Occasionally I hear people worrying about how mining will be incentivized after the mining subsidy reaches zero in 2140. Its a valuable discussion and shows extremely low time preference thinking. We want to make sure that Bitcoin survives and available for future generations to use. However, I also think that this worry is a result of the Keynesian/MMT world we currently live in. "If there's not at least a little bit of inflation, how do miners get reimbursed for their work?"
Miners will earn sats from fees is the typical answer. Then the conversation becomes a debate on whether there will be enough fee pressure and transaction volume on the main chain to sustain miners. Some people aren't convinced that fees will be enough. Monero fell to this line of thinking and implemented "tail emissions" (aka permanent inflation) into their monetary policy.
I think that most people in this space that are concerned with this issue don't think allowing more than 21 million coin is the answer. It would not longer be Bitcoin if we made that change. Some advocate for more general smart contracts on the main chain. Others are developing other use cases for transactions on the network. I believe that ensuring future fee pressure is one of the reasons why the folks over at Suredbits are developing their DLC product.
I recently listened to the "Beyond Bitcoin Maximalism" episode of the What Bitcoin Did podcast. This is one of the issues raised by the guest in the show. I want to give my take on this issue. I think that mining incentives post-2140 will be taken care of for the following reasons:
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Purchasing power of the fees earned by miners will be much higher than it is today - If Bitcoin survives 100+ years, it will be because we found it valuable enough to keep it around and continue using it. No network stays in continuous use for that long and doesn't have a sizable effect on the economy. For this reason, I believe that a single satoshi will have significantly higher purchasing power than it does today. People will spend their sats. No one's time preference is zero.
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The main chain will act as a base layer - Layers built on top of Bitcoin does remove transactions from the main chain. However, in order to have a reliable, relatively trustless secondary layer, it must interact with the base layer through transactions. Lightning currently uses two transactions to offload volume from the main chain. Federated Chaumian mints require at least one transaction to mint e-cash. There will be fee pressure and transaction volume coming from these secondary layers interacting with the main chain.
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Other use cases for transactions and the timechain will be used - The main chain has amazing properties that will encourage other types of transactions. This will especially be the case if the bulk of monetary transactions happen off-chain. Its an amazing, decentralized time keeper and permanent record that leverages cryptographic primitives. The possibilities are endless! Here are a couple of ideas off the top of my head:
- Using a series of Taro transactions as a sort of decentralized, authoritative DNS
- Transactions for property and large purchases could be done on the main chain so that the properties of the house or piece of land could be encoded into the transaction itself (either via a taproot tree or OP return). Essentially you have a cryptographically provable land deed or house title.
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Miners are a flexible, portable energy buyer of last resort - We are just beginning to scratch the surface of what miners could do for the energy industry. Paying energy generators for wasted power and fuel, subsidizing large energy projects in a voluntary manner, and making use of stranded energy sources are just a few ways miners and energy produces can work together. I believe that Bitcoin mining will become an essential part of the energy industry in the next couple decades. The two industries may even fuse. I think that what little value energy companies get from fees will be better than getting nothing for resources that would otherwise be wasted. So this answers the question of "who will mine in a low fee environment?".
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Soft forks unlock new use cases for on-chain transactions - The Taproot upgrade has proven to be more flexible than I thought. Taro and DLCs are probably just the tip of the iceberg. Segwit alone enabled the lightning network. If we get another significant soft fork within the next hundred years, it could enable new use cases and transaction types for the main chain that are worth using.
Let me know if I've gotten anything wrong or how my assumptions are faulty. If anyone has additional reasons why mining past 2140 will continue, don't hesitate to comment!