Quote from: LiteCoinGuy on August 10, 2015, 03:33:17 PM

Every few weeks, someone involved in Bitcoin writes the following somewhat breathless blog post:

1-Block rewards account for almost all mining rewards

2-Block rewards are going to drop (next drop in 2016/2017) and drop by 50% every four years forever

3-There won't be enough rewards for miners leading to insufficient hashing power

4-Therefore either (a) Bitcoin is in trouble (anti-Bitcoin camp) or (b) block rewards / inflation will have to be increased to keep miners incented (pro-Bitcoin camp)

Points 1 and 2 are true. Points 3 and 4 are an exercise in ignoring all data that you can't model, like the old cliche of the drunk looking for his keys under the lamppost because that is the only place he can see...

First, let's recall how rewards in $ terms to miners are calculated because that is what matters for hashing rate since silicon and electricity are priced in $, not BTC.

[# of bitcoins in the block rewards] x [price/bitcoin] + [# of transactions] x [fees per transaction]

Things to ask the author when you read the inevitable Concerned-About-Hashing-Rate-In-The-Future-But-Sanguine-About-Hashing-Rate-In-The-Present Blog Post.

What is your assumption for BTC price at the time of the block reward drop? Also, in the long-future (2020s before it drops again!), what are your assumptions about transaction volume and fees?

As a general rule, nobody has any defensible assumptions because if you can predict the BTC price in 2017 and 2021 (note, you can't), you would have more lucrative pastimes than predicting hash rates!

I will declare upfront that I have no idea what BTC price will be 1/5/9/13 years from now (same goes for transaction volume) and I have never read any credible analysis suggesting anyone else has a clue either.

http://ledracapital.com/blog/2015/8/9/bitcoin-series-35

here's what you fail to understand:

Miners must be incentivized to secure the network. We cannot assume that fintech companies will move to the blockchain via side chains and be willing to secure the network at a loss. We cant assume that a country will adopt bitcoin, that nasdaq or nyse will transact on the blockchain. We can only assume that bitcoin as a currency and store of value moves forward. If this is the case, we have to cater to the miners.

Because no one knows how bitcoin will scale in the future, relative to today, it becomes very difficult to model TX fees. Bitcoin TX volume, and thus fees, can explode for many different reasons, each drawing a different preferred blocksize and fee structure.

If this is the case, we should delay the hardfork as long as possible so that we collect as much data. I am not opposed to hardforks because most of the hashing is generally transparent and accessible (e.g. bitfury, 21e6, knc).

The biggest issue I have with 64mb blocksize is that what happens in 2024 if bitcoin has never experienced an exponential adoption event? If TX volume continues to increase linearly, fee models that we create today may be incorrect, irrespective of bitcoin price. So if we miss on fee projections, along with 6.25 btc block rewards, we risk the security of the network. It is far better to underestimate bitcoin adoption than it is to overestimate.

tiberium

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