchain". It is very unlikely that this fad will continue for more than 100 years ...

This whole question is wrong because you are only focusing on a tiny insignificant thing (fees) while there are a million different things that are much more important. For starters in 100 years from now, Bitcoin may not even exist. The cryptography used in Bitcoin is going to will have been obsolete for years by 2140, so by then Bitcoin either will have had significant changes (hard forks) that would fundamentally change it or a more probably thing is alternatives will have been invented that replace Bitcoin. As for fees, people don't tend to use a payment system that is expensive. If that becomes regular in Bitcoin, it would kill it. That means it stops being used by regular people for payment and it will lose its "hype" and subsequently there won't be any reason for scam attacks such as Ordinals to be using the "bitcoin name".

Disagree. The fee structure is a fundamental pillar on Bitcoin. Without that incentive there is no one to process blocks which contain transactions. As far as the cryptography being compromised, that is a problem that everyone will face eventually. And yes, that may be the first time a hard fork has 100% agreement, I mean that is a clear Schelling point in benefit of all Bitcoin holders. As far as high fees, people will just use 2nd layers. Unless some impossible to imagine alternative is invented that is so good that people want to migrate their money there, Bitcoin could perfectly exist in 100 years. This is a software, it's a digital asset, it's not some physical thing that has to be replaced. It's interesting to think about the far future and see what will happen. I believe BTC is here to stay unless a major discovery is made that like I said, invents something that we cannot even imagine now.

You're talking about 2140 but I would be worried much sooner, unless you believe the market cap will double after each halving. Two more halvings and the security of Bitcoin could be in great danger due to economical factors and before this happens we will see higher centralization due to less companies mining it. The tx fees will not be enough and block reward will be too small, if you can't see it - you're blind. There are only two solutions to this problem: .1 Switching to tail-emission and forgetting about "there will only be 21m" mantra. .2 Switching to PoS (which will make it even more centralized) Tail emission quick summary: https://www.youtube.com/watch?v=sRwSqM0YBto Another problem is the Bitcoin project competition, mining companies don't care about the project and securing it, they only care about profits. So why would they buy another batch of power hungry ASIC's if they can buy a lot of general purpose CPU's and mine with them more profitably ? Add the fact that you have more resale value of this CPU's, better warranty, etc. Numbers will speak and if Bitcoin price craze stops, this companies will reevaluate their mining business and alternatives. If they see they can have double the profit mining with CPU's on a stable enough project... they will switch in a blink of an eye. They could as well trade to BTC if they want, but the matter is - security of Bitcoin will be in danger. Some hints about current Bitcoin mining profitability (or rather lack of it): https://www.youtube.com/watch?v=QCFwmJXx7dc It will only get worse as the electricity costs rises and more mining taxation come. If nothing changes, there will never be 21m - So the mantra will die anyway along with the project. If you're gonna use second layer solutions, you can as well use PayPal. If there will be a decentralized way to handle much more transactions per second than today, it can as well be incorporated into first layer. Centralized "solutions" are not solutions and LN has failed in this regard. It's a shame "hard fork" term was even invented, because before that we just called it "Update" and all software needs updates. Due to this protocol code stagnation, right now I don't see bright future for it. Maybe someday it will change but it could be too late. PS. I know I sound very pessimistic but it's safer to be incorrectly pessimistic than incorrectly optimistic.

I think it will happen anyway, probably as an altcoin. And then, in the future, those altcoin users could even burn some overprinted coins from tail supply, to raise the price. Again, another good candidate for some altcoin. I wonder, if some people coming from ETH want to deploy some stuff on BTC, because they don't like PoS. Before Bitcoin, we already had Proof of Stake. It is called fiat, and existed for years. And Bitcoin raised partially from that, after what happened in 2008. So, I wonder, if people will go back, when Proof of Stake will collapse again, and the cycle would repeat again? Because if you have an ASIC, then your blocks are stronger. In BTC, there are many places, where one, two, or something up to six confirmations is sufficient. But if you have something, that can be mined on CPU, then it requires much more confirmations. For testnet3, people require for example at least 100 confirmations. And for many altcoins, it is also the case: You have less power? Then you need more confirmations. Second layers are there not only to replace the main solution, but also to bring more features. For example: if you have LN or sidechains, then you can remove data, if they are deeply confirmed on the first layer. If you have only one layer forever, then you can never delete your data. So, do you want to live in 2140, and still download all historical data, starting from 2009? Or maybe you want to say, for example "data below 2100 are deeply confirmed, are grandfathered in, and should never be reorged again". We already had some upgrades, which have exceptions in the source code, because it was easier to add them (for example duplicated transaction hashes), than to re-mine the whole chain, to reorg hundreds of blocks, and to invalidate previously valid coinbase transactions, which were already spent. So, to sum up: my advice is simple: you want tail supply? You want Proof of Stake? Go on, do it. Test it, observe it, make your own conclusions. And remember: nodes can leave and join the network at will, so you can always return, if you conclude, that your ideas were wrong. After all, even coding a bad idea is something, which can be used to improve your skills, and get some new experience.

This is not true, more confirmations on other chains come from different problems and you can have 0-conf transactions when it comes to some altcoins, I have paid numerous times with 0-conf. Mining hardware has nothing to do with how many confirmations are needed and ASICs certainly does not make it stronger (rather weaker due to more centralization). One project that I use has 10 confirmations needed due to privacy reasons and more hashrate/ASIC's wouldn't solve it. Bitcoin requires less confirmations - 6 but time between blocks is 5x higher (10 min) vs 2min and 10 confirmations of the competition project. So we have 60min vs 20min on non-ASIC chain when it comes to confirmations.

If the fees are not enough, it will be because there are not enough transactions to compete for the block space. In that case, the system will stop operating: This will have the following consequence: Ordinals will switch to another protocol, with transaction structure that is not biased by the Bitcoin protocol. We should never censor or discourage any valid transaction that does not fit our description of Bitcoin, no matter what. The only objective factor that defines which transaction gets into the next block is the law of demand and supply.

Where is, in your opinion, the limit between "secure" and "not secure"? As I wrote in my last post, the hashrate would probably go back to 2018/19 levels (90-95% less than now) if the complete block reward was cut and the BTC price was like today. It will be a bit higher due to Moore's Law and even could be higher than today for this reason but as hashrate is not the relevant factor for security but the "attack cost", the security will definitely be much lower than now (in 8 years Moore's Law based hashrate increase should be * 4 approx. without increased attack cost). But: Is that not secure enough? Just a small comparison: Bitcoin today has a block subsidy of roughly 200000 USD (65000$ * 3.125 BTC). Transaction fee income is about 10000-20000 USD per block. A block is generated approximately all 10 minutes. Litecoin has a block subsidy of roughly 500 USD (6.25 LTC * 80$), 4 blocks per 10 minutes, so the miner income is about $2000 per 10 minutes. So LTC has only 1% of the current Bitcoin subsidy, and in addition there are no relevant transaction fee rewards. The LTC reward is also much lower than the BTC transaction fee income. But it is considered safe enough for many exchanges to accept deposits of less than 24 confirmations (24 confs are equivalent to 6 Bitcoin confirmations, i.e. "one hour of confirmations"). And it is also safe enough that financial companies are basing regulated products on it (e.g. the CoinShares/ETC Group ETPs). Litecoin can also serve as a model to see what could happen if the long term price increase is not pronounced enough to balance the subsidy decrease due to halvings. Miners income is thus now less than some years ago. So in general I'm a bit more optimistic. I think Bitcoin is now much more secure that it needs to be, and after several halvings more, it will be likely that it is still secure enough - probably even in 2140.

We can only speculate for the near future not 100 years from now. And we already have the history to work with. For example 10 years ago miners were being paid 25BTC per block with nearly no fees but that was a $5,000 reward. Today they are being paid 3.125BTC and even without any additional fees that is like a $200,000 reward. That's been more than enough incentive. In the near future (like next 10 years) people all agree that price rise will continue. So there is no valid arguments left there for "incentive for miners" either. I disagree. First of all for a secondary layer to function well and give people incentive to use it, the primary layer that this 2nd layer depends on has to work smoothly. People aren't going to be able to open channels and settle them easily if the fees are outrageously high. Secondly if you checked the LN stats over the past year, there has been drops in usage (number of open channels, capacity, etc.) each time that the Ordinals Attack was at its peak and had caused a huge fee rise. That proves my first statement.

This is true and a bit scary, because one of their goal with this is to destroy medium players (small are already dead). Higher hashrate does not always mean higher security, as security comes mainly from decentralization. If only few players control majority of the hashrate, I would say it's not secure at all and the project is at the mercy of the regulators. Remember China ban on mining when in 2021.05.13 65.5% of hashrate disappeared in little over a month ? Another threat is the inevitable black listing of transactions forced by government on miners, as if the tainting wasn't enough. The security of the Bitcoin is in hands of the few companies, if profitability drops or they find something more profitable to mine then Bitcoin network will be doomed. After each halving the centralization is growing as more mining companies get out of it as reported by several sources. So I'm still very pessimistic when it comes to Bitcoin security in the upcoming years and if nothing changes then I'm 100% sure that this project won't last more than a decade. I wouldn't compare Bitcoin to much lesser projects when it comes to security as there is much more at stake and someone will be willing to attack it with higher budget like state actors from North Korea. When the balance between decentralization and hashrate is broken, we have seen a huge increase in hashrate but we can't say this about decentralization. In fact, decentralization has been dropping for quite some time because smaller players can't compete in this model. I just don't believe a trillion+ market cap will magically double after each halving, and that's what is needed for this to work. It's unsustainable. And yet, profits back then were much higher due to much lower difficulty. https://bitinfocharts.com/comparison/bitcoin-mining_profitability.html#alltime Hint: Profitability - It's not going up. And there's nothing wrong with it until it hits the wall of no profit.

1. It is not all about mining: https://en.bitcoin.it/wiki/Bitcoin_is_not_ruled_by_miners 2. Big server farms: And note one thing: most users will not mine in the future. They will be "client nodes". 3. If you have 51% in any Proof of Work system, then you no longer compete with other miners. You compete mainly with yourself. Going above 51% simply means, that you produce more Proof of Work than needed, and you make your own blocks harder to reverse, than anyone else's blocks. Which also means, that not only it is costly to compete with you. It is costly to also reorg your own chain, which you mined. Some example: you have regtest-like network, but with difficulty adjustments. Is it profitable to run some ASIC here, and have blocks with 64 leading zero bits? Obviously not. Reorging that would be costly not only for your competitors, but also for you. Which means, that if you are a regulator, and you find out in the future, that "hey, this decision was wrong", then you would need to reorg your own, very strong blocks. Because if you don't, then the truth will be written in the chain, and shared with every non-mining node.

The article talks a lot about breaking consensus by miners and that it can't happen but I'm talking about regulators forcing miners to use black-listing (not including certain tx) in a block, which doesn't break the consensus. Here's some more info on this subject: https://thebitcoinmanual.com/articles/bitcoins-battle-with-ofac-compliance/ Here are interesting stats about current regulators impact on Ethereum: https://www.mevwatch.info/

Suppose regulators force the miners of their country to blacklist certain transactions. What happens with miners outside their borders? They cannot force their behavior. The anti-censorship miners will normally mine any transaction, and the pro-censorship miners have the choice to either accept the chain with the most work (which would make their blacklisting pointless and financially damaging), or blacklist the most worked chain if it contains blacklisted transactions. Since the former is not an option, good luck with convincing the miners to attack the very essence of Bitcoin.

Marathon is already blacklisting transactions and it didn't split the chain. The tx will be mined by different company but the problem here is that it's already happening and other miners could be incentivized if not forced, to join this OFAC compliance. I don't remember how this incentive would work, there's somewhere article on it - if I find it, I link it.

Even if just 1% of the hashrate remains anti-censorship, it has a high chance to produce 1 block everyday. That's enough to clear the mempool from all blacklisted transactions every day. The only way to censor Bitcoin is to attack it, which incidentally will affect your own income either directly through waste of electricity or indirectly through capital devaluation.

*anti-censorship, makes sense...