• Bitcoin miners are essential for securing the Bitcoin network by proposing blocks of transactions and using intense computing power to complete the proof-of-work consensus algorithm.
• There is a concern that miner revenue will not be enough to offer adequate security in the future, post block subsidy.
• My view is that those who are worried about this are misunderstanding Bitcoin’s long-term game theory, incentive mechanisms, scalability and adoption potential.
The security budget of Bitcoin has been a topic of increasing attention in recent times. The worry is that the amount of miner revenue will not be sufficient to offer adequate security in the future, post block subsidy. Bitcoin miners play a critical role in keeping the network secure by proposing blocks of transactions to nodes which then validate, accept and update the Bitcoin ledger. They compete against each other to offer the new block and use powerful computing power to complete the proof-of-work consensus algorithm, winning the right to propose the new block. As a reward for their services, the winning miner receives a block reward which is composed of two components: the block subsidy and the transaction fees.
Presently, the block subsidy constitutes the lion’s share of total miner revenue. The block subsidy is the amount of new bitcoin released in each block (currently 6.25 bitcoin) and is reduced by half roughly every four years through the halving. Consequently, the fear is that the transaction fee portion of the miner rewards will not be raised enough to compensate for the loss of the block subsidy, leading to decreased security on the Bitcoin network and an increased likelihood of attacks as miners will no longer have the incentive to participate.
My opinion, however, is that most of the people who are anxious about this are not fully appreciating Bitcoin’s long-term game theory, incentive mechanisms, scalability, and adoption potential. A more open discussion should be held on this issue, instead of just being dismissed as a non-issue. There are people advocating for a miner tax, where a portion of the block reward would be dedicated to a security fund, and others advocating for increased adoption and usage of Bitcoin, which would lead to an increase in transaction fees.
At the end of the day, the Bitcoin network is secured by a combination of the block subsidy and transaction fees, so it is important to understand how the two components interact and how miners are incentivized to continue to secure the network. It is also important to understand how scalability and adoption could affect the security budget and the long-term sustainability of the network. It is clear that the debate around Bitcoin’s security budget is far from over, and it is up to the community to come together and find solutions.