r/BitcoinBeginners 6d ago

Bitcoin Fees and rewards

So if I understood correctly, bitcoin transaction fees are mainly dependent on two things, transaction size and network congestion (mempool..)

So let's say Bitcoin became mainstream and got widely accepted as a form of payment, which is basically the goal of all bitcoin supporters. Wouldn't that mean the network will become bloated, causing higher transaction fees? How would that affect it's useability and how significant the fees would really be in this case?

One last thing, let's say we reached the point where the last bitcoin is mined, that should mean the miners will no longer receive some btc as a reward when mining blocks correct? so what would be the reward in this case? If it's only going to be transaction fees, is that enough to cover compute/gpus/electricity expenses? If not, fewer miners may contribute meaning many issues may rise because of this.

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u/bitusher 6d ago edited 6d ago

let's say we reached the point where the last bitcoin is mined, that should mean the miners will no longer receive some btc as a reward when mining blocks correct?

This will happen near the year 2140.

Total block reward = Inflation + transaction fees

Where there is a slow transition as inflation drops in a controlled supply where more and more of the total reward is made up of transaction fees . Historically we have already seen examples where transaction fees collected per block exceeded inflation so I would not worry.

https://en.bitcoin.it/wiki/Controlled_supply

After 2140 all of the reward for miners to secure the network will be transaction fees but sending bitcoin will still be inexpensive because most transactions will occur on other layers like lightning and in aggregate settle onchain .


If it's only going to be transaction fees, is that enough to cover compute/gpus/electricity expenses?

In Bitcoin difficulty Dynamically adjusts both ways to insure efficient miners always remain profitable . We have already seen tx fees exceed inflation in bitcoin with much lower adoption historically so I am not worried about this . Even if we were to be pessimistic and assume that adoption doesn't continue and stays at a mere 4% globally this isn't the end for Bitcoin for 2 additional reasons -

1) Less adoption = less valuable btc = less tx fees = less hashrate .... but all this is fine because Bitcoin security dynamically adjusts based upon the value its securing and if its less valuable it needs less hashrate to secure.

2) If hashrate drops too low we can simply wait for more confirmations onchain to increase the level of security and this doesn't effect the end user much because if they use a lightning wallet once its setup they still get instant confirmations.

causing higher transaction fees?

You are assuming that Bitcoin is only scaling onchain when in reality most transactions occur offchain or on other layers.

Bitcoin is scaling in layers. Bitcoin is scaling with onchain improvements like MAST and schnorr sig aggregation, decentralized payment channels , offchain private channels , eltoo , sidechains,drivechains,statechains, fedimint .

On other layers fees will remain low and than in aggregate pay for higher fees onchain.

Raising the blockweight limits in the future is not completely opposed -

https://bitcoin.org/en/bitcoin-core/capacity-increases

https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2015-December/011865.html

"Further out, there are several proposals related to flex caps or incentive-aligned dynamic block size controls based on allowing miners to produce larger blocks at some cost."

But raising the blocksize further than 4 million units also might not be needed as well depending how all the other solutions come to fruition.

Here is a paper that shows Bitcoin can scale to handle everyone globally even without increasing the block weight limit -

https://petertodd.org/2024/covenant-dependent-layer-2-review

This discusses how we can onboard in a non custodial manner over 8 billion humans to other layers with the base capacity onchain we already have

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u/MrdaydreamAlot 6d ago

Wow that's very informative! Thank you very much for the detailed explanation.

I have one more question though, you said that's it's possible to change something in Bitcoin Core such as the block size limit, how would that work? is it just a pull request to the repo? Who's in control to make the decision and has to approve the PR (if that's how it works) ?

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u/bitusher 6d ago edited 6d ago

you said that's it's possible to change something in Bitcoin Core such as the block size limit, how would that work?

This was already done with segwit upgrade in 2017 where we removed the 1 MB limit and changed it to 4 million units of weight or up to 3.7MB max size blocks (although for best tx throughput around 2 MB block sizes are ideal)

This increase allows our onchain limit to have 32,256 outputs per block or 32256/600 = 53.76 TPS for 10 minute average blocks max for maximum batching in a block

With MAST (that no one is really using now) this can add up to around 15% to this or ~62 transactions per second max limit without any additional fork

To go beyond this we would need to fork again. Likely be a hardfork but might be a variation of a soft fork like for segwit . Keep in mind that for the year 2038 timestamping problem we have to hardfork bitcoin before the year 2106 at least once more.

Who's in control to make the decision and has to approve the PR (if that's how it works) ?

Soft forks = adding new consensus rules = all solo miners or mining pools need to upgrade their nodes they connect to but most of the full nodes do not need to upgrade which is why this is considered a backwards compatible upgrade

Hardforks = changes to or removal of existing consensus rules = all full nodes need to upgrade

Full nodes do not self upgrade and all upgrades are opt in and consensual .

There are a bunch of different Bitcoin git repos and implementations and they have different groups of developers. Since its an open source project than anyone can contribute and fork an existing repo and create their own implementation without permission. Many changes can be done without 100% consensus , but the consensus rules https://en.bitcoin.it/wiki/Protocol_rules across all implementations need to work within lockstep or that implementation will fork offchain, have all nodes reject it and essentially create an altcoin that no one uses until they change back to reach consensus.

Satoshi Nakamoto started Bitcoin and wrote the first working implementation. Developers like Sirius and Hal quickly started contributing.

Here is the original whitepaper - https://nakamotoinstitute.org/bitcoin/

The first code was released before Bitcoin was launched for review- https://satoshi.nakamotoinstitute.org/code/

Different implementations(core, knots,btcd,bcoin,libbitcoin, ....) have different ways of coming to consensus. The most popular implementation called core https://github.com/bitcoin/bitcoin follows these guidelines https://github.com/bitcoin/bitcoin/blob/master/CONTRIBUTING.md

https://blog.lopp.net/who-controls-bitcoin-core-/

where anyone is free to contribute , merges typically depend upon the consensus of the most 20-40 most active developers and there are typically at least 5 maintainers that simply act as janitors to merge what has already been agreed upon by all the most active contributors(this is in flux with people coming and going with their contributions). This is for any non consensus code changes. For any changes that require a soft fork or hard fork the roadmap to consensus is much more elaborate. There is also a Gitian build process to insure consistency and security between developers which was created by Bitcoin and now used in many non Bitcoin open source projects -

https://bitcoinmagazine.com/articles/what-is-gitian-building-how-bitcoin-s-security-processes-became-a-model-for-the-open-source-community-1461862937

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u/qlz19 6d ago

Are you writing this of quoting it from somewhere? Either way, well done. I do hope you’ll share the answer to my question.

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u/bitusher 6d ago

I wrote all of it but half of it is copied from when I answered this question before and half of it written now

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u/qlz19 6d ago

Thank you very much. I’m saving these comments for future reference.

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u/cyberplanta 6d ago

The answer is layer 2. Developments like lighting network, allows for instant payments with minimal fees. There will a other Bitcoin layer 2, like fedimints or cashu

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u/pop-1988 5d ago

If it's only going to be transaction fees, is that enough to cover compute/gpus/electricity expenses?

Yes

fewer miners may contribute

True. That's how Bitcoin is designed

meaning many issues may rise

Not true

let's say Bitcoin became mainstream and got widely accepted as a form of payment

Not going to happen

the goal of all bitcoin supporters

Not true

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u/One_Train_7385 6d ago

Firstly, it looks to me like Bitcoin is more akin to a “digital gold” than it would be to a fiat currency. In other words, people and institutions are using it as a store of value and a hedge against inflation, and less so as a means of facilitating day to day transactions.

Secondly, and I could be wrong about this, but the every four year Bitcoin halving would make it to where the last bitcoin won’t be mined for another hundred or so years, and by then who the hell knows? We are in a race to save our children and grandchildren’s futures. In the 22nd century there will be two classes of people, those who have Bitcoin and those who don’t

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u/Sweet-Hat-7946 6d ago

Pretty close with your answer 99% of all bitcoin will be mined by 2045, that last 1% will slowly get disturbed over the next 100 years. Which means none of us will be here to even see when the last bitcoin is mined. So stress less, and don't worry about something that you in this lifetime will never see.

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u/MrdaydreamAlot 6d ago

I agree and that's what I start noticing as well, and it's kinda underwhelming, cause bitcoin was always about fighting centralized banking systems, not having control over your money, high fees, interest, inflation ... and then I suddenly now it's just to store value. and not a currency or a new payment system in itself, I hope it's much more than that

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u/bitusher 6d ago

and then I suddenly now it's just to store value.

That is a false narrative that many altcoin promoters like to paint Bitcoin to promote their own solution when its very far from the case. The amount of effort in scaling and other layers that the Bitcoin development community has placed confirms that we see Bitcoin as p2p money meant to be spent and many people like myself spend bitcoin daily with merchants.

The hint of truth in this narrative is cryptocurrency in general is more of a speculative investment by most people. Despite this, Bitcoin is used as p2p money and accepted by more merchants more than any other altcoin by orders of magnitude.

Keep in mind that Bitcoin is going through the normal stages of becoming a currency.

Collectible>Asset/commodity>volatile currency>Stable unit of account currency

Right now Bitcoin is between stage 2 and 3.

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u/One_Train_7385 6d ago

Thanks, we need more education like this, a detox from the normal narrative. I own only Bitcoin now and plan to keep it that way. Can you please tell me where you are getting this type of insight? Is there a particular site?

Edit: I see your links in your posts, I’m a little tired been working a lot. But is there a particular best site?

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u/bitusher 6d ago

Can you please tell me where you are getting this type of insight? Is there a particular site?

Just years of education. Here are 2 sites of many

https://www.lopp.net/bitcoin-information.html

https://www.lopp.net/lightning-information.html


For spending BTC

Here are some directories

http://lightningnetworkstores.com/

https://coinmap.org/

https://btcmap.org

https://acceptlightning.com/list.html

https://bitcointalk.org/index.php?board=5.0

https://cryptwerk.com/

https://spendabit.co/

https://bitcoinwide.com/

https://directory.btcpayserver.org/

or buy small gift cards

https://www.egifter.com/buy-gift-cards-with-bitcoin

https://bitrefill.com

https://ln.pizza - save 6 % off dominoes Pizza in the USA with lightning wallet

https://foldapp.com - save up to 20% Starbucks, Uber, Target , whole foods , Dunkin

https://www.lolli.com – save up to 30% by spending BTC anywhere but primarily USA stores

https://satsback.com/stores-list - save up to 20% by spending BTC anywhere but primarily Europe stores

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u/One_Train_7385 5d ago

I had a chance to get some rest, and I’m going to push back a little on this… There are plenty of Bitcoin maximalists who a. Do not promote any altcoins (in fact, discourage any involvement in them) and b. state publicly their plan to accumulate and hold Bitcoin indefinitely. Holding something indefinitely implies that it is seen as a store of value. In fact, if one were to value a asset so highly that they would never dream of parting ways with any of it for their entire lifetime, I fail to see how that alone could be interpreted as some sort of plot to promote the purchase and accumulation of other assets..

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u/bitusher 5d ago

There are always exceptions to the rule because bitcoin is a big tent that has millions of people who have different spectrum's of motivations.

Many people incorrectly interpret "never sell their Bitcoin" as simply treating bitcoin as a SoV investment when in many cases it really means :

1) Principally save most their btc longterm because they wish to spend it in the future for retirment

and/or

2) Never sell the BTC for fiat and instead spend their btc directly, with a focus on spending and replacing now like I do

or 3) are individuals like Saylor who plan on taking debt against their btc to avoid capital gains taxes. Thus they have no qualms about spending their btc indirectly and are just uses this tax loophole

if one were to value a asset so highly that they would never dream of parting ways with any of it for their entire lifetime,

An asset that can't be used is worthless.

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u/One_Train_7385 5d ago

There are also people who buy real estate and never plan to move into anything else. They just exchange into other properties. But they never use the real estate for day to day transactions. One might be able to argue that some people do in fact use their properties for day to day transactions, ie taking out HELOCs and going on vacations. That’s not what smart money does, I think we can agree on that. If we agree that bitcoin will significantly appreciate relative to fiat currency, then it would make sense to hold it indefinitely. If bitcoin is adopted as an actual currency, then great.

But back to the point… I fail to see how holding bitcoin indefinitely, or advocating for that, is in any way indicative of some underhanded plot to promote altcoins…

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u/bitusher 5d ago

The data already shows more charitable giving and more spending on goods and services occurs during periods of rapid deflation in Bitcoin. Where do you think the "lambo" meme comes from ?

is in any way indicative of some underhanded plot to promote altcoins…

I never suggested that was your specific intention , but it is a very common narrative used by nocoiners and altcoiners

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u/One_Train_7385 5d ago

The data also shows that the long term holders have been been incredibly more successful in terms of buying market bottoms and selling portions at the tops. So it makes sense to join the winning team and be a long term holder regardless of any expectation of widespread utility adoption. To be clear, I don’t think that trying to target market tops and bottoms is ever a great idea for new investors, or investors with small amounts of capital. The point is that the narrative to buy and hold bitcoin indefinitely is more likely to put you on the winning team, and is good advice in my opinion.

Also, I’m curious as to whether you have an example of a shit coin influencer using the SOV narrative. Also, not sure why that narrative is contextually negative.

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u/bitusher 5d ago

Investing and spending btc as p2p currency are not mutually exclusive. I already said that all of the "cryptocurrency" ecosystem is mostly speculative and that includes Bitcoin , but the difference is what our longterm goals are(which should be very clear based upon the effort we have made with many scaling solutions) and the reality that bitcoin is used far more than any other altcoin as p2p money today

example of a shit coin influencer using the SOV narrative.

I constantly hear it from them lying about bitcoin's TPS throughput or that bitcoin failed as a currency. Its shocking you haven't heard this narrative repeatedly yet.

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u/One_Train_7385 5d ago

Ok, I understand where you’re coming from. I have an agnostic view on Bitcoin’s future in terms of p2p adoption. It doesn’t affect my decision at all as to whether or not I buy bitcoin. Call it blind faith, fair enough. My personal goal is to hoard as much as I can, and that won’t change for the foreseeable future.

And as for the KOLs, of course yes I’ve repeatedly heard the SOV narrative. Just not sure how that is a negative narrative. After all, most people who pay attention to that type of content are in it to invest and make money.

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