[jyl]

I wonder if the ever-declining rewards to bitcoin miners will become a problem. The reward gets halved on a predefined schedule (every four years, I think), around 2040 the reward will be zero. Then the miners' only revenue will be transaction fees. So computing costs have to decline faster than the reward, which is probably reasonable. Then when the reward is zero, computing costs have to be lower than the transaction fee or the fee has to be raised. If mining becomes unprofitable, blocks will not be hashed and thus transactions not processed. Is there a mechanism to adjust fees?

This also means that the rate of creation of new bitcoin declines to zero by 2040. If bitcoin usage grows faster than bitcoin supply, then bitcoin will become more valuable over time. In other words, there will be deflation in the bitcoin world. Deflation is bad because it incentivizes people to delay spending (the item will be cheaper if you wait) and to not borrow (repaying the debt becomes more expensive). That is the case in every normal exhibit/currency. Is bitcoin different for some reason?