Future Challenges of the Bitcoin Network: Can Transaction Fees Support Security?

Around the year 2140, the Bitcoin network will face a significant turning point - all 21 million Bitcoins will have been fully issued, and miners will no longer receive block rewards, relying solely on transaction fees to sustain operations. This change has raised concerns about the long-term security of Bitcoin.

The Evolution of Bitcoin Incentive Mechanism

Currently, Bitcoin miners' income mainly comes from two parts:

1. Block reward: Each new block generates a fixed number of new Bitcoins as a reward. This reward is halved every four years, known as "Bitcoin halving."

2. Transaction Fee: An additional fee paid by users to incentivize miners to prioritize their transactions.

As time goes by, the block rewards will gradually decrease until they disappear, and transaction fees will become the only source of income for miners. This shift has raised concerns about network security.

Challenges of the Post-Reward Era

Pessimists believe that relying solely on transaction fees will not sustain a sufficient security budget, which may lead to a decline in hash power and increase the risk of a 51% attack. Optimists, on the other hand, believe that the increase in Bitcoin's value and the demand for block space will raise transaction fees to a sustainable level.

The risks that may arise from a decrease in the security budget include:

• 51% attacks have become easier to implement
• The volatility of computing power has intensified, and a short-term weakness period may occur.

Innovative Solutions

The Bitcoin community is exploring various solutions to address this challenge:

1. Layer 2 network: such as the Lightning Network, improves transaction speed and reduces costs, expanding the application scope of Bitcoin.

2. Bitcoin Rune: Allows the creation of tokens on the Bitcoin network, increasing transaction demand.

These innovations are expected to increase trading volume and fees, contributing to future security budgets.

Changes in User Experience

As the transaction costs on the main chain rise, ordinary users may primarily conduct daily transactions through layer two networks, while the main chain will be used more for large transfers and settlements.

Considerations for Investors

Investors need to weigh the scarcity of Bitcoin against its long-term security. The security of the network will depend on the future market for transaction fees, which may affect the long-term valuation of Bitcoin.

Conclusion

The challenge faced by the Bitcoin network will be determined by technological innovation, economic evolution, and social consensus in shaping its future direction. Although the year 2140 is still far away, this issue has already sparked widespread discussion and active preparation within the industry. Whether Bitcoin can successfully transition to a pure transaction fee model will be the ultimate test of its design philosophy.