Why do you think transaction fees are not enough? I’ve never had any reason to avoid transaction fees. Won’t mining bitcoin become cheaper as energy becomes cheaper?
Discussion
>> everyone tries to become one of the people that doesn't pay and then eventually there's not enough people paying for the thing to keep existing to benefit people
*Everyone* tries to avoid spending.
On a capped network everyone will ALWAYS try to avoid spending and hodl for as long as possible.
There is no incentive to spend because everyone assumes that their buying power will increase as time goes on
you Maxis are talking about it all day long.
The only thing pushing up transaction fees for the last two years have been people shitcoining on the network
In the absence of a block reward
only people who use sats for goods and services provide security for the network.
hodlers ride for free.
Since there will be no new supply,
everybody wants to hodl.
nobody wants to exchange for goods and services.
But since it's transactions that provide security,
On a long enough timeline
security goes to zero.
It's not about if transaction fees cover the cost of mining, it's about the fact that some people, holders, pay nothing to secure their wealth and that cost is subsidized by transaction fees. This isn't me complaining about some injustice or something, it is about the incentives on the bitcoin network.
Could they conceivably cover the costs of security?? For a time, yes, as you see now that is exactly what is happening, but ultimately incentives are your outcome. People are incentivized to hodl, because they can offload their security costs to those who spend or move around bitcoin, and it's compounding, it has a positive feedback loop; the more people just hodl, the more transaction fees have to cover the cost, the more incentive someone paying those fees has to just hodl. Ultimately, there's a threshold somewhere where security begins to decline, and with it, value.
Mining becoming cheaper with energy... I tried to look up the name of the phenomenon and I can't find anything (search engines filled with renewable energy blogspam) and I can't remember, but historically it has been empirically observed that, as energy becomes cheaper, people spend *more* on it and increase their energy usage. So far bitcoin has also followed this. Also, co wider increasing efficiency of ASICs does not lead to less mining power on the network, but simply a better edge to whoever can get their hands on it. Ultimately, security of the network is not a function of hash power, since machines get more powerful and cheaper, but is a function of share of total available hash power in the world held by the network, and that very closely correlates with energy expenditure by the network of miners. If the expenditure goes down, security does also.
As the block reward decreases, banks will run miners at a loss. This will centralise mining further.
I don't know about banks, but Satoshi designed bitcoin with an assumption early on, that all nodes mine and therefore all users mine. Later, he figured out that "nodes" would run in "server farms" and spoke about it. Of course he assumes all nodes mine there too, and everyone else uses remote nodes. Well the way the incentives are set up, eventually the only people that can afford to send transactions, barring a collapse of the value and therefore price, would be people that are 1) mining the transaction, or 2) sending a transaction to the miner that mined the block. They might collude with each other to allow each other to send free transactions, but that's not a stable state. This *is* the result of the block size limit, and a smaller block size makes success more likely, if your definition of success is a system where only miners send transactions. This is not peer to peer digital cash, but a settlement layer for sovereign entities.
But that's separate from the issue of uncapped supply I was talking about above.