3. February 2023

Securing Bitcoin’s Future: Understanding the Impact of Decreased Miner Rewards

• The concern around Bitcoin’s future “security budget” is based on the worry that miner revenue will not be enough to offer adequate security post block subsidy.
• Bitcoin miners play a crucial role in securing the network by proposing blocks of transactions which nodes then verify, accept and update to the Bitcoin ledger.
• It is important to discuss the potential impact of decreased miner rewards on Bitcoin security, scalability and adoption potential.

The topic of Bitcoin’s future security budget has been gaining increased attention lately. This is mainly due to the worry that miner revenue may not be enough to offer adequate security in the future, post block subsidy. This is a valid concern and something that should be discussed more publicly.

So what is this “security budget” and why is it important? Bitcoin miners play a crucial role in securing the network and ensuring its safety. They do this by proposing blocks of transactions which nodes then verify, accept, and update to the Bitcoin ledger. In return for their service, the winning miner receives a block reward. This reward is made up of two components: the block subsidy and the transaction fees. The block subsidy is the amount of new bitcoin minted in each block (currently 6.25 bitcoin) and makes up the vast majority of total miner revenue.

With the halving, the block subsidy is cut in half every four years. This raises the worry that the transaction fee portion of the miner rewards will not be raised enough to make up for the loss of the block subsidy, leading to decreased security for the Bitcoin network and an increased likelihood of attacks as miners are no longer incentivized to participate.

It is important to discuss the potential impact of decreased miner rewards on Bitcoin and its security, scalability, and adoption potential. If transaction fees are not raised enough over time, miners will no longer be incentivized to secure the network. This could lead to a decrease in overall security, as the network would be more vulnerable to malicious actors. In addition, scalability could be affected, as the network could become congested if fees are unable to keep up with demand. Finally, adoption potential could be hindered, as users may be turned off by fees that are too high or too unpredictable.

Therefore, it is important to consider how miner rewards could be increased over time. One possibility is to increase the block size, which would allow for more transactions to be included in each block and allow miners to collect more transaction fees. Other potential solutions include utilizing second layer technology such as the Lightning Network, or implementing a tiered fee structure.

Ultimately, it is important to discuss the potential impact of decreased miner rewards on the future of Bitcoin and its security, scalability, and adoption potential. The right solutions need to be implemented to ensure that miners are incentivized to continue securing the network. This is a complex problem that requires further discussion and research in order to ensure the future success and security of Bitcoin.