Doesn't bitcoin then completely fall over when the block reward is 0? What incentive do former miners have to process transactions?
I've seen discussion that as the block reward falls, transaction fees will go up but this doesn't seem like enough. Hash rate will fall and people will sell up and get out of it. If the hash rate falls enough doesn't that open the network up to fraudulent transactions if a big player (in terms of hash rate) decides to go rogue? The whole 51% takeover thing. Seems like the entire market cap of bitcoin will pop at some point in the future.
First off, it's not like the block reward goes to zero overnight. It steps down over time.
The reward is currently 3.125 btc. It gets cut in half every 210,000 blocks, which is ~4 years. It'll drop to 1.5625 in 2028, 0.78125 in 2032, and so on. It won't hit 0 btc until the year 2140.
Secondly, even with 51% of the hashing power, a rogue mining org can't create fraudulent transactions. A block with invalid transactions will be rejected by the rest of the network.
Instead, it does allow a rogue miner to pick and choose which transactions it confirms in a block. Still bad, but it's not like they can steal bitcoin from people. And if they just sat and mined empty blocks, they wouldn't earn the transaction fees. The only way they could profit is to short the hell out of bitcoin, start mining empty blocks which effectively is a DoS on bitcoin, then cover the short after it plummets in value.
To do such an attack wouldn't just require immense money to buy the mining equipment, but also a ton of money to put up as collateral for the short.
I've seen discussion that as the block reward falls, transaction fees will go up but this doesn't seem like enough. Hash rate will fall and people will sell up and get out of it. If the hash rate falls enough doesn't that open the network up to fraudulent transactions if a big player (in terms of hash rate) decides to go rogue? The whole 51% takeover thing. Seems like the entire market cap of bitcoin will pop at some point in the future.