Security ratio of Bitcoin
Last 24h compared to period average
The Security Ratio is an important indicator for assessing the security of a proof-of-work (PoW) chain, such as Bitcoin.
By monitoring the Security Ratio, stakeholders in a PoW chain can make informed decisions about the security of the chain and take appropriate measures to maintain its integrity.
Calculation of Security Ratio is simple and can be determined as follows:
ratio = Total Block rewards Total Circulation supply * 1 000 000
Block rewards represent the total reward that a miner receives for mining a block. This includes not only newly minted coins, but also all transaction fees from that block.
Since the security ratio is calculated on a unit basis, it is independent of the currency expression, such as dollars.
Look into the composition of rewards in Bitcoin
Fixed reward for newly mined block in Bitcoin
Chart 1 - Fixed reward for newly mined block
The Block reward Security Ratio focuses solely on the rewards associated with block minting.
This fixed reward for each mined block is an important factor in the economics of a PoW blockchain as it determines the rate at which new coins are created and added to the supply.
security ratio = Block reward Circulation supply * 1 000 000
With each block mined, a certain amount of new currency is released = block reward. This amount may vary over time.
In a nutshell, to maintain current security over time, the decreases in block rewards must be offset by the revenue from transaction fees (grey full). Transaction fee revenue (grey solid) is a function of the number of transactions (blue) and their price.
Variable transaction fees reward in Bitcoin
Chart 2 - Variable transaction fees reward
The Fee Security Ratio focuses solely on the transaction fees paid by users, rather than incorporating newly minted coins as part of the block rewards.
This ratio provides a more accurate representation of the security level ensured by transaction fees alone. It can be calculated using the following formula:
ratio = Total Transaction Fees Total Circulation Supply * 1 000 000
The Fee Security Ratio highlights the proportion of network security derived from transaction fees, making it an essential metric to understand a blockchain network's sustainability in the long run. As block rewards diminish over time, particularly in networks with a decreasing issuance schedule like Bitcoin, transaction fees become increasingly critical for maintaining network security.
Comparing Fee Security Ratios among blockchain networks with similar market capitalizations can provide valuable insights into the sustainability and long-term security of these networks, as it shows their reliance on transaction fees to incentivize miners and secure the network.
Percentage composition of the total reward
Total Security budget
Bitcoin over time
Bitcoin is a digital currency that was first introduced in 2009. It is a decentralized currency, which means it is not controlled by any government or financial institution. Instead, Bitcoin is based on a peer-to-peer network of computers that work together to verify transactions and maintain the currency's blockchain ledger.
One of the key advantages of Bitcoin is its security. Transactions are verified using advanced cryptographic techniques, and the blockchain ledger ensures that transactions cannot be altered or reversed once they have been confirmed. This makes Bitcoin a popular choice for businesses and individuals who value privacy and security. Security of Bitcoin over time on the level of attack vectors and incentives is then tracked through security ratio on this website SecurityRatio.com.
Another advantage of Bitcoin is its speed and convenience. Transactions can be processed in a matter of minutes on core layer and matter of seconds through lighting (2nd layer above bitcoin), regardless of where the sender and receiver are located. And because there are no middlemen involved, transaction fees are often lower than traditional payment methods.
Because Bitcoin is a relatively new and unregulated currency, its value can be volatile and subject to sudden fluctuations. Investors should also be aware of the potential for fraud and theft, as Bitcoin transactions are irreversible.
Despite these risks, Bitcoin continues to gain popularity and acceptance as a legitimate form of payment and investment. To learn more about Bitcoin and its potential benefits and risks, check out the following frequently asked questions: