[openasocket]

There's a finite number of bitcoins, fewer and fewer bitcoins are being produced over time by design. There can only be 21 million bitcoins, and the majority have already been mined. So the reward just for completing a block (not including the transaction fees) has been steadily decreasing, and that's not even taking into account that more and more miners means it's harder to get that reward. Thus the trend is going to be towards increased transaction fees.

[AgentME]

No, transaction volume and congestion is the thing that drives transaction fees up.

If transaction volume (and fees) stayed constant, then as the minting rate goes down, there will be a lower reward for blocks, and some miners will drop out of mining because it's not profitable for them. Miners dropping out will lower the mining difficulty, so the remaining miners will get a bigger cut. The system finds an equilibrium. Mining profitability only affects the mining difficulty and miners themselves (and the amount of resources necessary for a 51% attack, but as long as that remains obscenely high then the specifics don't really matter in this discussion).

[Sargos]

... so bitcoin is doomed as a real currency as the prices are only going to get higher and people are not going to pay a $5 transaction fee for a $10 product.

How is the bitcoin community rationalizing this seemingly inescapable mathematical failure?

[wasx]

Scalability and de facto centralization was always going to be the slow death of Bitcoin,from the size of the blockchain, ASIC miners (which locked out people who couldn't afford to build warehouses of them, creating a centralized market of people who can actually mine coins) and transaction fee. Its too soon now to say that Bitcoin is dying but it certainly will at the current rate, when? Who knows but it's got pretty severe design flaws that I think weren't properly considered in development.

[nicky0]

Faith in the Lightning Network, the Saviour which is to come.

[openasocket]

The transaction fees won't grow forever. Generally speaking, they just need to be high enough that miners can turn a profit. What that amount is, I don't know.

And the fact that there's a limited number of transactions that can be processed in a single block, and competition between miners to validate transactions as quickly as possible, complicates things.

[Sargos]

What keeps the transaction fees from growing forever? If only a certain amount of transactions can be processed when a coin is mined then that means that competition will only grow as bitcoin becomes more widely used. This competition will raise prices yes? Because if you don't have a high bid then you won't get included when the coin is mined. And since coin mining becomes slower and slower over time that means that less windows of opportunity exist for even greater numbers of transactions. It certainly seems like this issue will only get worse unless there's some other factor I don't know about.

[nicky0]

That's not really the answer. The answer is that there are more transactions being broadcast than there is space in the blocks to accommodate them. Thus creating fee pressure.

[openasocket]

That's certainly a major factor, that I neglected to mention, but not the only reason.