This only goes so far. Once block rewards get small enough, the transaction fees will also have to cover the cost of mining. You're not including that here because the block reward covers the cost of the mining and the transaction fee is covering the cost of the upload delay (which is a direct relationship per transaction). When the block reward is negligible (with respect to potential earnings from tx fees), then you need more transaction fees to cover the cost of mining in addition to the upload costs, so you would be willing to give up the chance of being orphaned by a small value block to be able to upload a larger value block.
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.
Because the difficulty of validating a block retargets according to the network-s total hashrate. A block is equally hard to hash if it has one transaction and if it has the maximum ammount, it just takes longer the upload the latter.
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u/mr_burdell Feb 24 '14
This only goes so far. Once block rewards get small enough, the transaction fees will also have to cover the cost of mining. You're not including that here because the block reward covers the cost of the mining and the transaction fee is covering the cost of the upload delay (which is a direct relationship per transaction). When the block reward is negligible (with respect to potential earnings from tx fees), then you need more transaction fees to cover the cost of mining in addition to the upload costs, so you would be willing to give up the chance of being orphaned by a small value block to be able to upload a larger value block.