Will 8 decimal places really be feasible in the future?

Question

I had a thought..

Given that block mining rewards halve every 4 years and eventually disappear, miners' incentives to continue mining will be transaction fees. The standard "priority" transaction fee (as far as the Android wallet is concerned) is 0.0001 BTC.

I know that as of now some transactions are mined for free, but to my understanding, transactions that are mined for free have to be at least 0.01 BTC.

My thought is that in the future, transaction fees are likely to rise to a higher rate (let's say 0.001 BTC) and will be required for every transaction. If you don't have at least 0.001 BTC, you basically won't be able to send any BTC to another address, which would seem to render the remaining 5 decimal places useless.

Is there something I'm missing?

Answer 1

You need to consider two separate effects:

1. Mining starts being funded with tx fees rather than inflation. This will result in higher fees, until tx fees per block are similar to current inflation (maybe 1-2 orders of magnitude less).
2. The value of every bitcoin increases. The real tx fee per transaction remains more or less the same. The nominal fee decreases. The number of txs per block increases, resulting in an equivalent nominal total fee per block. The real total fee per block will increase, to fund greater security for the bigger network.

The 2nd effect is expected to be bigger in magnitude, and to happen sooner, than the first. So overall, we should see a decrease in the nominal fee per tx, allowing us to use small fractions of a bitcoin (which will then have significant value, in real terms).