Avalanche Founder "Bitcoin's Real Problem is Reduced Mining Rewards"

▲ Bitcoin (BTC) mining

Emin Gün Sirer, the founder of Avalanche, identified the issue of reduced mining rewards as a key risk that could threaten the long-term sustainability of Bitcoin (Bitcoin, BTC). He argued that Bitcoin's economic design could face the problem of insufficient mining rewards in the long run, and that this problem poses a greater risk than quantum computing threats or competing tokens.

U.Today reported on the 10th that Sirer predicted Bitcoin could face an impending crisis. Sirer viewed flaws in the Bitcoin network's economic structure, stating that the design, where mining rewards decrease over time, could burden network stability in the long term.

This discussion spread when Kalshi Crypto introduced comments from Binance founder Changpeng Zhao with a provocative headline. The post conveyed as if Changpeng Zhao predicted Bitcoin could eventually be replaced, but the actual context of his remarks was different. On May 9, in an interview with Ran Neuner of Crypto Banter, Changpeng Zhao said that Bitcoin could theoretically be replaced in the future if superior technology emerges. However, he acknowledged that Bitcoin is currently virtually global money.

Changpeng Zhao also mentioned that with the influx of institutional capital, Bitcoin's four-year cycle has become less significant than in the past. This is interpreted to mean that Bitcoin's market structure is gradually shifting from a past cycle-driven by individual investors to one influenced by institutional funds.

The bigger problem identified by Sirer is Bitcoin's Proof-of-Work (PoW)-based security structure. Bitcoin operates by miners expending vast amounts of electricity and computational power to verify blocks and secure the network. In return, miners receive block rewards and transaction fees. However, with each halving, block rewards significantly decrease.

Critics argue that block rewards may no longer cover miners' enormous energy and equipment costs. In this scenario, the Bitcoin network's security budget would largely have to rely on transaction fees. It is pointed out that if transaction fees do not become very high, miners might be forced to operate at a loss.

Sirer also proposed a solution utilizing technology he participated in developing. He suggested that Bitcoin could alleviate the heavy burden of transaction verification through a pre-consensus layer. However, U.Today reported that such proposals might not be easily accepted by conservative members of the Bitcoin community.

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