Before we can decide on tradeoffs that reduce security in favor of less energy usage, or less inflation, or whatever goal you might have for reducing (or delaying) coinbase rewards, we need to decide as a community how much security bitcoin *needs*.
Do we need to be secure against an attacker with a budget of $1 billion/year for an attack? $10 billion/year? More?
An upper limit would be the budget of the largest government: the US. The US federal budget is almost $5 trillion/year. But they certainly couldn't spend all that budget attacking bitcoin. About $3 trillion of that is mandatory spending, which couldn't be allocated to such an attack. About $1.5 trillion is discretionary, which includes the military budget. It seems like an upper limit on the amount that could be siphoned from that budget to attack bitcoin would be 5%. That would take massive political cooperation and wheeling and dealing. Likely spending that much would not be politically feasible, but it seems possible, since a 5% reduction in other activities is something other departments would likely be able to sustain with just a bit of downsizing. Or that money could simply come from more borrowing. 5% of $1.5 trillion is $75 billion. So that seems like a pretty solid upper limit on the amount the US could allocate to an attack in a year, in that it seems incredibly unlikely that more money than that could be allocated. Such an expenditure might be eventually seen as justified since the federal reserve has been inflating the supply of dollars by 17.5% on average every year, which would be $1 trillion next year (and more the next, etc). A similar story is told if you calculate the amount of seigniorage banks get access to by their ability to use fractional reserve to inflate the supply of M2 money.
It should be considered tho that this seigniorage doesn't give its beneficiaries that full value, but rather some fraction of that value - say 5% earned by being first to buy with that new money and earning interest on it. So 5% of a trillion is $50 billion. Still, over just two years, that's enough to pay for an attack of at least that size ($75 billion).
The budget for the government of China is about $3.6 trillion, the second largest in the world. And since they're an authoritarian country, they can basically do whatever they want with that money. It still seems unlikely they would spend more than 5% of that budget on doing something like attacking bitcoin. However, consider that China's M2 money supply has been increasing at a rate of almost $3 trillion per year. Protecting the ability to do this is seems like something worth spending some (printed) money on. So perhaps at some point, spending 10 or 20% of their budget for a year or two to attack bitcoin might seem like a good idea to some mickey mouse in the government. That would be $720 billion/year.
So given the amount of seigniorage taken in every year by these central banks, it would seem to justify large expenditures. I'm not sure how realistic it would be, politically speaking, to gather $720 billion in a single year to attack bitcoin. It seems far fetched, even if the seigniorage they're protecting seems to justify it.
So is this the level of attack we want to be resilient to? Nearly a $1 trillion attack? I don't know. But we should figure that out as a community. And keep in mind, the level of attack we need to defend against depends on the size of bitcoin. The more valuable bitcoins are, the more damaging, more lucrative, and more valuable an attack would be for attackers. Its seems reasonable to assume that this is a linear relationship - that if bitcoins are worth twice as much, we need twice as much security (ie we want to make attacking bitcoin twice as costly).
The next step is figuring out a reasonable lower bound for how much it takes to attack bitcoin. There are many attacks that can be done on bitcoin, but the one relevant to the discussion here is a 51% attack. Bitcoin's PoW basically is attackable buy buying about 25% of the existing mining power (for reasons like the
selfish economic attack and the
economic mining monopoly attack), which is about 40 exahashes/second.
If you bought 400,000
WhatsMiner M30S+ rigs at current market price, you'd need $1 billion to buy them all (which doesn't include the cost of setting up all that equipment, powering it, building the network infrastructure for it, etc etc). Let's say all that infra doubles the price to $2 billion. Even then, you couldn't simply buy half a million mining rigs from the market. That many just aren't available. An attacker would have to spend year and years building up their mining operation before they could actually perform the attack. They'd basically have to mine at a slight (probably insignificant) loss for that time. Their demand would push up the price of these mining rigs for at least a year or two until supply comes up to meet it. So lets say this doubles the price of the mining rigs (it could very well do significantly more than that). That makes for $3 billion to build up this malicious mining operation. China could seize a mining pool, but likely couldn't do it quietly. They'd have to seize the pool and immediately use it to attack before miners stop using the pool (which might take a week or two). Maybe this would save them half the cost?
So, lower bound on cost of attack is $1.5 billion. Upper bound on US govt attack is $72 billion. Upper bound on China govt attack is $720 billion. So based on this back-of-the-napkin line of thinking, its not super clear that reducing bitcoin's security is "enough" yet. There is also the question of: does a $1 trillion currency need to be secure against a $720 billion attack? Probably not. But should it be secure against a $10 billion attack? Maybe.
However, the security will go up with price. If bitcoin goes up by 10x, as it is wont to do, that's nearly 10x the security (nearly, since coinbase rewards 10x, but the real value of fees almost certainly wouldn't go up as much). So that brings us to $15 billion of security. Still not clear without doing some more accurate analysis to determine more confidence in tighter bounds on cost of attack and likely attack budgets.
But it certainly seems likely that my attack cost bounds are an order of magnitude too low, and its equally possible my estimates of potential available attack budgets are an order of magnitude too high. It doesn't seem quite as likely the reverse is true (that my bounds aren't good bounds).
It seems possible that we currently have enough security, but seems likelier that we don't. It just isn't clear to me. Maybe someone has done some more accurate analysis that could help here.
But before we talk about whether we should reduce our security to save costs, we need to determine how much security we need and how much security we have. Without good estimates with confident bounds, we simply can't make an informed decision to reduce security.
> I don't think 99% of transactions need that level of security
Well you can't get security for the 1% of transactions that need it without giving that security to all transactions on the chain. Also, the blockchain security created by miners isn't really a per transaction thing anyway. An attack would affect all bitcoins regardless of what transactions they do or do not take part in.