I’ve got a limited understanding of bitcoin, so let me know if I’ve got something wrong here:
Bitcoins are finite, at some point, if the system survives long enough, the last new bitcoin will be mined and assigned ownership to someone
Bitcoin mining gets progressively more and more difficult, so lots of work goes into solving the mathematical problem to gain new bitcoins as they become more rare
A few questions that I don’t quite get:
If miners are rewarded with new bitcoins, it seems like there could be two ways to see bitcoin mining come to a halt (outside of bans by government or other extraneous factors) - when there are no new bitcoins to be mined, or if bitcoins lose value so much that it isn’t profitable to mine them - are there other ways mining would stop without external intervention?
Is there any scheme to reward bitcoin miners after the last bitcoin is assigned or is this very much a future problem people aren’t thinking about much?
What is the relationship between bitcoin mining and maintaining the blockchain ledger? I hear that these two are connected somehow, but they’re not exactly the same thing? Or are they?
If the last bitcoin has been mined, is there a way the blockchain ledger still gets maintained, or does it go away too?
The designers envisioned a scheme where supply of money was deliberately limited so the supply could not be expanded by the digital equivalent of printing more money.
They’re connected and are mostly (but not entirely) the same. The blockchain basically IS bitcoin. It is a digital record of all transactions, including the owner (identified by cryptographic key).
The only way anybody can claim they ‘own’ a bitcoin is if it is listed as such on the blockchain. You can’t just have a bitcoin that happens not to be on the blockchain or transactions that aren’t on the blockchain. Without the blockchain, bitcoin is worthless.
Mining is basically the act of updating the blockchain. You don’t ‘mine’ fresh bitcoins like you would metals. The calculations update the blockchain with the latest transactions and the reward for the miner for expanding the blockchain is having new bitcoins added to the blockchain on their key.
Has to be. No blockchain, no bitcoin. As above, the blockchain ledger basically IS bitcoin. Without the blockchain, no bitcoin transactions can take place.
In theory, what happens is mining still occurs. The current reward for mining is new bitcoins plus a transaction fee that everybody pays if they want to use their bitcoins. After the last coin is mined, what happens in theory is those transaction fees alone will be sufficient to keep mining going, thus keeping the blockchain updated.
The difficulty of Bitcoin varies based on how many miners are working. In practice, as the price has gone up, that has attracted more computational power, but it doesn’t just go up in lockstep. It goes up and down as the price does.
Yes, and it’s currently in effect in parallel with mining rewards. Transaction fees are paid for each transaction. They are voluntary and can be whatever size the sender wants, but including transactions in a block is also voluntary, so there’s effectively a real-time auction for which transactions will get included in a given block and a generally known market-clearing price if you want your transaction to be likely to happen in the next N blocks.
If bitcoin transactions are tracked in blockchains, how does some shady group get away with being paid in bitcoin? Does a bitcoin not eventually come out into the real world when it is spent to buy legitimate goods, at which point the police can track the transactions backwards?
“Who paid you this bitcoin??”
Or would this require launderers in foreign countries untouchable by authorities to funnel bitcoin through to create churning and deniability for the sources of illicit bitcoin?
The answer to that is mostly that criminals are stupid. You can, with a lot of effort, make bitcoin transactions difficult to trace, but almost nobody puts in that much effort, and even if you do, they’re still easier than greenbacks, and much easier than gold. But people think they’re untraceable, so criminals use them.
Since (I assume) bitcoins are individually identifiable, wouldn’t doing a transaction with a bitcoin that was at one point in its history stolen make the owner liable for possession of stolen goods? Even if they were unaware, I presume they would forfeit the bitcoin itself?
Bitcoin transactions are the MOST traceable form of payment. The blockchain is literally the entire history of everyone who “owned” a coin (or part of a coin) since the day it was minted. That’s sort of the whole point.
What Bitcoin is is anonymous. That’s the feature. You know which wallet a coin moves to and from. You don’t know who owns the wallet. You know how many coins are in a given wallet but you don’t know who controls the wallet. That’s the spot where people can hide.
The issue is that it’s not really feasible for most people to maintain all their “coins” in their “wallet” manually. Way too much risk of losing it, screwing up a public key or otherwise fucking it up. And since this whole system is distributed and there’s no managing entity, there’s no one who can undo your fuckup. So people start resorting to software and companies to help them manage this stuff. It’s at that point that you tend to start seeing where anonymous wallets and real humans getting linked up. And the second you pay for something out of a wallet in a personally identifiable way all your past and future transactions will become known unless you take steps to re-establish your anonymity.
So does anyone know how many bitcoins there can be in total? If current trends continue, can new bitcoins be mined for decades, centuries, millenia?
I didn’t know about the transaction fees - I’ve heard that people have trouble getting their bitcoin transactions added to the blockchain, and that sometimes it can take weeks to get a transaction on, but I assume that’s people who haven’t paid a transaction fee or paid a low fee.
There’s a cap of about 21 million. At the current rate, the estimate is 2140 before they’re all mined.
Note that the 21 million is the maximum possible. There are already several that are “lost”, i.e. in the blockchain but inaccessible because the cryptographic keys have been lost.
Personally, I’m not sure it’ll be around that long or, if it is, it won’t be supplanted by something else or rendered obsolete by technological or societal progress or collapse.
As the code can be duplicated and improved upon, the only thing Bitcoin has going for it is first mover advantage. But of course, in this case, that advantage may be everything.
Kind of, but no. Individual bitcoins are not identifiable, only transactions and addresses are.
Example. There are 4 addresses: A,B,C,D.
10 Bitcoins are stolen from A and sent to C.
10 Bitcoins are transferred from B to C.
10 Bitcoins are transferred from C to D.
Where are the stolen 10 Bitcoins? Are they all still at C? Are they all at D? Are exactly half of them at D? Now add dozens or hundreds more addresses and transactions. Which ones are dirty and which are clean?
Bitcoin transfers are fully trackable. Individual bitcoins are not, though, since they don’t have serial numbers or anything.