These two aspects will keep Bitcoin safe going forward, even without a mining subsidy

With the end of the mining subsidy, many believe that Bitcoin’s security will deteriorate. Miners will still be motivated by other factors, though.

This is mainly due to the concern that, once block subsidies are eliminated, miner revenue won’t be sufficient to provide adequate security. By suggesting blocks of transactions for nodes to verify, accept, and update to the Bitcoin ledger, bitcoin miners play a critical role in the network’s security. Miners use a lot of computing power to finish the proof-of-work consensus algorithm and compete against one another for the right to propose this new block to the chain.

The successful miner is paid a block reward for this service, which is made up of two elements: the block subsidy and the transaction fees. The block subsidy is the quantity of new bitcoin released from the total supply of 21 million (currently 6.25 bitcoin); this subsidy of new bitcoin released from the total supply is halved approximately every four years. Currently, the majority of miner income comes from the block subsidy.

The issue, to put it simply, is that if the transaction fee portion of miner rewards is not increased enough to compensate for the loss of the block subsidy, the security of the Bitcoin network will decrease and the likelihood of attacks will rise because miners will no longer be motivated to participate. But it appears, the majority of those who are concerned about it misunderstand Bitcoin’s long-term game theory, incentive mechanisms, scalability, and adoption potential.

In light of that, it is safe to say that this is a subject that ought to be talked about more openly rather than dismissed. Concerningly, some people are calling for the addition of tail emissions, which would increase the 21 million-coin supply of Bitcoin.

The Bitcoin adoption curve and incentive structure, in my opinion, already include the solution (if you can call it that). There are two parts: the first is the scaling of transaction fees with Bitcoin adoption and as a security measure, and the second is the transformation of Bitcoin mining into an auxiliary tool.

Transaction Fee Sizing.

This problem is typically brought up by someone who doesn’t understand how or why transaction fees will rise or who is in favor of proof of stake (here’s an example). Ironically, one of the causes of higher transaction fees might be a logical defensive response to an assault by a malicious party mining inactive blocks to stop users from transacting. If there are any empty blocks being mined, the mempool will fill up with Bitcoin users who are raising their fees in an effort to be included in the next block. An amazing report by Riot Blockchain and Blockware Solutions outlined how this and similar attacks would be thwarted by inbuilt defense mechanisms from the Bitcoin immune system, most of which would result in significantly higher transaction fees:

“Under an empty block attack or other attacks attempting to stop users from transacting, it is in the self-interest of Bitcoin users to raise their transactions’ fees to get into the next block. The more empty blocks (the longer the attack lasts), the more pending transactions in the mempool. Transaction fees could soar from 1 sat/vbyte to 1,000+ sats/vbyte. The reward for one block could go from close to 0 BTC to 10+ BTC assuming the current maximum block size of 1,000,000 vbytes. The system is antifragile, and an empty block attack would be met by an endless market based counterattack of high transaction fees. And knowledge of this counterattack would likely deter the attacker from this attack in the first place.”

Another illustration of fee increases brought on by the network defending itself would be a response to miners’ attempts to censor merchants. This article goes into more detail about this example:.

“If a majority miner is not accepting transactions from merchants then the censored merchants must either increase their fees or not transact at all. If a merchant cannot move their bitcoins then they effectively have no value for the duration in which they are being censored. We can deduce that, due to personal time preference, a merchant who is being censored will be willing to pay a higher confirmation fee proportional to the duration in which they are being censored, up to the theoretical maximum in which the fee is the entirety of the transaction.”

There are numerous arguments for transaction fees rising as a result of the adoption of Bitcoin, specifically as a medium of exchange, in addition to naturally-occurring defensive incentives that would lead to an increase in fees.

Scaling solutions will be more in demand as adoption rises as there will be more competition to add transactions to Bitcoin’s limited block space, which raises the current fees and increases competition. The market will continue to offer these scaling solutions in response to customer demand; currently, some well-liked options include exchanges batching transactions, the Lightning Network, and other Layer 2 and Layer 3 developments that can eventually combine thousands of Bitcoin transfers into a single transaction that settles on-chain.

It is entirely reasonable to assume that the majority of typical user transactions will take place on additional layers or sidechains once you have a better understanding of Bitcoin’s adoption curve. Final settlement of transactions that require increased security or involve institutions moving large amounts of money will take place on-chain along with these more productively bundled transfers. An extremely high transaction fee would be justified by the final settlement.

With the end of the mining subsidy, many believe that Bitcoin’s security will deteriorate. However, other factors will continue to motivate miners.

Increased efficiency and a more recent realization that Bitcoin miners can serve as an adjunct tool for other business practices should lessen concerns about miners going offline and reducing the network’s overall security. The Bitcoin miners’ incentive to pursue stranded, wasted, or excess energy has recently been a highly underappreciated development in the mainstream.

With the ability to instantly sell on-site untapped or non-transportable energy to the Bitcoin network via mining, bitcoin mining presents a novel and innovative proposal for society. Ocean thermal energy conversion (OTEC) combining with Bitcoin is one of the most intriguing innovations in this industry.

A very thorough article on how OTEC and Bitcoin can increase energy production and efficiency can be found here:

By utilizing the thermal energy of the oceans, Bitcoin has the potential to help unlock 2 to 8 terawatts of clean, continuous, and year-round baseload power — for one billion people. That converts the oceans of Earth into a massive, renewable solar battery.

It accomplishes this by utilizing a standard heat engine to combine warm tropical surface water and deep, icy seawater. The unique appetite that Bitcoin has for purchasing and consuming stranded energy from the prototypes and pilot plants that will be necessary to demonstrate that it works makes this straightforward concept ideal for being scaled up to a global level. Furthermore, OTEC may be the most effective and environmentally friendly way to mine Bitcoin because it uses practically unlimited amounts of cold water to cool nearby ASIC miners. “ .

This is just one illustration of how mining can become even more effective over time, and with improved effectiveness comes continued network security because it makes fewer sense for miners to shut down.

Additionally, bitcoin mining is increasingly being used as a support tool for other industrial operations. Bitcoin miners can collaborate with a variety of businesses and industries to provide significant advantages to what might otherwise be considered standard business procedures. One astounding illustration: According to a recent Troy Cross interview, ASICs used to mine Bitcoin produce heat, which can be used to boil water and create steam, purify the water again by condensing it, and ultimately lead to water distillation that is supported by mining.

These ASICs need to be cooled with fans in addition to producing heat. Combining mining with businesses or industries that naturally produce cool air is another astounding idea. Cross used carbon capture facilities as an example, which incorporate sizable fan banks as part of their routine business operations. The cost of ASIC cooling is reduced when these fan banks are combined with a mining operation.

As these developments progress, efficiency and cost will be increased by adding Bitcoin mining to a plethora of unrelated businesses and industries that produce cooling or require heating. In addition to distilling whiskey and heating greenhouses, bitcoin mining also makes money from stranded or wasted energy.

Bitcoin mining will keep being paired with sectors over time that increase the profitability of mining or everyday business operations. If your company has large fan banks, it will eventually be absurd to not direct them toward ASICs or Bitcoin miners when naturally occurring heat or wasted energy are available. Over time, all of this leads to more miners receiving favourable incentives, maintaining network security and possibly offsetting the block subsidy’s declining value.

The fact that Bitcoin mining has evolved into a support tool for a wide range of independent industries, combined with the fact that the adoption of Bitcoin has naturally led to rising transaction fees over time, shows that there is reason for optimism regarding the network’s long-term security.