What will miners do if all the Bitcoins are mined? Is it stable to rely on transaction fees?

So far, more than 83% of all Bitcoins will be mined, and it is expected that more than 99% of all Bitcoins will be mined by 2040. So the question is, what will happen when all Bitcoins are mined?

Bitcoin limited supply: 21 million

An important feature of Bitcoin is that it has a limited supply of only 21 million, which means that it cannot be printed as the Federal Reserve does. Similarly, the limited supply of Bitcoin makes it a deflationary cryptocurrency, and its scarcity also indirectly drives the value of Bitcoin up.

However, since the Bitcoin network is maintained by miners, they will receive block rewards when verifying transactions, which also raises a series of problems, such as:

1. When all blocks are mined, miners can still get incentives. Where will they make money?

2. What will miners do once the 21 million hard cap is reached?

3. How will miners make a living in the future?

4. If the Bitcoin network wants to continue to ensure security, how should miners be incentivized?

The answers to these questions are actually very simple. The answer is just three words: transaction fees.

What happens when all the Bitcoins are mined?

Currently, when a new block is created, miners receive a block reward, which includes incentives for newly mined bitcoins and transaction fees. Block rewards can motivate miners not to do anything illegal on the network and protect the network.

Once all bitcoins are mined, miners will have to rely on transaction fees as their only source of income. But can transaction fees guarantee the normal operation of miners? If not, the number of miners may be greatly reduced, which will lead to a more centralized network, or even a network collapse? In fact, according to Interchange and crypto analyst @Awe_andWonder, bitcoin transaction fees may gradually increase in the future, allowing miners to slowly reduce their reliance on block rewards.

The analysis chart below shows that Bitcoin transaction fees are expected to exceed block rewards by 2030. Once transaction fees account for more than half of block rewards, miners will be able to smoothly transition to "making money" from transaction fees.

But are transaction fees enough to incentivize miners?

No one can give a definite answer to the above questions, because no one can be sure how the future will develop, and whether transaction fees can play a role. However, there is enough evidence to show that miners rely on transaction fees to make a living and can also better maintain the Bitcoin network.

After all, as long as the price of Bitcoin increases, transaction fees will also increase. However, some people are worried that the increase in transaction fees will prevent more people from using Bitcoin, but don’t forget that compared with fees such as bank transfers and house purchase commissions, Bitcoin transaction fees are still relatively low. As Interchange pointed out:

“The average real estate transaction fee is 2% of the transaction price, or $8,000 per transaction. I believe that more people will be willing to spend $50 to send a payment in crypto.”

Bitcoin transaction fees also increase over time

Over time, Bitcoin miners will become more reliant on transaction fees, and in the long run, the value of Bitcoin will also increase, leading to higher fees - meaning it is economically viable for miners to continue protecting the network.

Of course, making miners completely dependent on transaction fees won’t happen overnight, and there are many other factors that will cause things to change. But regardless, there is still enough time for miners to adapt to the new model and ensure the security of the Bitcoin network.

This article is from "Golden Finance" and translated from bitcoinist.