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When Bitcoin gets depleted
I want to get some opinions on what is going to happen when Bitcoin gets depleted or gets too expensive to mine? Will there still be enough incentive to maintain the ledger? Will transaction fees increase even further to incentivize people to keep on maintaining the ledger?

(01-07-2018, 11:25 AM)Burnmeister Wrote: I want to get some opinions on what is going to happen when Bitcoin gets depleted or gets too expensive to mine? Will there still be enough incentive to maintain the ledger? Will transaction fees increase even further to incentivize people to keep on maintaining the ledger?

That is two different questions and problems....

Approximately every 10min a new block is mined on the bitcoin blockchain, and 12.5 bitcoin are created. That is equal to around 1800 bitcoin created per day, and about 54000 every 30 days. Every 210 000 blocks that are mined, the amount of bitcoin that is created every ten minutes is cut in half.

When bitcoin started it was 50 btc every 10min. After the first 210000 blocks (approx 4 years) that was cut in half to 25 btc every 10min. After the next 210 000 blocks 4 years later, that was cut in half to 12.5 btc, which we currently have. The next halving is in the year 2020 sometime, where it will be cut in half to 6.125 btc every 10 min.
What this means is that by the time the amount halving every four years reaches zero, we will all be long gone as it will be in the year 2140.

By the time there is no more bitcoin to be created, miners will still be incentivized to create the blocks by getting the bitcoin transaction fees as payment. If all goes to plan and bitcoin is worth a ton of money, the fees for all the transactions in each block should be able to make it viable for miners to create the blocks.
If it is not viable to mine, many miners will stop mining, which means the reward for mining will be split between fewer miners, giving them each a bigger share, and making it profitable for them to continue.

If bitcoin gets too expensive to mine, it means that the cost to mine bitcoin does not justify the reward that you get for mining. This happens all the time when more advanced mining equipment comes along that out performs older equipment.

Miners need to upgrade their equipment to ensure that they stay profitable, or just turn off their machines.
This also happens if the price of bitcoin drops dramatically....miners find that the amount of bitcoin they mined is worth less than the cost to run their equipment, and it is better to just turn off the mining equipment, or rather just buy bitcoin instead of mining it.

The more people that mine, the less of a reward you get for your hashing power of your mining equipment. This is why your mining revenue will constantly go down as more miners start mining every day. More miners join every day hoping to make money mining bitcoin. The more that join, the higher hashing rate of the miners, and the quicker a block will get mined.
Since bitcoin is designed for a block to get mined every 10 minutes, the algorithm needs to be adjusted every 2 weeks odd to make sure that it sticks to around 10min per block on average.

The difficulty is adjusted every 2 weeks to make it harder to mine a block of transactions, which re-calibrates things so that its back to the 10min average per block. The increase in difficulty, means your miner is not as effective as it was 2 weeks before, so you get less bitcoin for your hashing power.

This is why many people lose money when they start bitcoin mining, because the calculation they make for how much profit they will make, does not account for the ever increasing difficulty of the bitcoin algorithm, and the decline in their earnings over time. Just because you can earn X amount of BTC today, does not mean you can multiply that over 6 months to see how much profit you will make....it does not work like that. It is impossible to predict future price, and therefore future mining difficulty increases and decreases. New miners cannot predict the percentage increases in mining difficulty each month which directly correlates to close to the same percentage drops in revenue each month. Big jumps up in difficulty mean big drops in mining revenue for the same hashing power.

If the price of bitcoin suddenly goes up.....it suddenly becomes more profitable to mine bitcoin again, and many miners who have turned off their equipment will see that it will pay them to turn it back on again. So the amount of miners mining, and the combined hashing power of the bitcoin network is linked to the price of bitcoin.

When bitcoin dumps in price, it becomes unprofitable for many miners, and many will turn off their miners.
You can see from the attachment the increase in the difficulty of mining bitcoin over the last year or so. On average it goes up every month, with big jumps when the price jumps.

So bitcoin will always be profitable to mine for some people, and the ones who it is not profitable for anymore, will turn off their equipment...which will make the hash rate drop, and the profit go up....making it more profitable, so more miners join, and the scenario repeats....

There will always be people who can mine with free or really cheap electricity, or who have access to mining hardware at dirt cheap prices....so its not like bitcoin will stop being mined, that will only happen if bitcoin is worth less that the cost to mine it, and the last person left on earth mining it decides to turn off their mining equipment.

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Thanks for the thorough answer, much appreciated!

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