After the block rewards disappear in 2140, is a security model driven purely by transaction fees sustainable? Will it lead to a 'tragedy of the commons'?

Background

Bitcoin's block reward is projected to halve to zero by 2140, at which point miners’ income will rely solely on transaction fees. This raises concerns about the sustainability of its security model and whether it could lead to a "tragedy of the commons" (where shared resources are depleted due to self-interested individual actions).

Is a Transaction Fee-Driven Security Model Sustainable?

• Arguments for Sustainability:

  • If Bitcoin transaction volume grows significantly (e.g., through mass adoption or layer-2 solutions like Lightning Network), fees may sufficiently incentivize miners. Historical data shows fee proportions increased after past halvings (e.g., reaching 10-20% post-2020).
  • Bitcoin’s automatic difficulty adjustment mechanism lowers mining difficulty when hash rate declines, making it easier for remaining miners to earn rewards and maintaining network stability.
  • Long-term, miners may optimize efficiency (e.g., via renewable energy) to reduce costs, enabling profitability even in low-fee environments.

• Arguments Against Sustainability:

  • Transaction fees are subject to market supply and demand: Insufficient demand (e.g., during bear markets or amid competitive cryptocurrencies) may render fees unable to cover miners’ costs (e.g., electricity and hardware), causing hash rate to plummet.
  • Increased security risks: A lower hash rate makes the network more vulnerable to 51% attacks (where attackers control majority hash power to alter transactions). Estimates suggest the current security budget (block rewards + fees) is ~$20 million/day; relying solely on fees would require a >10x fee increase to maintain equivalent security.
  • Miner centralization: Small miners may exit, concentrating hash power in few large mining pools and raising centralization risks.

Overall, sustainability hinges on Bitcoin’s adoption rate and fee market dynamics: Feasible under high adoption but carries significant uncertainty.

Could This Lead to a "Tragedy of the Commons"?

• Risks of Tragedy:

  • Miners, as "individuals," may prioritize short-term profits (e.g., mining only when fees are high) over network security. This could cause a "free-rider problem": Miners underinvest, expecting others to bear security costs, ultimately weakening the network.
  • During low-fee periods, miner exits may trigger a vicious cycle: Declining hash rate → reduced security → eroded user confidence → lower transaction demand → further fee reductions.

• Mitigating Factors:

  • Bitcoin’s protocol design (e.g., difficulty adjustment) and community governance (e.g., optimizing fee mechanisms via soft forks) can partially counter the tragedy. For instance, users may voluntarily increase fees to attract miners.
  • External factors: Regulatory support or institutional adoption could boost transaction demand, strengthening the fee-driven model.

Conclusion: A tragedy of the commons is possible but not inevitable; it depends on whether network participants can coordinate (e.g., via protocol upgrades) to prevent resource depletion.

Summary

A security model relying solely on transaction fees may be sustainable post-2140 but requires sufficient transaction volume. Otherwise, it risks hash rate collapse and a tragedy of the commons. The Bitcoin community must plan ahead (e.g., scaling solutions) to enhance resilience.