What happens to the bitcoin network when the miners all stop, years in the future after all the bitcoins have been mined? How will the network continue to function? Won't bitcoins then be useless? What would be the incentive for an individual to continue using computational power to service all the transactions? Isn't this like a ticking time bomb or is there something I'm not getting?
Bitcoin becomes very insecure if miners stop mining. Think of how easy a 51% attack would be to pull off.
However, I disagree with your assumption that miners will stop. And certainly that if Bitcoin dies it would be because miners stop. I would instead think that miners would only stop if something else already killed Bitcoin. Bitcoin is designed to always give miners an incentive to keep mining and secure the network. If miners don't have an incentive to mine, then Bitcoin has already failed.
Many mining pools don't pay out income from transaction fees and the whole thing is often glossed over. But mining income is newly minted coins PLUS fees from the transactions you include in the blocks you generate.
Have a look at the tx fee statistics at http://blockchain.info/no/charts/transaction-fees
As I write this at the end of march 2013, it looks like tx fees were about 4 BTC per day a year ago and are now about 50 BTC. At the same time the newly minted coins in each block has dropped from 50 BTC to 25 BTC.
With 6 blocks per hour this means one year ago we mined 7200 BTC in new coins and 4 BTC in fees per day. Now we mine daily 3600 BTC in new coins and 50 BTC in tx fees. So tx fees went from being 0.00056% of the income a year back to the 1.39% of mining income they are today.
I'm sure you can see where this is going. No, mining does not stop when the minting of new coins stops.
They won't ever stop!
For now they get the block rewards, but they halve every so many blocks. (can be changed but is unlikely to)
Later they will receive rewards that people put on transactions. It's still unclear how high those fees will work out to be. Likely all transactions will carry some very small fee, and miners will keep up the hard work to earn those fees.
I also expect "green addresses" to play a much bigger role in the future. Those addresses' transactions will be "certainly good", given they are owned by trusted parties.
Miners will have to decide whether
- (a) they expect to be paid a fixed fee (as a minimum) for each transaction they put into their blocks, or
- (b) a percentage fee (percentage of the amount being transferred).
(a) might seem like the obvious choice, because it costs the same amount of time and computing power to verify a small transfer as a large one. On the other hand, (b) has the attraction that it encourages more transactions, and therefore more fees to be earned over all. (Assuming bitcoin operates like a normal currency, there are always going to be more small transactions that people want to make than large ones, but on the other hand people will not make a transaction if a large percentage of the money transferred is eaten up in fees, so a fixed fee would operate to prevent small transactions i.e. the majority of potential transactions.)
Maybe the ultimate answer will be some sort of sliding scale, with a minimum fee, and then a percentage being charged that will vary downwards as the amount being transferred increases.
A lot will change in the crypto space before the last Bitcoin is mined. The revolution is DLT (Distributed Ledger Technology), not blockchain. Blockchain is merely the form of DLT that Bitcoin uses. The drawback to blockchain is that the network must wait 10 minutes before adding each consecutive block. This is to ensure that multiple computers do not add the same transaction to the blockchain at the same time. This is the primary purpose of the minors. This is also why the mining difficulty is always increasing. The network must always have a ten minute pause between each block.
If the miners only receive transaction fees for validating transactions then the people using Bitcoin will ultimately decide how much money they are willing to spend on transaction fees, verses using something else. Many miners will likely quit, thus driving down the cost of mining to the point where those who remain will profit.
So, to answer your question, because the network will always need a 10-minute pause between blocks, the only way Bitcoin will fail from miners quitting is if the transaction fees become so low you can't get enough miner to prevent a 51% attack.
One of the answers I read above hit the nail on the head for me. The innovation that cryptocurrency is responsible for is 'Distributed Ledger Technology' (DLT). And as was said above, the 'Blockchain' is simply one form of such a thing. In my opinion, Bitcoin and its Blockchain are together, just a prototype that provides proof-of-concept for the 'proof-of-work' algorithm. What I'm hinting at is the inevitability (in my mind) that Bitcoin and its Blockchain (BaiB) will be superseded by something a lot more suitable for international transactions, finance and banking. I now believe there is no 'one-size-fits-all' when it comes to DLTs and particular use cases. BaiB would be the perfect solution for government record keeping, tax records for companies, expense accounts, payroll, etc. but, Ethereum has proven itself an amazing innovation with its own set of revolutionary capabilities. Then, there's IOTA, a coin that has deployed an amazing innovation for DLT, that being something called a 'Direct Acyclic Graph' (DAG). This DAG is far more suitable as a global payments solution than BaiB as there is no transaction fees on the network, no mining required and the transactions are instant. I can't see how Bitcoin will go about surviving in an atmosphere evolving so quickly!