Wenbin Wu (Principal Researcher, CCAF), Alexander Neumueller (Research Lead, Digital Assets Energy and Climate Impact, CCAF) and Colin Wang (Research Affiliate, CCAF).
This report examines the economic incentive structure behind the Bitcoin protocol. As the block subsidy gradually declines, the question of whether there are enough incentives to keep the network secure comes to the fore. The protocol’s design anticipates transaction fees eventually replacing the subsidy, yet historical evidence indicates that fee revenues have consistently represented only a fraction of what would be required to maintain the level of incentives observed today.
Drawing on academic research, on-chain data and industry evidence, the analysis reviews the fee market, attack economics, the options under debate and spillovers to traditional finance. It also introduces the Security Budget Health Indicator, providing five measures for tracking the security budget – miners’ subsidy and fee income – alongside related risks.
Produced by the Cambridge Centre for Alternative Finance (CCAF) at Cambridge Judge Business School, in collaboration with Financial Innovation for Impact (Fii), the report offers developers, miners, investors and policymakers a balanced account of what is known, what remains uncertain and what to monitor.
Highlights from the report
1
Sustaining the subsidy’s dollar value requires roughly 19% annual price growth
Sustaining the subsidy’s dollar value requires roughly 19% annual price growth
2
Transaction fees remain a small and volatile share of miner revenue
Fees averaged 0.67% of miner revenue in the 90 days to 4 October 2026 and have rarely exceeded 5% since 2010. Substantial fee revenue arises almost exclusively during congestion events, such as the April 2024 launch of the Runes token protocol. Furthermore, daily fee revenue is highly volatile – exceeding price volatility by a factor of 11.7 over that same 90-day period. Network upgrades that lower transaction costs, including added block capacity and Lightning Network off-chain payments, can further erode fee revenue depending on block space demand.
3
The cost of attack tracks miner revenue rather than the value secured
A majority attack requires controlling over half the total hashrate to rewrite recent transaction history and double-spend coins. Acquiring this capacity with new hardware requires billions of dollars, and rental marketplaces lack the necessary scale. Since hashrate is sustained by miner revenue rather than the network’s market capitalisation, falling revenue lowers the economic barrier to attack and risks leaving a smaller, more concentrated mining industry with less capital at stake.
4
Integration into regulated finance creates a financial stability concern
Exchange-traded funds, corporate treasuries and institutional custody expose regulated markets to network risks, with US spot bitcoin ETFs surpassing $100 billion in net assets in November 2024. A successful attack could transmit losses through confidence-driven price declines, margin calls and interrupted settlement. This growing economic integration simultaneously increases the incentive to execute such an attack.
5
No single metric captures the security budget’s health
Since strength in one area can mask weakness in another, the Security Budget Health Indicator tracks 5 distinct measures. By independently monitoring fees as a share of miner revenue, fee volatility relative to price volatility, annualised miner revenue against market capitalisation, a benchmark cost of acquiring majority hashrate relative to market capitalisation and mining pool concentration, the report provides a framework for careful observation rather than complacency or alarm.
6
Stakeholders can reduce risk without changing consensus rules
Proposed rule changes face steep barriers. A perpetual subsidy, for instance, would require a hard fork and breach the 21 million supply cap, which is widely regarded as inviolable. Instead, developers, pools and miners can strengthen censorship resistance by supporting protocols that distribute transaction selection away from dominant pools. Listed miners can disclose comparable data on equipment, power and sensitivity to the bitcoin price, fees and the subsidy. Investors can prepare for potential chain reorganisations. ETF issuers can harmonise security-budget disclosures, and supervisors can incorporate miner revenue, attack-cost benchmarks and pool concentration into broader financial-stability monitoring.