It's weird how so many of the arguments against what I've originally written pretend that it matters whether the reward comes from a block reward or transactions fees. It does not matter. Certainly miners don't care how they get paid - for them they have a simple calculation of "bitcoin value I get out must be greater that electricity cost I spend".

And the fundamental idea behind proof-of-work that they amount of work you're "proving" must be enough to make double-spend attacks infeasible. If the electricity cost to mine a block is low enough compared to the value that could be gained by a double-spend attack (which is of course comparable to total BTC market cap), then the network is not secure.

>It's weird how so many of the arguments against what I've originally written pretend that it matters whether the reward comes from a block reward or transactions fees. It does not matter.

It does matter. Block rewards are a transfer of value from bitcoin owners, which increases as people BUY bitcoin. Block fees increase as people USE bitcoin. Those are two separate things. What we are seeing now is mining that goes far beyond the mining necessary to secure the network, and that's due to (temporary?) speculative demand which increases the value of the block reward.

>And the fundamental idea behind proof-of-work that they amount of work you're "proving" must be enough to make double-spend attacks infeasible.

well, infeasible by a single antagonistic party. There's also the cost associated with the depreciation of the hardware. Even if mining somehow required no electricity, then the network would still be secure because there is some Time-Value cost associated with owning computer hardware.

>If the electricity cost to mine a block is low enough compared to the value that could be gained by a double-spend attack (which is of course comparable to total BTC market cap), then the network is not secure.

I agree. I think bitcoin will eventually succumb to selfish mining attacks.

"It's weird how so many of the arguments against what I've originally written pretend that it matters whether the reward comes from a block reward or transactions fees. It does not matter."

"It does matter."

Miner do not care, so it does not matter.

This is amazing to watch. hn_throwaway_99 complains that he only gets handwaving and circular arguments against this, only to get multiple answers which are exactly that.

Mining will always spend a large chunk (>50%? depends on the complete distribution of efficiency off all miners) of rewards on electricity. A quick search shows this to be 0.5% of all electricity used in the world. If Bitcoin price goes up 10x right now, this would shortly increase to around 5%.

But, there is also a thing that miners still have to pay electricity in dollars or whatever, so they are forced to sell on exchanges. This creates a downwards pressure on Bitcoin price.

Currently this could be somewhere around $billion per month. So, you need a billion a month of fresh sucker money, just for the bitcoin price to stay the same.

Aren't the fees dependent on the velocity of Bitcoin, and not the market cap?

There's some dependence in the fees, since they'll be paid in Bitcoin, and that there's still the odd new Bitcoin being made, but you're still being paid per transaction, unrelated to the value of the bitcoins in the transaction

You're right that there isn't a direct causal relationship between fees and market cap, but I think the ratio between them is important. If miner revenue becomes a tiny fraction of market cap, 51% attacks become a very real threat. Then the community would need to do something to increase the ratio, such as establishing a permanent block reward.

I agree. In fact, some cryptocurrencies like have implemented constant "tail emission" block rewards. The problem is that this scares off investors and speculators because there's not as much scarcity.

When market cap / price goes up, more people enter the market to mine until supernormal profits are gone - This is the relationship being discussed.

People will enter the market which pushes up the difficulty / electricity and hardware consumption until profits are brought back down to a normal level.

Yes, but I predict people will cease entering the market once the hype dies down and people learn how flawed bitcoin is.

People will always enter the market (to produce) if there is a difference between the price of a Bitcoin and the cost to produce a Bitcoin (electricity, equipment etc).

If the price goes down and it costs more electricity to produce a Bitcoin that is economically viable, people will leave because the juice isn’t worth the squeeze.

So the same relationship works inversed too - difficulty to mine and electricity consumption is related to market cap / price from an econ perspective. I agree with your point on Bitcoin hype, but the production side is just economics and people trying to make a buck if there is money on the table.