Doesn’t that imply that transaction fees have to go up with time? Or is the computational complexity lower for “verification” of transactions than it is for “mining” a bitcoin?
Also, if the computational complexity is as high as implied in the media, countries may simply outlaw it in the name of energy savings. I think that’s why many people believe etherium will “win” over bitcoin over time. Of course, it’s all “code” so bitcoin can change as necessary (I think).
Yes (sort of) fees will have to go up with time; and no, the computational complexity is the same.
The way bitcoin works (AIUI) is that miners have to solve a very difficult math problem in order to get the right to mine the next block on the blockchain. Once a miner succeeds, they are rewarded with a certain number of bitcoin (right now, it’s 6.25). Replacing the bitcoin reward with a transaction fee reward doesn’t alter the computational process.
We don’t know whether the amount of the transaction fee will be higher or lower than current rewards (6.25 bitcoin is worth about $100K), but who pays the fee will certainly change. Right now, the bitcoin reward is “paid” through a very small amount of inflation in the currency - so everyone who holds bitcoin pays a de minimis amount to compensate the miners. After 2140, only the people conducting the transaction will pay the fee. Maybe. Things can change a bit in a 118 years.
Thanks!
The Captain
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Interestingly, Bitcoin miners in general are having a rough go at the moment.
Right you did but your not comprehending what you are reading.
That right there tells you that they still need to mine but they will no longer receive coins but transaction fees only.
Here is what it says if you read further.
** If Bitcoin in 2140 largely serves as a store of value, rather than for daily purchases, then it’s still possible for miners to profit—even with low transaction volumes and the disappearance of block rewards. Miners can charge high transaction fees to process high-value transactions or large batches of transactions, with more efficient “layer 2” blockchains like the Lightning Network working in conjunction with the Bitcoin blockchain to facilitate daily bitcoin spending.**
So they still need to mine but only for transaction fees.
Andy
Your still not understanding. Back in 2017 Coinbase had not gone public on the stock exchanges. Tesla did not have any bitcoin on it’s balance sheet. Fidelity didn’t allow trading in Crypto or hold any Crypto ETF’s. Canada did not allow ETF’s to be built on Crypto. There weren’t over 38,804 Crypto ATM’s all over the world.
How do you know? We already said you do not have to trade any of these Crypto’s on any exchange. So any trading volumes you are looking at are only a guess. Also many people just hold Bitcoin and Ethereum is used for gas money so a lot of the volume is lost on both of the coins.
I am going to bookmark this chain albaby and every year we will come back and look at it. It should be interesting to see who is correct. You thinking Cypto will not be around or negligible and me thinking Crypto will thrive and grow bigger and bigger starting new business’s.
Andy
OK
The Captain
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I understand all that. None of that makes crypto especially important or significant, relative to the national economy. There’s literally millions of cardholders that use and millions of merchants that accept the Discover Card (to pick a roughly same-sized financial enterprise). If Congress decided to ban the Discover Card, it would cause inconvenience - and obviously massive economic harm to the Discover Bank and its business counterparties. But Congress could do that without materially affecting the national economy. Easily.
The same is true of crypto. If Congress passed a regulation that barred or crippled the use of crypto in most circumstances, it would certainly be bad for the folks who installed those crypto ATM’s. But so what? There were hundreds of thousands of cigarette vending machines across the U.S. at one point, in nearly every bar and restaurant. More than there are crypto ATM’s. Then the FDA banned them in nearly all circumstances (after several states did so first). That was hard for the vending machine owners, and cost the establishment owners some easy rent money. But that didn’t stop it from happening when the government finally made up its mind to all-but-end that practice.
It might cause problems for companies like Tesla that would have to divest themselves of their crypto holdings. But nothing insurmountable. Sure, Congress would consider those likely negative effects in deciding whether to pass such a regulation - but that’s true of almost every type of regulation. Not because crypto is just too big to regulate.
Sounds good. Any predictions on what the most significant new business we’ll see developing around Crypto in the coming year? As I mentioned upthread, almost all of the economic activity around crypto has been enabling people to speculate on the value of tokens - platforms like Coinbase and OpenSea that are used to trade and lend those tokens. Those services have been pretty well established. What’s the next one?
I believe it will be in Fintech. We have already discussed it and you don’t think it will have traction but I do. We will see.
Andy
Can you give us a real-world example? Is there some sort of BNPL scheme that works better with crypto? Is there some sort of security trading vehicle that works better with crypto? Is there some sort of electronic bank that works better with crypto? etc? What’s the SoFi of crypto?
Have we? I know we talked about international remittances - the Western Union type of services - but Fintech means a whole lot more than that.
Are you arguing that Zelle, international remittances and chainlink working with swift on cross border exchanges is not part of fintech?
Andy
Ethereum $1,210.59 Bitcoin 16, 783 12/21/22
Of course it is. That’s why I was asking for specifics. Fintech is enormous, and the only tiny slice of it that I recall discussing with you was remittances. We never really talked about Chainlink - you mentioned and linked an article about it as an example of a crypto business, but never really got into details (they’re a “picks and shovels” company, right, doing oracle software for blockchains?). You never really got into what they actually do or why they’re important (other than helping people, as I mentioned upthread, successfully speculate on tokens).
Than why are you arguing? You asked, I told you fintech so let’s just wait and in a year we will see where they are at.
Andy
Hi Mark,
We had a long discussion on Chainlink, Swift, cross border payments, Zelle. You can search on those terms and see the discussion.
Andy
I guess my reason for asking a further question can be best illustrated by another question: can you give an example of a crypto business that wouldn’t be categorized as fintech? It’s rather an enormously broad term, after all.
Again, just curious what you thought the next (or rather, first) big thing with crypto might be - and “fintech” is just so enormously broad that it’s not really much to go on.
Yes but it is much smaller than what I actually first said. I can’t be sure exactly what they are going into because there is so much innovations coming in this space.
Andy
Which fintechs that are using crypto would you invest in today? After all, getting in early is the key to outsize returns (Amazon, Apple, Google, etc) for companies that will experience massive growth.
There isn’t one Mark, I am not trying to tell anyone what to invest in, rather I am trying to bring up information on the technology. The feedback has helped me to understand this technology. I feel I have a better understanding of it now than I did 6 months ago.
Andy
Me, too, Andy.
THANKS to EVERYBODY for the conversation!
ralph