The Bitcoin block subsidy, which is a key component of its monetary policy, is designed to distribute new bitcoins into circulation and incentivize miners to secure the network. The subsidy started at 50 BTC and halves every 210,000 blocks, roughly every four years, until it reaches zero around the year 2140.
As the block subsidy decreases, miners increasingly rely on transaction fees for profitability. Transaction fees are paid by users to have their transactions included in a block and are determined by market dynamics, such as network congestion and transaction size.
We’ve seen in the past and most recently the mempool has essentially been emptied.
As Bitcoin permeates through the traditional financial infrastructure, the more likely Bitcoin becomes a store of value dropping the velocity of Bitcoin significantly.
Transactions fees wont be enough even if the fees skyrocket.
A solution to this problem has already been discovered. (Still in the experimental phase.)
A „Second Subsidy Token“ based on Bitcoin blockchain data has been created and will soon be redirected to the miners who validate the latest Bitcoin block.
Called Non-Arbitrary Token (NAT) - a fungible token whose supply is determined by Bitcoin’s on-chain data instead of arbitrary human decision. This is a departure from what has been the status quo for as long as cryptocurrencies have existed: supply and monetary policy being chosen by decree.
The specific data that the NAT token is based on is the „bits field“ of Bitcoin blocks. The bits field is a 256-bit number that contains information about the block, such as the timestamp, the previous block hash, and the Merkle root etc.
The number of NAT tokens that are created for each block is determined by the numerical value of the bits field.
If/when the hash rate of Bitcoin increases, the bits field number will decrease over time, which means fewer NAT tokens will be distributed per block.
The mission of NAT is to provide Bitcoin miners with a second block subsidy by generating new NAT tokens every 10 minutes and sending them to the respective miners.
Miners have various costs to cover in order to keep the Bitcoin network running.
After each halving, Bitcoin would need to double in value, which will not be sustainable in the long run, as costs will not decrease.
Therefore, miners will need new income streams to meet their expenses. The only sustainable solution is NAT.
This is not financial advice. Just experimentation within the Bitcoin community.