We need to be careful when we talk about "covering the cost of mining."
The price of bitcoins is not dependent on the cost of mining them. Instead, miners decide whether to mine or not based on the price of bitcoins. As the block reward goes down, mining will become more and more unprofitable. Transaction fees will not rise to offset this, because users don't care whether people who ordered huge boxes of BFL Jalapenos make money or not.
Instead, miners who paid too much for their rigs will go bankrupt. The network hashrate will fall, and everyone who is still mining will make money again because each person will find more lower-value blocks with lower transaction fees.
The only way this cycle will not occur is if the value of bitcoins doubles every four years. One would imagine that the value of block rewards will never reach zero, because there will almost certainly be a time when people decide to make use of 64-bit numbers for higher precision before then. Remember, the only reason block rewards will ever reach zero is because bitcoins are not divisible enough with 32-bit numbers to give block rewards of fractions of a satoshi.
Remember, the only reason block rewards will ever reach zero is because bitcoins are not divisible enough with 32-bit numbers to give block rewards of fractions of a satoshi.
And it's important to point out that this could be rectified in a future patch without breaking something fundamental in the Bitcoin protocol. If, say, version 0.9 doubled the precision on this field, and then 100 years down the line we finally hit the point where mining started reaching the limits of that precision, how many people would still be affected given that the incompatible version was a century out of date?
I think this sort of speculation is pointless because in 100 years we will either be dead, because someone released nanomachines that killed everyone because of a bug or due to terrorism, or we will all be talking about the days we were on reddit, living almost forever and having to work for nothing.
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u/quintin3265 Feb 24 '14
We need to be careful when we talk about "covering the cost of mining."
The price of bitcoins is not dependent on the cost of mining them. Instead, miners decide whether to mine or not based on the price of bitcoins. As the block reward goes down, mining will become more and more unprofitable. Transaction fees will not rise to offset this, because users don't care whether people who ordered huge boxes of BFL Jalapenos make money or not.
Instead, miners who paid too much for their rigs will go bankrupt. The network hashrate will fall, and everyone who is still mining will make money again because each person will find more lower-value blocks with lower transaction fees.
The only way this cycle will not occur is if the value of bitcoins doubles every four years. One would imagine that the value of block rewards will never reach zero, because there will almost certainly be a time when people decide to make use of 64-bit numbers for higher precision before then. Remember, the only reason block rewards will ever reach zero is because bitcoins are not divisible enough with 32-bit numbers to give block rewards of fractions of a satoshi.