Bitcoin only has security because it currently has inflation, the block reward subsidy. Bitcoin’s security budget is simple, Inflation rate + transaction fees. The users of the network do not directly shoulder the majority of the security burden. By design, this eventually comes to and end, and users will have to pay directly to keep the network secure. Since the network is decentralized, there is no mechanism in place to keep fees at any particular level. This means users will dictate what fees are paid, and users are incentivized to be fee minimizing. In the long run, fees will decrease as users find more and more ways to minimize what fees they do pay. Ultimately this will leave the network insecure as the block reward subsidy decreases and end users will not take up the difference. This will become apparent in 6-7 more halvings when the block subsidy will becomes less than the current average transaction fees earned. At that point, or soon thereafter the network will collapse as it will be apparent that the mining incentive scheme will not work over the long term.
Being a decentralized network means users are free to join and leave as they please, just as increased awareness and usage over bitcoins short 14 year life has pushed it to stratospheric highs, eventually saturation will be met and the situation will reverse. Users will leave the network for some alternative and it will become a self reinforcing spiral leading bitcoin back to where it started, zero.
Well done!
Nice!!!!
Bitcoin only has security because it currently has inflation, the block reward subsidy. Bitcoin’s security budget is simple, Inflation rate + transaction fees. The users of the network do not directly shoulder the majority of the security burden. By design, this eventually comes to and end, and users will have to pay directly to keep the network secure. Since the network is decentralized, there is no mechanism in place to keep fees at any particular level. This means users will dictate what fees are paid, and users are incentivized to be fee minimizing. In the long run, fees will decrease as users find more and more ways to minimize what fees they do pay. Ultimately this will leave the network insecure as the block reward subsidy decreases and end users will not take up the difference. This will become apparent in 6-7 more halvings when the block subsidy will becomes less than the current average transaction fees earned. At that point, or soon thereafter the network will collapse as it will be apparent that the mining incentive scheme will not work over the long term.
Being a decentralized network means users are free to join and leave as they please, just as increased awareness and usage over bitcoins short 14 year life has pushed it to stratospheric highs, eventually saturation will be met and the situation will reverse. Users will leave the network for some alternative and it will become a self reinforcing spiral leading bitcoin back to where it started, zero.
Great article! Thank you!