Many experts wonder what the future of Bitcoin’s blockchain holds. The coin itself appears to be recovering after a crypto winter, but what happens when the value of the coins mined becomes less than the power it takes to mine them? Some suggest that the coin needs to migrate away from cryptocurrency mining and over to a different consensus algorithm.
For instance, many altcoins use Proof-of-Stake as their preferred consensus method, which could help keep the Bitcoin blockchain beneficial and profitable to those who mine the coin. That means the network could see transaction fees right or become very bogged down.
When the next Bitcoin "halving" occurs in 2020, there is potential that transaction fees for the crypto drop so low that miners won’t have the necessary motivation to continue mining. As a result, 2020 could see many miners run out of business with the Bitcoin price adjusting dramatically.
If miners decide to leave the Bitcoin blockchain, then network security becomes a real concern. The departure could result in a drop in hashrates, which would leave the blockchain open to hacks, as a result, the value at which the coin is trading may diminish greatly.
With the diminished perceived value of Bitcoin, even the best Bitcoin exchange may see significant losses if the coin does not change its consensus model. It’s either that or the network will need to find a way to compensate its miners with legitimate transaction fees.
What many people don’t know is that miners don’t just get the reward for mining a block in the blockchain. They also receive payment in the form of transaction fees. While there is legitimate concern over the halving causing the network to slow, there are still hundreds of thousands of transactions that take place on the network every day.
That means that even though the actual mining creation rewards may not be as attainable, the transaction fees themselves could create enough profit that miners continue to mine forever. The idea is that even though all coins are in circulation, miners are still incentivized solely on fees from coin trading alone.
What the future holds for Bitcoin
Bitcoin in its current state is outdated and is likely headed toward obsolescence. That doesn’t mean the blockchain has to arrive at that point. There are plenty of projects working alongside the network to improve its performance and functionality.
For example, one of the most touted projects associated with Bitcoin is the Lightning Network. This project creates specific channels for transactions on the Bitcoin blockchain, which greatly increases the throughput speeds of the network.
Bitcoin’s blockchain has it’s deficiencies, just like any other cryptocurrency on the market. However, that doesn’t mean that it can’t address these issues and update its network so that its value is derived from transaction fees or through a different consensus algorithm.
The biggest challenge comes in finding a way to keep Bitcoin as a store of value and provide incentives to its miners. Otherwise, the original cryptocurrency might find itself struggling to stay relevant in 2020.