Fidelity Digital Assets has pushed back against concerns that Bitcoin’s long-term security will decline as mining rewards decline, arguing in a new research paper that the network’s economic incentives are sufficient to protect the blockchain over time.
The report, written by Fidelity research analyst Daniel Gray, reiterated the view that Bitcoin’s security relies on more than block rewards. The company said transaction fees, market incentives and other economic factors will continue to force miners to protect the network, making sustained attacks prohibitive.
The findings refute long-standing criticism that the four-year halving makes Bitcoin less secure by reducing the amount of new coins issued. Critics argue that reducing block rewards could ultimately undermine miners’ incentives unless transaction fees increase enough to offset the shortfall.
This issue has been one of the hottest long-term issues surrounding Bitcoin ($BTC), the fixed supply schedule gradually reduces new issuance until the block subsidy eventually dies out. Whether transaction fees and other incentives can maintain network security remains a central debate among developers and market participants.
Since April 20, 2024, Bitcoin miners have received a subsidy of 3.125. $BTC per block mined, reduced from 6.25 $BTC During the previous halving cycle. However, Gray argued that the decrease in issuance does not reduce incentives for miners, as the increase in Bitcoin prices more than offsets the decrease in block rewards.
He noted that average daily revenue for miners has increased, from about $26,300 during Bitcoin’s first halving to more than $40.2 million today. “Despite declining issuance, miner incentives, and thus network security, have historically strengthened with the price of Bitcoin,” Gray wrote.
The average daily revenue of Bitcoin miners increased significantly throughout the halving. sauce: faithful digital assets
Related: Nvidia’s $20 billion debt boom strengthens Bitcoin miners’ AI axis
Public Bitcoin miners face increasing economic pressure
While Fidelity maintains that Bitcoin’s long-term incentive structure remains intact, many publicly traded mining companies continue to face short-term financial pressures. Some industry analysts say the current environment is one of the most challenging in history, due to lower mining rewards, rising costs and increased competition.
In response, rather than relying solely on Bitcoin mining, some miners are leveraging existing power infrastructure and data center assets to diversify into artificial intelligence and high-performance computing to meet the growing demand for AI workloads.
A recent report from VanEck estimates that publicly traded miners may need up to $50 billion in additional capital to fully transition to AI infrastructure, highlighting the scale and cost of the transition.
Public miners face a major funding gap to realize their AI ambitions. sauce: minor weekly
“Bitcoin mining can be performed with relatively simple buildings, modular infrastructure, and fleets of ASICs that endure rapid reductions,” Blocksbridge Consulting said in a recent Miner Weekly publication. “AI and HPC facilities require higher standards for uptime, cooling, electrical redundancy, networking, and customer support.”
Related: Crypto Biz: Is AI an exit strategy for miners?
