Bitcoin (BTC) and Bitcoin Cash (BCH) are two different versions of Bitcoin. They are technically different, but the underlying economic designs that those technical differences cause is the biggest, and most important, difference between the two.
Below are a number of situations analyzing how BTC and BCH price, fees, and sustainability would behave up to the year 2040 using these different economic designs.
Keep in mind that these scenarios use only today's technology (storage, internet speeds, etc.) and does not account for 20 years of potential technological improvement (today to 2040).
To put this in context, as per the waybackmachine, the Western Digital 400BB 40GB hard drive cost $130 in 2001. Today you can buy the Seagate Barracuda 8TB for the same price, which is 200x larger and 3.27x faster. To compare an SSD would be something like the Samsung 970 EVO PLUS 1TB which is 57x faster and 25x larger.
Onward!
Assumptions & Initial Data:
Average Transaction Size: 350bytes
Coin Price: $57,465 USD (Rough BTC price at time of writing)
2TB SSD Price: $200 USD
100/100 Bandwidth Cost: $70 USD (source)
Link to data
No significant changes from the BTC of today. The price does not go up or down, and fees are always a consistent 'low' of $3 per transaction.
Results: Miner income steadily falls after each halvening. Miners steadily leave BTC for other SHA256 networks and BTC becomes easier to attack over time. Tx fees have almost no effect on miner income/incentivization.
We assume that todays 'low' fees of $3 per transaction stay consistent. The BTC price doubles each halvening forever.
Results: Miner income flatlines at $298k per block, stopping miner growth. Income (and mining ecosystem growth) does not increase unless fees rise, or the price of BTC grows faster than exponentially.
If the price ever drops below the exponential curve for any reason, at any time, then miners lose incentivization and start leaving. Sudden price drops (whales, major events, speculation, mania, etc.) that occur will disrupt the networks operation (slower block generation) as a proportional amount of miners suddenly leave due to the price drop.
A very significant price drop could bring the network to a standstill for an extended amount of time. Tx fees have almost no effect on miner income/incentivization.
The BTC price stays the same as today. Halvenings reduce the miners income, but Tx fees increase to make up the difference.
Results: Similar results as Situation 2 with a stagnating miner ecosystem, but a worse user experience as the minimum required fees to keep miners incentivized increases over time. If the Tx fees ever drop below these levels then miners will leave.
The BTC price increases by 50% each halvening, and the user Tx fees make up the difference in lost miner income.
Results: Similar results as previously in that miner growth stagnates. If the price of BTC or the Tx fees drop below these values then miners leave.
The BTC price increases by 50% each halvening, the user Tx fees make up the difference in lost miner income, and the blocksize is increased to 4MB (SegWit turns it into 8MB for rough calculations)
Results: Miner growth stagnates. As long as the BTC price continues increasing it bears the majority of the miner income incentivization, but user fees will still continue to increase. Any downturn in the price will negatively affect miner income or transaction fees.
Blocksize increased to 4MB (8MB with SegWit). 50% BTC price increase each halvening. Mining hashrate continues growing by ~1EX per halvening, and those new miners are paid the same income as 2021 miners so existing miners income is not diluted.
Results: Mining ecosystem continues growing at today's rate. Transaction fees continuously get more expensive over time and quickly becomes the primary source of miner income. However, if transaction fees ever drop below these levels then miner income drops, and miners leave.
Blocksize increased to 4MB (8MB with SegWit). BTC price doubles each halvening. Mining hashrate continues growing by ~1EX per halvening, and those new miners are paid the same income as existing 2021 miners so existing miners income is not diluted.
Results: Mining ecosystem continues growing at today's rate. Transaction fees continuously get more expensive over time. Coinbase rewards still play a major role in miner income, so if the BTC price ever drops it will have an equivalent affect on miner income unless fees increase to compensate. Transaction fees will eventually become the primary force behind miner income, but if fees ever drop below the trend line then miner income will also drop, and miners leave.
Summary
BTC, even with small blocksize increases, requires that fees continually rise over time to compensate for the falling coinbase reward that occurs every 4 years (the halvening).
If the price of BTC climbs exponentially then the fees required to use the network stay 'low', but even something like $3 per transaction excludes most people in the world from ever using it. Those who can afford those high of fees will also not be incentivized to use it when cheaper options let them do the same thing for cheaper.
Current blocksize is 32MB. Assume 128MB by 2024, then 4x each additional halvening. Same price as we started with for BTC, and doesn't change, to show direct comparison of the networks economics in the same situation.
Results: Even with a static token price the fees from user adoption sustains miner income after a critical number of transactions occurs. The more users of the network there are the lower the fees become while sustaining the (stagnating) miner ecosystem.
Current blocksize is 32MB. Assume 128MB by 2024, then 4x each additional halvening. BCH price doubles each halvening.
Results: The BCH price almost fully subsidizes the (stagnating) miners and transaction fees are less than $0.00001. In 2040 if the BCH price were to fall 99% the network would still sustain the miners if transaction fees increased to $0.024
Current blocksize is 32MB. Assume 128MB by 2024, then 4x each additional halvening. BCH price increases by 50% each halvening. Mining hashrate continues growing by ~1EX per halvening, and those new miners are paid the same income as existing 2021 miners so existing miners income is not diluted.
Results: Miner ecosystem continues growing as it has been. Transaction fees trend lower as the network gets more use. In 2040 if the price of BCH falls 99% the network will continue to grow the mining ecosystem if the fees remain at $0.08.
Current blocksize is 32MB. Assume 128MB by 2024, then 4x each additional halvening. BCH price doubles each halvening. Mining hashrate continues growing by ~1EX per halvening, and those new miners are paid the same income as existing 2021 miners so existing miners income is not dilluted.
Results: Miner ecosystem continues growing as it has been. Transaction fees trend lower as the network gets more use. In 2040 if the price of BCH falls 99% the network will continue to grow the mining ecosystem if the fees remain at $0.07.
Summary
BCH shows a clear trend: more usage equals lower fees. By 2040 this would require blocks 4GB in size, which equates to roughly 19,500 transactions per second. This would require, using the linked data above:
590GB of storage space per day
273Mbit internet (assuming 1 download + 3 uploads)
My home computer can handle that today, granted the data storage would be costly. Luckily storing the entire blockchain history is not required by all nodes, and more improvements are being made to this over time. The real barrier to this scaling plan is CPU processing and software which has been addressed in other articles. (See 1GB Block Tests (2017) and 3000 TPS on BCH (2019) for examples.)
Conclusion
The point of this data is to show that BTC and BCH each have an obvious trend that exists due to their different economic designs.
BTC
Requires that transaction fees continuously increase over time.
'Low' fees requires that the BTC price increase exponentially and never falls below that curve.
If required to rely on the coin price then the networks performance/usability becomes vulnerable to price fluctuations, including potential chain death scenarios due to massive price drops.
BCH
Requires that adoption increases until a critical mass of usage occurs.
The more the network is used the cheaper transaction fees become.
The larger the network grows the more self-sustaining it becomes, so even massive price drops have a negligible effect on the networks performance and usability.
Which design looks better to you?
In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes. I'm sure that in 20 years [2028] there will either be very large transaction volume or no volume.
-Satoshi Nakamoto
