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In the past year only, the bitcoin mining difficulty has increased fivefold. If in the coming years the difficulty increases so much that mining is no longer profitable (i.e. consumes more power than money is earned), can the bitcoin network exist without miners? Can bitcoin supporters or governments have data centers that handle transactions only and do not spend computational resources on mining new bitcoins?
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if in the coming years the difficulty increases so much that mining is no longer profitable
That's not really possible. The mining power is set so that the miners need 10 minutes in average to mine a block. If 50% of the miners would disappear because it's not profitable any more, the difficulty would decrease so that it's profitable again.
Can the bitcoin network exist without miners?
Yes and no. There is still the decentralized blockchain, so you can still check who has how many bitcoins, and you can view the whole history of transactions (they do still exist), but you could not spend them if nobody would mine the transactions.
Can bitcoin supporters, or governments have data centers that handle transactions only and do not spend computational resources on mining new bitcoins?
Transactions can't be confirmed if nobody spends the necessary processing power to mine blocks. Confirming transactions requires mining.
12I believe the question was whether transactions can be confirmed if nobody spends the necessary processing power to mine blocks. So the answer to the last part would be "no". But I think you have also adequately explained why that is a non-issue. – kasperd – 2017-12-25T22:42:07.003
How can the difficulty decrease if miners disappear? – Dmitri Zaitsev – 2017-12-26T02:43:23.080
4Perhaps mining transactions is confused with mining bitcoins? I think the question only meant the latter. – Dmitri Zaitsev – 2017-12-26T02:47:32.453
1@DmitriZaitsev That's a question about something fundamental to how the Bitcoin protocol works. Ask it as a separate one if it hasn't already been asked. – wizzwizz4 – 2017-12-26T13:05:11.467
3The real risk is if something happens and 90% of the mining power disappears. Ten minutes per block versus 20 minutes is no big deal; ten minutes versus 100 minutes is. A 50% drop in mining power will be reflected in a difficulty change after no more than a month; a 90% drop will take almost half a year to recover. – Mark – 2017-12-26T21:16:45.123
1If 90% of the miners decide it is not profitable, and they have 9 times mining power of the active miners, I think their better strategy is to collude and break this system. Especially if they are using dedicated hardware. – user23013 – 2017-12-27T11:35:09.070
1kasperd interpreted the last part of my question correctly. @Alpha if you would please edit the answer and add that confirming transactions cannot be done without mining, I will accept this answer. – Eduard Avetisyan – 2017-12-28T14:00:39.400
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This is an excellent question. I think when the last bitcoin is mined a century from now, it is conceivable that mining could be replaced by higher transaction fees. So the blockchains can keep growing and cryptocurrencies could live on forever.
Some interesting articles on the topic:
https://news.bitcoin.com/what-happens-bitcoin-miners-all-coins-mined/
https://cryptocoinmastery.com/what-happens-when-all-bitcoins-have-been-mined/
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Complete loss of mining would shut down transaction confirmation on Bitcoin. Transactions are confirmed by being included in a block of the blockchain. As the mining reward is released to the successful miner by the Coinbase transaction in the block they authored, it is not possible to confirm transactions without the expending the work of mining for the block subsidy.
Luckily, the difficulty should never grossly exceed the available hashrate, as the difficulty is a self-regulating system that adjusts every 2016 blocks. At worst, a portion of the hashrate would leave the network, making block intervals longer for some period until the difficulty adjustment normalizes the block intervals.
Herenby, the readjustment scales the difficulty up or down to a limit of factor 4, such that the next 2016 blocks would take 14 days if the hashrate were to stay the same as in the past difficulty period.
As there were great advances in hashing hardware since Bitcoin emerged, so far the difficulty has been mostly adjusting upwards, and the average block interval is in average closer to nine minutes than ten.
Loss of mining for transactions or for new bitcoins? Even if no bitcoins are mined, why would this matter to support the transactions? – Dmitri Zaitsev – 2017-12-26T02:53:42.867
3@DmitriZaitsev: The mining reward is paid out with a transaction. Mining for confirmations and mining for the block reward are one and the same thing. – Murch – 2017-12-26T03:49:51.003
So how is it related to new coins? The transactions can be separated from new coins, can't they? – Dmitri Zaitsev – 2017-12-26T05:27:49.760
@DmitriZaitsev: The block subsidy (new coins) are paid out in the Coinbase transactions of the block the successful miner authored. The Coinbase transaction also collects the transaction fees. The block may contain more transactions that get confirmed by the block. Without blocks there are no confirmations, nor new bitcoins. – Murch – 2017-12-26T17:12:16.060
1@DmitriZaitsev no, pretty much the entire point of the system is that the two are inextricably linked, so that the coin reward creates an incentive for miners to do the work of confirming transactions. – hobbs – 2017-12-27T05:13:42.833
@Murch If every transaction needs the increasingly expensive block creation, how can that work on scale in long terms? And how then Bitcoin can compete against newer currencies, which will do the same job easier and faster? – Dmitri Zaitsev – 2017-12-27T05:18:58.043
@DmitriZaitsev: Perhaps it would be better if you asked a new question. This is getting further and further away from the topic here. – Murch – 2017-12-27T05:20:34.720
– Dmitri Zaitsev – 2017-12-27T05:29:43.570
Herenby? Hereby? – Peter Mortensen – 2017-12-28T12:13:55.117
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can the bitcoin network exist without miners?
Not really, the network may still exist reporting historical transactions and collecting unconfirmed transactions but without miners finding blocks transactions will never confirm.
Can bitcoin supporters or governments have data centers that handle transactions only and do not spend computational resources on mining new bitcoins?
No
In the past year only, the bitcoin mining difficulty has increased fivefold. If in the coming years the difficulty increases so much that mining is no longer profitable (i.e. consumes more power than money is earned)
Understand that difficulty is reactive to the amount of mining power aiming to keep the block rate roughly constant. Increased difficulty is driven by increased mining, similarly decreased mining would result in decreased difficulty. So as long as changes to mining capacity are gradual the number of miners should have little impact on transactions.
Mining in turn is driven by economics, if mining is profitable more mining equipment will be brought online. If mining loses money then mining equipment will be taken offline. An equilibrium should be reached where the cost of mining is comparable to the income (mining rewards and transaction fees) from mining.
However there is a catch, the difficulty only adjusts every 2016 blocks and it can only adjust by a factor of 4 each time. If there is a sudden crash in the value of bitcoin (or in the post-reward era a sudden crash in transaction fees) a large proportion of mining infrastructure may suddenly become unprofitable. If the unprofitable infrastructure is shut down too quickly it could cause major problems for bitcoin.
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Complete loss of mining is not possible I believe. Even if it is possible theoretically, it won't happen in practice unless bitcoin prices goes to zero.
Let's assume total mining power (hashrate) decreases in the network and people choose to not mine. Then difficulty will also decrease, which means total power needed to consume to mine a block will decrease as well. So, at some point mining will again become profitable, and people will choose to mine. It is the basic game theory behind the Bitcoin.
However, there is a way more severe consequence of decrease in total hashrate: Security vulnerability. If total hashrate decreases, it will require less resources to perform a %51 attack and will increase the probability of success of the attack. When people start to think that Bitcoin is no more secure, everybody start to move away, not only miners. Losing users leads bitcoin prices go down to zero. Just like a small snowball which becomes an avalanche.
To sum up, yes losing miners would possibly end up with slowly disappearing of whole Bitcoin ecosystem.
There is currently no way to handle transaction without mining process. If your suggestion of government acting a role in transaction verification happens, then bitcoin becomes non-decentralized and it loses whole point of being open, censorship-free, neutral and borderless.
What do you mean with "yes losing miners would end up with missing of Bitcoin"? If you have 51% of the hashing power, you can't regardless do anything. You can't let bitcoins disappear and you can also no initiate transactions as you don't have the private keys. – ndsvw – 2017-12-26T14:00:21.477
I meant "disappearing of whole Bitcoin ecosystem", not bitcoins as tokens/coins of users. I changed the expression though, thanks for the comment. – Alper Celayir – 2017-12-27T15:00:00.537
Let's assume mining power decreases rapidly (say, 0.6% per day), while bitcoin prices remain constant. Because difficulty only changes every 2016 blocks, this is equivalent to a 10% increase in the cost of mining, which in turn will cause more miners to leave, which causes the cost of mining to go up, which turns into a self-sustaining loop: the difficulty can't fall fast enough to keep up with the loss of mining power, so the cost of mining rises exponentially, even though the price of bitcoin is constant. – Mark – 2017-12-27T23:55:41.367
@Mark Yes, if mining power constantly decreases (0,6%) then average time to mine a block increases %10 (from 10 to 11 minutes). However, after two adjustments, difficulty decreases about %20 as compared to our initial difficulty. Adding up the %10 mining time increase; after two adjustment cycles we would have new difficulty about %88 of our initial difficulty. Eventually, decrease in the mining power, causes decrease in the overall difficulty. Then at some point, some miner who left may decide to mine back again since it would be more profitable with the difficulty of that time. – Alper Celayir – 2017-12-29T12:08:32.457
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As long as someone has a copy of the blockchain, I guess Bitcoin "exists". However, if nobody mines blocks, there will be no new confirmed transactions, so generally nobody could spend their Bitcoin anymore.
However, the beauty of difficulty is that it also falls. If miners stop mining (e.g. because it is unprofitable), then the difficulty falls, and it becomes easier to mine. In an extreme case it could fall low enough that people could mine with a simple CPU again*. As long is someone is willing to pay the fee (which could be extraordinarily low if miners are able to use simple, efficient, low-cost hardware) it would almost certainly be profitable as long as people are willing to pay even a tiny transaction fee.
Difficulty only falls when blocks are mined. If mining activity actually drops to zero, then the difficulty is stuck wherever it was when the last block was mined. If mining activity falls too fast, difficulty can't adjust to keep up. – Mark – 2017-12-27T23:40:59.367
@Mark True, but my broader point, to the OP's question was that it is unlikely that difficulty will "increase so much that mining is no longer profitable", since as it becomes unprofitable people stop mining, thus reducing the difficulty and making it profitable again. Now your point that once it is literally zero, difficult is locked in is true. However, it is unlikely that mining will go from something meaningful (i.e. a point where mining is unprofitable) to zero in a single 2016-block period (i.e. two weeks). – Scott Willeke – 2017-12-28T03:43:57.903
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This is a fascinating question. Of course, the first answer is rather boring: "the difficulty of mining is constantly changing, so the law of supply and demand will ensure there are always miners." However, it we set this part of the answer aside, we get to dig deep into what a bitcoin really is, and that's what makes this question so much fun.
When you offer something of value, such as a good or service, in exchange for a bitcoin, you are making the assumption that everyone makes when they use a currency: that the buyer can give you something of value in return for your good or service. In the case of cash, it may be nothing more than a piece of paper which you trust other people will find value in. Bitcoin is the same way, but a bit more nuanced.
If you are receiving a bitcoin in exchange for your good or service, you start by creating a "private key" for a bitcoin account, which is basically a random number. Now when you get "paid" in bitcoins, what actually happens is that the buyer publicly announces some information which makes your private key worth something. This something is the body of the transaction, which includes the information that proves the buyer is in a position to transfer a bitcoin.
What makes this information valuable is that you have confidence that, with that public information in hand, your "private key" is now empowered to make you a buyer of someone else's goods and services. It's a bit exotic sounding, if you ask me. The buyer effectively blesses a random number that only you know to have some value by uttering a phrase, but if you really look at what happens when a buyer announces a transaction to be added to the block chain, that's what they're really doing!
Of course, the value of that information is only worth what the next seller of goods and services will accept its value as. One of the fundamental assumptions which sellers use to determine if your private key for a bitcoin account is valuable is whether the previous transaction could ever be "double spent," meaning the person who bought your goods and services uses that bitcoin to "bless" two separate transactions when they were only supposed to use it once. In cash terms, this would be the equivalent of photocopying a dollar bill and spending it twice. And that's where mining and the block chain becomes important.
With bitcoin, there is a master ledger known as the "block chain." If someone uses a coin to bless someone else's account (i.e. they spend the bitcoin), and that action appears on the master ledger, others are expected to recognize that that coin cannot be reused to bless a second account (i.e. double spent). This ledger is consistent, containing no double-spent coins.
The miners maintain this master ledger. They are paid to do so (by both the "freebie" coins that are minted for the miner with every block and by transaction fees paid on each transaction), and their services are to make it computationally infeasible for anyone to "cheat the system" by breaking down this one master ledger guarantee.
Without miners, there would be nobody to maintain this master ledger. A coin would only be worth how much people trusted it would not be double spent.
There are solutions to this:
Of course, none of these will come to pass. In reality, the difficulty of mining a new block scales, as many of the other answers have put forth. Eventually the difficulty will drop low enough that it will become profitable for miners to mine (just as it was profitable in the early days of BTC). The tradeoff, of course, is that the easier it is to mine a new block, the easier it is for a hostile entity to apply enough hashing power to corrupt the block chain, forking it so they can double spend coins. Bitcoin is resilient against such computational attacks because the difficulty of mining is high enough.
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IMHO it is important for the businesses accepting bitcoin and the people using bitcoin (everyone :)) in the future to each maintain a certain level of hashpower thereby keeping it decentralized and secure.
What if a restaurant gets so crowded that nobody goes to it? Won't they go out of business? – David Schwartz – 2019-05-19T00:40:33.343
2Difficulty was only 3 billion when I started. Ah, the good old days. – 4276 – 2017-12-25T18:13:23.043
2FYI: coins that don't use a blockchain but a DAG (directed acyclic graph) can exist without miners (iota, byteball) – RobSeg – 2017-12-26T14:31:11.107
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Whether or not it's profitable... Sometime in ~2140, due to Controlled Supply there will be no more coins to mine (or there abouts, depending on increases or decreases in mining capacity).
– WernerCD – 2017-12-26T17:47:56.0173One newbie comment (from a newbie!) When folks hear about bitcoin mining they assume it means, finding new bitcoins. But, the other function of bitcoin "mining" is, proving transactions. – Fattie – 2017-12-27T17:49:36.197
The main trick is that no one can not mine the treasures using his
personalfacilities. – D L – 2018-02-18T22:22:44.227