The Crypto Post

One of the most frequently repeated arguments against Bitcoin’s long-term viability is the idea that its security model will eventually fail as block subsidies decline. This concern typically assumes that transaction fees must follow a stable, predictable, and steadily increasing path in order to compensate miners once new coin issuance becomes negligible. However, this assumption reflects a misunderstanding of how Bitcoin’s fee system actually operates. Academic research shows that transaction fees are not designed to behave like a fixed revenue stream. Instead, they arise from decentralized interactions among users competing for block space and miners responding to economic incentives. Far from being a weakness, this emergent behavior is precisely what allows Bitcoin’s security model to adapt over time without centralized control.
This analysis is grounded primarily in two complementary academic studies that examine Bitcoin transaction fees from different but reinforcing perspectives. Yuichiro Kamada and Shunya Noda, in Dynamic User Competition and Miner Behavior in the Bitcoin Market, develop a dynamic economic model that captures how users adjust fee bids in response to short-term congestion and how miners decide whether and when to operate based on expected rewards. Their work focuses on strategic interaction and equilibrium behavior in a decentralized fee-setting environment.
In parallel, Jiangqin Ma and Erfan Mahmoudinia, in Comprehensive Modeling Approaches for Forecasting Bitcoin Transaction Fees, provide empirical evidence using mempool analytics, network parameters, and time-series models. Their research demonstrates that fee behavior is driven by multiple interacting variables and resists simple prediction. Together, these studies explain both why fees emerge dynamically and why they cannot be reduced to a fixed formula.
Fees Do Not Follow a Linear or Predictable Trajectory
As Kamada and Noda explain, Bitcoin transaction fees do not increase or decrease in a smooth, linear fashion. Instead, they respond sharply to short-term changes in congestion, block arrivals, and user demand. When blocks are delayed due to randomness in mining or sudden spikes in transaction submissions, the mempool grows. Users observing this congestion respond by increasing their fee bids in order to improve their chances of timely confirmation. Conversely, when congestion subsides, competitive pressure among users diminishes, and fees fall accordingly.
This behavior means that fees are inherently volatile, but not arbitrarily so. The volatility reflects rational responses to scarcity rather than instability in the protocol itself. Importantly, this nonlinearity makes the fee market adaptable: it can scale upward quickly during periods of high demand and relax just as efficiently when demand decreases.
Bitcoin’s Fee Market as an Emergent Economic System
Kamada and Noda conceptualize Bitcoin as a consumer-driven fee-setting market, a class of markets in which buyers set prices and sellers decide whom to serve. In such systems, prices are not imposed externally; they emerge from decentralized interaction. Bitcoin’s transaction fees are the outcome of countless individual decisions made by users bidding for inclusion and miners selecting transactions based on expected revenue.
The authors explicitly emphasize that fees are endogenous to the system. They state that
“users adjust their fee bids dynamically based on short-term congestion and system throughput.”
This insight is critical because it shows that Bitcoin’s fee market is not governed by protocol rules dictating prices, but by market forces reacting to real-time conditions.
Adaptive User Behavior and Strategic Fee Bidding
A central element of the dynamic model is the recognition that users are not passive participants. Modern wallet software provides visibility into mempool conditions, fee estimates, and expected confirmation times. Users therefore adjust their bids strategically, balancing cost against urgency. If confirmation is time-sensitive, users bid higher; if not, they may choose lower fees and accept longer delays.
This adaptive behavior creates a continuous feedback loop. As more users raise bids, marginal users must decide whether to follow or wait. The resulting fee levels are not predetermined but continuously recalibrated. This resembles auction dynamics, where prices reflect competition for scarce resources rather than fixed pricing schedules.
Miner Decision-Making and Network Security
On the supply side, miners respond to fee signals when deciding whether to operate and which transactions to include. Kamada and Noda show that miners observe both congestion levels and total fees available in the mempool. When expected rewards are insufficient relative to operational costs, miners may temporarily suspend activity. When fees rise, mining becomes more profitable, drawing miners back into operation.
This mechanism directly links transaction fees to network security. Rather than collapsing as subsidies decline, security resources adjust dynamically, responding to the economic value users place on transaction settlement.
Empirical Evidence: Why Fees Are Hard to Forecast
Ma and Mahmoudinia empirically validate the complexity described in the theoretical model. Their analysis shows that Bitcoin transaction fees are influenced by a wide array of factors, including mempool size, transaction arrival rates, block timing variability, network difficulty, and even external variables such as market volatility.
The authors demonstrate that even advanced forecasting models struggle to produce stable long-term predictions. This difficulty is not due to poor modeling but to the inherently adaptive nature of the fee market. Fees change because participants respond to new information, not because the system follows a predictable path.
Why No Fixed Formula Can Govern Bitcoin Fees
The forecasting results reinforce a critical conclusion: Bitcoin fees cannot be captured by a single equation or rule. Statistical and machine-learning models must incorporate dozens of interacting features to approximate short-term behavior, and even then, uncertainty remains high. This underscores that fees are not mechanically determined but emerge from strategic interaction.
Any attempt to impose a fixed fee rule would undermine this adaptive process and reduce the system’s ability to allocate block space efficiently.
Fees as the Long-Term Foundation of Bitcoin Security
Both studies converge on the implication that Bitcoin does not require predictable or smooth fee growth to remain secure. As block subsidies decline, fees naturally assume a larger role because they directly reflect demand for settlement. Users who value security and finality pay for it, and miners respond accordingly.
Security, therefore, is not guaranteed by issuance but by market demand.
Why the “Security Budget Collapse” Argument Misunderstands Bitcoin’s Fee Market
A common critique claims that Bitcoin’s security model is mathematically unsustainable because block subsidies decline while transaction fees allegedly fail to reach “sustained extremes.” This argument assumes that miner security requires a stable, predictable, and permanently elevated fee revenue stream. However, both the theoretical framework developed by Kamada and Noda and the empirical findings of Ma and Mahmoudinia directly contradict this premise.
Kamada and Noda demonstrate that Bitcoin’s fee market is not designed to produce stable fee levels. Instead, it operates as a decentralized, competitive auction where users dynamically adjust bids based on congestion and urgency, while miners respond to expected short-term profitability. In such a system, security does not depend on constant high fees, but on the system’s ability to rapidly increase fees when demand for block space — and therefore security — rises.
Crucially, the model shows that users do not need to continuously pay extreme fees for the network to remain secure. What matters is that when the cost-benefit ratio of attacking the network increases, fees respond endogenously, attracting additional mining resources. This directly undermines the claim that “fee spikes are insufficient.” In an emergent market, spikes are not anomalies; they are the mechanism through which scarcity is priced.
Ma and Mahmoudinia’s empirical analysis reinforces this conclusion. Their findings show that Bitcoin fees are driven by short-term congestion, mempool dynamics, and transaction arrival rates rather than long-term averages. Forecasting models struggle precisely because fees respond to real-time competitive behavior, not static formulas. This means that security funding scales with actual demand for settlement, not with arbitrary long-term projections.
The critique also assumes that users permanently abandon the network when fees rise, creating a so-called “ratcheting effect” that caps fee revenue. However, the evidence suggests a more nuanced reality. Users self-select based on urgency and willingness to pay. High-value settlements remain on-chain when security is most needed, while lower-priority transactions defer. This selective participation is not a failure of the fee market, but its core efficiency feature.
From this perspective, Bitcoin does not require exponentially rising prices or permanently high fees to remain secure. It requires a fee market that responds dynamically to scarcity, competition, and economic value — precisely the system described in both academic studies. The assumption that security collapses unless fees remain constantly extreme reflects a misunderstanding of how emergent markets allocate resources under changing conditions.
Why Bitcoin Is Unlikely to Collapse in the Near Future
The common narrative of an impending Bitcoin collapse assumes that declining subsidies will leave miners underpaid. However, this narrative ignores the adaptive nature of fee markets. When demand rises, fees increase, attracting hash power. When demand falls, costs adjust downward. This elasticity is a defining feature of resilient systems.
Rather than signaling fragility, fee volatility indicates that the market is functioning.
Conclusion: Emergence as a Design Feature, Not a Bug
Bitcoin’s transaction fees are not linear, fixed, or centrally managed. They are emergent outcomes of a decentralized market in which users and miners continuously adjust to changing conditions. This emergent structure explains why Bitcoin can transition from subsidy-based to fee-based security without collapsing. Far from being a weakness, complexity is the foundation of Bitcoin’s long-term robustness.