The Bitcoin is a secure network. Really secure. Now, at least.
It is nearly impossible to take over the network with the amount of computing power that keeps it running.
This is achieved by the most popular of all decentralized network’s reward miners with bitcoin block rewards when they protect it from attack.
The ‘block subsidy,’ which is halved every 210,000 blocks or four years, will eventually disappear. In the end, miners will no longer receive any subsidies, and instead, they’ll rely solely on transactions fees to generate their revenue.
What if the fees don’t offer enough financial reward to lure miners? Couldn’t they bring the system down if they decide that it isn’t worth securing?
Jordi Alexandra, CIO at Selini Capital and founder of Lyn Alden Investment Strategy spoke with Blockworks on the empire podcast about the conundrum.
The trend in fees is down
‘The long-term expectation from the beginning, even in Satoshi’s own words, was that fees eventually would be the primary and eventually only source of revenue for Bitcoin miners, which is important for the long-term immutability and censorship-resistance of the network,’ Alden says.
Alden’s concern is that Bitcoin block spaces might not be appealing enough for people to pay “a significant amount per transaction in order to settle values there or to do something else” in the long run, in which case, the network could become vulnerable to attacks at lower costs.
Alexander claims that fee income, aside from the recent blip, is “aggressively” trending downward. You have to pay for security guards when you own something valuable. If you reduce their wages, they will stop showing up to work.
He says that if state actors don’t come to the rescue, they can coordinate with other actors, purchase ASICs, or whatever technology is available at the moment, to spam the network.
Alden claims that the fee model is already working as intended and the network is continuing to grow in popularity, even if it’s in a cyclical fashion. Since the beginning of 2023, the transaction fees have increased. The longer Bitcoin continues to work and do what it does and that it remains functional and understood by more people, the more adoption I expect.
Alexander says there is a “free rider” problem in the network. Someone just buys and sits on it. They do nothing. They do not even charge fees.
He says that since many people are now using bitcoins as a digital gold, or a store for value, the number of transactions may eventually fall to unsustainable levels.
Alden counters by saying that the network can thrive despite the low number of transactions made by people who use the network solely for savings and settlement. If you assume that in 20 years, five percent of people will want to interact directly with the Bitcoin base layer on occasion, there is likely to be a sustained fee market.
Alden states that with only 5 percent of the population of the planet using Bitcoin on occasion and base-layer transactions costing $30 in the future, “you’re talking about billions and millions of dollars for the miners.”
The ASIC price that you would need to pay to attempt an attack at that time is in the tens or hundreds of millions.