It’s scary to think about it. Will Bitcoin be safe in 10 years? Will miners be safe?

After nearly ten years of development, Bitcoin has temporarily reached a stage-by-stage consensus on its use - an asset.

Whether it is the attitude of national institutions towards BTC, the support of financial instruments for BTC, or the impression of all players in the circle on BTC, it is difficult to find any objection to listing it as an "asset".

This is why BTC is currently called "digital gold".

However, Satoshi Nakamoto clearly defined Bitcoin as a "peer-to-peer electronic cash system" in the white paper. How come it has become "digital gold" after only 10 years of development?

This is also the main argument of the CSW camp for this BCH fork. They claim to return to the original definition of BTC in Satoshi Nakamoto's white paper, and make BCHSV a real "peer-to-peer electronic cash" to restore the reputation of BCH. In the end, they want to launch a war against BTC and subvert the "already crooked" BTC.

Originally, many people thought that the most likely scenario in the future would be: BTC is BTC, BCH is BCH, no matter whether the ABC or SV camp wins, BTC will take the "electronic gold + asset storage" route, and BCH will take the "payment and cash" route, and they will not interfere with each other.

However, there is a terrifying question: if the current momentum continues, how will BTC fare in 2030?

All of this stems from two facts:

“I’m sure in 20 years there will be either a lot of Bitcoin transactions or there won’t be any,” Satoshi Nakamoto said in 2010.

Bitcoin production is halved every four years and all bitcoins will be mined by 2140.

What is the relationship between these two things?

01

What does Satoshi Nakamoto mean?

Satoshi Nakamoto’s original words need to be seen in context. He said: “After a few decades, the mining reward will become very small, and the on-chain packaging fee will be the main source of income for miners. I am sure that in 20 years, the transaction volume of Bitcoin will be either very large or non-existent.”

However, 10 years have passed, and judging from the current development trend of Bitcoin, in another 10 years, perhaps neither of the two scenarios he described will happen.

As for the possibility of “No Volume”, basically no one believes it. Therefore, the problem is mainly focused on “Very Large Transaction”. At the same time, it should be noted that the transaction mentioned by Satoshi Nakamoto is on the chain, not off the chain.

02

Why did Satoshi Nakamoto say this?

In the white paper, Satoshi Nakamoto clearly defined Bitcoin as a "peer-to-peer electronic cash system." In his vision, if BTC is not "dead" after 20 years of development, by 2030, many people should use this system and trade with Bitcoin. Miners can collect fees for packaging blocks as their main source of income.

When Satoshi Nakamoto designed Bitcoin, he kept the total output of Bitcoin constant at 21 million, and the number of Bitcoins produced by each block was halved every four years until all Bitcoins were mined in 2140. The reward for issuing new blocks was 50 BTC per block when it was created in 2009, which was halved to 25 BTC in 2012, 12.5 BTC in 2016, and only 6.25 BTC in 2020.

Continuing the deduction, in 2024, each block will be packed with 3.125 BTC, in 2028 it will be 1.5625 BTC, and by 2032 it will only be 0.78125 BTC.

In other words, there is no need to wait until 2140. Basically, by 2040, the system output per block will have become about 0.1 BTC, which is already negligible.

By then, miners will not be able to rely on new block issuance rewards, so how can they survive? According to what Satoshi Nakamoto said, will they rely on a large amount of on-chain transaction packaging fees to survive?

03

Terrifying when you think about it

BTC and the miners’ dilemma

When the system rewards completely disappear or are extremely small, the main source of income for miners changes from system block rewards to packaging fees. However, can miners survive on this little packaging fee?

Many people say that as long as the handling fee exceeds the cost of the mining machine, it will be OK. By then, Bitcoin should be able to expand, there will be more and more transactions on the chain, and the price of Bitcoin should be high enough, so there should be no problem.

Now, let's analyze them one by one:

▪Capacity expansion

After years of wrangling among various parties, Bitcoin’s expansion has not yet reached a consensus. Currently, the block size remains at 1M, and the average size of a transaction is around 0.25KB, which means that a block can only contain about 1M/0.25KB=4000 transactions.

The recent transaction fee is about 0.0001 BTC, and 4,000 transactions only bring a profit of 0.4 BTC. If the block size remains at around 1M, and assuming that the 0.0001 BTC fee will not soar like it did at the end of last year, then the miners’ fee income per block will only be 0.4 BTC.

When will the expansion be successful? God knows...So the expansion is not optimistic at present.

▪Number of on-chain transactions

The current consensus on Bitcoin is that it is “digital gold”, or a store of value, rather than electronic cash. Since it is a store of value, most people should “hoard” it rather than “spend” it.

Even if they do spend it, it’s mostly to buy houses or cars, or at least to pay taxes (Ohio, USA, recently introduced a bill that is expected to be passed to pay taxes with BTC). The possibility of using BTC to buy groceries or coffee is relatively small at present.

How can this application scenario, where most people hoard and a few use it for large payments, make the number of on-chain transactions huge?

You may say that the transaction volume of BTC itself is very large! But don’t forget that the current BTC transactions on exchanges are all off-chain, or in other words, the transfers are made within the exchange wallet, and do not involve the chain at all. In 2030, will decentralized exchanges that mainly trade on the chain completely replace the current centralized exchanges with good experience? This question is difficult to say.

At the same time, there are more and more nodes in the Lightning Network. As we all know, the Lightning Network was created to improve the application experience of BTC, that is, to move many on-chain transactions to off-chain. Therefore, the more developed the Lightning Network is, the fewer on-chain transactions will be.

▪The price of Bitcoin

Of course, if the price of Bitcoin can go up to 1 million USD per coin, then the above two points may not be a problem. Because in that case, even a 0.2 BTC packaging fee is a very considerable income, and miners will still rush to increase computing power and compete for packaging.

The question is, what is the probability that BTC will soar to a sky-high price by 2030? No one can guarantee this.

04

Is there a solution to this problem?

Someone once asked a similar question on Zhihu: After all the Bitcoin has been mined in a few years, who will pay the miners?

One answer is this:

Even if Bitcoin does not undergo any changes (such as Lightning Network and sidechain), there is no need to worry about this. I think a Nash equilibrium will emerge. No block rewards → fewer miners → more income for individual miners → miners do not have to charge high fees.

By 2140, due to the halving mechanism every four years, BTC rewards will actually be very small after 2100. Therefore, the change in the income structure of miners is also slow and has been predicted long ago. It will not suddenly give miners a bolt from the blue. Miners will also change slowly, those who should leave will leave, and those who want to stay will stay.

"Nash equilibrium" is a concept in game theory, which is simply defined as follows:

For each participant, as long as others do not change their strategies, he cannot improve his situation. Nash proved that Nash equilibrium must exist under the premise that each participant has only a finite number of strategy choices and allows mixed strategies.

This answer seems to be fine at first glance, but it ignores a very important factor, which is the covetous eyes from BCH.

As we all know, BCH was born due to the failure of BTC’s expansion consensus, and the recent BCH fork has also caused a lot of controversy.

As the "son" of BTC, the core mechanism of BCH is exactly the same as BTC, and it is also halved every four years. In 2032, the system block reward will be reduced to 0.78 BCH...

What’s more important is that BCH and BTC both use SHA256, and mining machines can switch between the two currencies at any time.

By 2030, the block size of BCH will most likely be 128M or even larger, and the number of transactions contained in a block will be several times or even dozens of times that of BTC. And as long as BCH survives, whether BCHABC or BCHSV wins, BCH will follow the "electronic cash" system described by Satoshi Nakamoto. Therefore, compared with BTC, which focuses on value storage, the number of transactions on the BCH chain should be at least one or two orders of magnitude higher.

If this is true, will miners who rely heavily on the number of on-chain transactions to earn packaging fees switch most of their computing power to BCH instead of BTC? At that time, will the status and price of BCH and BTC reverse?

05

Where is the way?

Based on the current situation, I made the following assumptions:

▪Financial instruments

As mentioned above, if BTC transactions are supported solely by asset transfer demands, they are doomed to be low-frequency. However, as the leader in the cryptocurrency world, BTC may be the first currency to launch various financial instruments. By then, physically settled futures will bring relatively frequent transfer demands and at the same time increase the price of the currency.

▪Strategic assets

As the block reward amount continues to decrease, the huge profits of miners will become increasingly thinner. Putting aside the BCH factor, it is indeed true that the Nash equilibrium will be slowly reached, thus adjusting the mining cost-benefit ratio to a reasonable range.

But the existence of many things does not just depend on whether they are extremely profitable. For example, traditional kindergartens only make 6-7% profit each year, but many traditional investors with low risk appetite are still very enthusiastic about them.

In the future, mining fees may only be 10%-15% annualized. But if all countries recognize the value of BTC and regard it as an important investment target, then BTC will be a very stable investment for many heavy capitals. Then the mining cost will no longer be so important.

▪Sidechain

If BTC has many side chains in the future, BTC may transform into a settlement layer. Although a single side chain, such as the Lightning Network, will reduce the number of transactions on the chain, what if BTC mounts many side chains and handles a large number of settlements? The number may be considerable, after all, BTC's current security is still the highest. Therefore, it is not surprising that N side chains will be mounted in the future. Side chain systems represented by RSK are eager to try. Maybe ten years later, we will see a completely different BTC. Who knows.

▪Capacity expansion

Although the expansion issue has been tried several times and ended in failure, what happened in the past does not mean it will happen again in the future.

By 2030, will BTC still maintain 1M blocks?

Perhaps at a certain critical time point in the future, BTC will successfully expand. By then, more and more people may regard BTC as "digital gold" that can be stored and spent, just like people treated gold hundreds of years ago. Perhaps in the future, more and more people will use BTC to do things that do not require instant verification and payment, such as paying taxes, buying cars, buying houses, and mortgaging assets.