I'm seeing some fundamental issues in bitcoins future from my current understanding. I could certainly be wrong, but I'd love to talk about it and find out why I'm wrong if I am. I'll start out with my premises and go from there.

1 In the future, the majority of miners profits will be derived from fee's once bitcoin's reward depletes and all coins are issued.

Fairly self evident, no coins means miners need to make their money somewhere.

2 The amount of hashing power in the system directly correlates to the security of the system, as it determines the computational power required to create a 51% attack.

Again I believe this is self evident. If the system total hash is higher you need a greater amount of hashing power to perform a 51% attack.

3 The amount of hashing power in the system directly correlates to the money available to be made via transaction fee's.

This is a ratio compared to what is available on the market for H/$, not so much a fixed amount. For example if in the future super efficient ASICs are developed this could be something like 1 GH/$, the number itself is irrelevant. The key point is that miners will always stabilize around the cost of getting a finger in the pie against their reward for having a slice of pie. If it costs more to run then you get rewarded miners unplug. If it's cheaper to get in and it's profitable to get rewarded miners will do so.

4 The greater market cap in bitcoins, the more attractive it is for the target of a 51% attack, as there is more to gain

I think this is fairly self evident, being able to control a 100 billion dollar market is more advantageous than controlling a 1 billion dollar market, which is more beneficial than a 1 million dollar market, etc.


From these premise I draw the conclusion that the amount of hashing power in the system (premise #3) will directly correlate with the amount of transactional fee’s in the system (premise #1), and hence the security of the system (premise #2). I also believe there is a ratio between the market cap, and the transactional fee’s being generated (MC:T ratio). The issue becomes problematic if BTC is ever used to store wealth rather than make transactions as a currency. We see in this situation that the MC:T ratio would get larger and larger, with wealth being pored into a closed system, yet there not being enough transactions to generate the security required for the increased size of the market. According to premise #4 we have an increasing target, but not the security to go along with it.

So – What can we do about it? Honestly I can’t really think of much without destroying the bitcoin. You could increase the fee rate per transaction, but then you’d be destroying one of the key strengths of the bitcoin – cheap ways of transmitting money from person to person. It’s possible that the bitcoin could grow large enough that the transaction fee’s could be valuable enough to stop a 51% attack, even if there is an obscenely large MC:T ratio, but I wouldn’t like to count on that idea, as if something is incredibly profitable they will find a way to exploit it.

In my opinion if the majority of coins are horded instead of used as a currency (i.e. wealth storage) then the bitcoin could have long term issues, and possibly be subjected to attack.

TL;DR Currently bitcoin hash rate is tied to worth because you're rewarded in a fashion directly related to their worth. In the future hash rate is tied to transaction frequency, which is independent of the network worth and hence need for security.

Thoughts?