Bitcoin Security Not Weakened by Declining Mining Rewards

Fidelity Digital Assets has challenged the conventional wisdom that Bitcoin's security will weaken as mining rewards decline. According to its research report, the network's incentive structure can remain strong even with reduced block subsidies.

The report, authored by Daniel Gray, argues that transaction fees, market incentives, and other economic forces encourage miners to secure the blockchain, making sustained attacks prohibitively expensive. Gray notes that the decline in block rewards has not translated into weaker incentives because Bitcoin's rising price has offset the reduction.

Gray cited average daily miner revenue growth from $26,300 during Bitcoin's first halving cycle to over $40.2 million today, saying miner incentives have historically strengthened alongside Bitcoin's price.

However, publicly traded mining companies are facing near-term financial pressure due to lower mining rewards and rising costs. Some miners have diversified into artificial intelligence and high-performance computing to utilize existing power infrastructure and data center assets.