Developer, Bitcoiner, Entrepreneur, Author of "The Truth About Bitcoin"

Sylvain Saurel

It's a question that's come up frequently in the Bitcoin world over the past few years. Ever since Bitcoin became an extremely serious business in the eyes of the general public. That is since its price reached $20K at the end of 2017.

Before that, nobody took the Bitcoin system seriously among the general public.

Since then, things have changed. More and more people are studying how the Bitcoin system works. If you do some research, you'll find that Bitcoin transactions are embedded into blocks. To issue the next block, it is necessary to find the hash associated with that block.

This hash is the input to the MD5 cryptographic hash function. The miners on the Bitcoin network thus have the answer, and they have to find the question if you want a meaningful comparison. It's a kind of giant decentralized Jeopardy! across the world.

I'm simplifying here, but it's important to understand that there's a notion of difficulty in finding this hash that comes into play. This difficulty is linked to the computing power of the Bitcoin network's miners. The greater the computing power, the greater the difficulty in finding the next block on the Bitcoin blockchain.

Mining difficulty is automatically adjusted by the network every 2,016 blocks issued. This means an adjustment every 2 weeks or so. The aim is to maintain the ideal of one transaction block issued every 10 minutes on average.

You've seen the notion of computing power. Computing power means increasingly powerful computers to find the hash of the next block. Today, even mining ASICs are used. These ASICs are specialized devices for finding the next hash, with the capacity to perform a huge number of operations per second.

As time goes by, ASIC manufacturers produce increasingly powerful devices. A veritable war is waged between Bitcoin miners to find the next block. The more computing power you have at your disposal, the better your chances of finding that block.

However, all this comes at a cost.

Bitcoin miners are getting more and more expensive, and you need more and more of them because the total computing power on the Bitcoin network is increasing all the time. This is known as the Hash Rate of the Bitcoin network. The higher the Hash Rate, the more secure the Bitcoin network becomes, as it becomes more difficult to attempt to take control of more than 51% of the network's computing power to reverse transactions.

In addition to the cost of mining ASICs, you have to add the cost of electricity. Running these devices 24/7 is very expensive. Of course, costs will vary according to your geographical location, as electricity costs are not the same from one country to another, or even from one region to another.

To encourage miners to make their computing power available to the network to ensure its security and smooth running, Satoshi Nakamoto, the mysterious inventor of Bitcoin, has provided two elements:

A BTC reward is issued in the form of a transaction from the successfully added block. This transaction is called the Coinbase transaction.

Transaction fees, also in BTC, are paid by users wishing to make a transaction on the network. The amount of these fees fluctuates over time according to the number of transactions pending in an area called the Bitcoin network Mempool.

With the Bitcoin supply hard-capped at 21 million units, the BTC reward must decrease over time, eventually reaching 0 by 2140. To achieve this, the BTC reward is halved automatically by the Bitcoin system every 210,000 blocks issued during an event called Halving.

Originally, the reward was 50 BTC. At the first Halving in 2012, it was reduced to 25 BTC. Then, 12.5 BTC in 2016, and 6.25 BTC in 2020. The fourth Bitcoin Halving will take place around April 2024 and will halve the reward again to 3.125 BTC.

As a result, miners will receive less and less income to finance their Bitcoin mining activity. Even if ASICs make great strides in terms of energy consumption, the battle between miners will still rage on, which means that costs will always be high.

The question posed here is what will happen the day the reward reaches 0, and may already apply when it gets very close to 0 well before 2140.

In my opinion, there are several possible scenarios. It all depends on how confident you are in the future of the Bitcoin revolution.

The most optimistic scenario is that of a hyperbitcoinization of the world. The mass adoption of Bitcoin is such that higher transaction fees will make it possible to finance miners' activity while maintaining a constantly rising Hash Rate. Fees will increase, but in a reasonable way, since the price of Bitcoin will rise sharply in parallel. You should think of the Bitcoin network here as a central bank that will not be used for day-to-day payments. The Lightning Network will be used for this purpose, as a means of everyday payment.

Then, from time to time, nodes will make exchanges with the Bitcoin system, with the ability to pay very high transaction fees. They will have the means to do this thanks to the very large number of transactions that will take place on the Lightning Network and the transaction fees levied.

Fees on the Lightning Network will remain minimal, but the high volume of transactions will add up to substantial sums.

The more balanced scenario is to imagine Bitcoin ultimately remaining a digital version of gold. Bitcoin's scarcity attracts investors, but they don't appropriate it as an everyday means of payment. Transaction costs remain high, which is partly offset by the rise in Bitcoin's price, but not enough to ensure that the Hash Rate continues to rise steadily. Bitcoin will probably struggle to catch up with gold's market cap in this scenario, but it will still far exceed that of silver.

The most pessimistic scenario is that Bitcoin's adoption slows down, stays on a plateau, or stops. The general public fails to grasp the unique opportunity represented by Bitcoin. Bitcoin is a unique opportunity, but Bitcoin belongs to the people. If the people don't fully embrace this revolution, Bitcoin won't be able to reach its full potential. This does not call into question the Bitcoin system, but the fact that the people have not chosen to make it their solution.

As a result, miners won't be able to survive lower and lower transaction fees. Indeed, there would be fewer transactions, and therefore less competition between users to have their transactions validated, leading to lower fees.

With the BTC reward for issuing the next block approaching zero, more and more miners would leave the Bitcoin system for lack of financial means. The Bitcoin system would become increasingly insecure. It would then be more exposed to attacks. Its price would also fall. All it would take is one successful attack to undermine the entire Bitcoin revolution.

The latter scenario would be a missed opportunity for humanity. Westerners might recover, but people in emerging countries, for whom Bitcoin is already an every day Plan A, would have a hard time.

To conclude, let's say that if you've understood the why of Bitcoin, and you fundamentally believe in the Bitcoin revolution, any scenario other than the first seems impossible. In your eyes, it's even a realistic scenario.

It's a question that's come up frequently in the Bitcoin world over the past few years. Ever since Bitcoin became an extremely serious business in the eyes of the general public. That is since its price reached $20K at the end of 2017.

Before that, nobody took the Bitcoin system seriously among the general public.

Since then, things have changed. More and more people are studying how the Bitcoin system works. If you do some research, you'll find that Bitcoin transactions are embedded into blocks. To issue the next block, it is necessary to find the hash associated with that block.

This hash is the input to the MD5 cryptographic hash function. The miners on the Bitcoin network thus have the answer, and they have to find the question if you want a meaningful comparison. It's a kind of giant decentralized Jeopardy! across the world.

I'm simplifying here, but it's important to understand that there's a notion of difficulty in finding this hash that comes into play. This difficulty is linked to the computing power of the Bitcoin network's miners. The greater the computing power, the greater the difficulty in finding the next block on the Bitcoin blockchain.

Mining difficulty is automatically adjusted by the network every 2,016 blocks issued. This means an adjustment every 2 weeks or so. The aim is to maintain the ideal of one transaction block issued every 10 minutes on average.

You've seen the notion of computing power. Computing power means increasingly powerful computers to find the hash of the next block. Today, even mining ASICs are used. These ASICs are specialized devices for finding the next hash, with the capacity to perform a huge number of operations per second.

As time goes by, ASIC manufacturers produce increasingly powerful devices. A veritable war is waged between Bitcoin miners to find the next block. The more computing power you have at your disposal, the better your chances of finding that block.

Bitcoin miners are getting more and more expensive, and you need more and more of them because the total computing power on the Bitcoin network is increasing all the time. This is known as the Hash Rate of the Bitcoin network. The higher the Hash Rate, the more secure the Bitcoin network becomes, as it becomes more difficult to attempt to take control of more than 51% of the network's computing power to reverse transactions.

In addition to the cost of mining ASICs, you have to add the cost of electricity. Running these devices 24/7 is very expensive. Of course, costs will vary according to your geographical location, as electricity costs are not the same from one country to another, or even from one region to another.

To encourage miners to make their computing power available to the network to ensure its security and smooth running, Satoshi Nakamoto, the mysterious inventor of Bitcoin, has provided two elements:

A BTC reward is issued in the form of a transaction from the successfully added block. This transaction is called the Coinbase transaction.

Transaction fees, also in BTC, are paid by users wishing to make a transaction on the network. The amount of these fees fluctuates over time according to the number of transactions pending in an area called the Bitcoin network Mempool.

With the Bitcoin supply hard-capped at 21 million units, the BTC reward must decrease over time, eventually reaching 0 by 2140. To achieve this, the BTC reward is halved automatically by the Bitcoin system every 210,000 blocks issued during an event called Halving.

Originally, the reward was 50 BTC. At the first Halving in 2012, it was reduced to 25 BTC. Then, 12.5 BTC in 2016, and 6.25 BTC in 2020. The fourth Bitcoin Halving will take place around April 2024 and will halve the reward again to 3.125 BTC.

As a result, miners will receive less and less income to finance their Bitcoin mining activity. Even if ASICs make great strides in terms of energy consumption, the battle between miners will still rage on, which means that costs will always be high.

The question posed here is what will happen the day the reward reaches 0, and may already apply when it gets very close to 0 well before 2140.

. It all depends on how confident you are in the future of the Bitcoin revolution.

The most optimistic scenario is that of a hyperbitcoinization of the world

. The mass adoption of Bitcoin is such that higher transaction fees will make it possible to finance miners' activity while maintaining a constantly rising Hash Rate. Fees will increase, but in a reasonable way, since the price of Bitcoin will rise sharply in parallel. You should think of the Bitcoin network here as a central bank that will not be used for day-to-day payments. The Lightning Network will be used for this purpose, as a means of everyday payment.

Then, from time to time, nodes will make exchanges with the Bitcoin system, with the ability to pay very high transaction fees. They will have the means to do this thanks to the very large number of transactions that will take place on the Lightning Network and the transaction fees levied.

Fees on the Lightning Network will remain minimal, but the high volume of transactions will add up to substantial sums.

The more balanced scenario is to imagine Bitcoin ultimately remaining a digital version of gold

. Bitcoin's scarcity attracts investors, but they don't appropriate it as an everyday means of payment. Transaction costs remain high, which is partly offset by the rise in Bitcoin's price, but not enough to ensure that the Hash Rate continues to rise steadily. Bitcoin will probably struggle to catch up with gold's market cap in this scenario, but it will still far exceed that of silver.

The most pessimistic scenario is that Bitcoin's adoption slows down, stays on a plateau, or stops

. The general public fails to grasp the unique opportunity represented by Bitcoin. Bitcoin is a unique opportunity, but Bitcoin belongs to the people. If the people don't fully embrace this revolution, Bitcoin won't be able to reach its full potential. This does not call into question the Bitcoin system, but the fact that the people have not chosen to make it their solution.

As a result, miners won't be able to survive lower and lower transaction fees. Indeed, there would be fewer transactions, and therefore less competition between users to have their transactions validated, leading to lower fees.

With the BTC reward for issuing the next block approaching zero, more and more miners would leave the Bitcoin system for lack of financial means. The Bitcoin system would become increasingly insecure. It would then be more exposed to attacks. Its price would also fall. All it would take is one successful attack to undermine the entire Bitcoin revolution.

The latter scenario would be a missed opportunity for humanity. Westerners might recover, but people in emerging countries, for whom Bitcoin is already an every day Plan A, would have a hard time.

To conclude, let's say that if you've understood the why of Bitcoin, and you fundamentally believe in the Bitcoin revolution, any scenario other than the first seems impossible. In your eyes, it's even a realistic scenario.

Sylvain Saurel

Are you concerned about Bitcoin's security budget as the block reward trends toward zero?