Fidelity Digital Assets has dismissed concerns that Bitcoin’s long-term security will deteriorate as mining profits decline, arguing in a fresh research report that the network’s economic incentives remain sufficient to secure the blockchain over time.

The report, authored by Fidelity research analyst Daniel Gray, reiterated the view that Bitcoin’s security depends on more than just block rewards. Transaction fees, market incentives and other economic factors continue to incentivize miners to secure the network, making continued attacks too costly, he said.

The findings challenge long-standing criticism that each four-year halving weakens Bitcoin’s security by limiting the issuance of fresh coins. Critics argue that decreasing block rewards could ultimately undermine miners’ incentives unless transaction fees raise enough to offset the shortfall.

This issue has become one of the most closely watched long-term questions surrounding Bitcoin (BTC), whose fixed delivery schedule gradually reduces the number of fresh issuances until block subsidies eventually disappear. Whether transaction fees and other incentives can keep networks secure remains a major debate among developers and market participants.

As of April 20, 2024, Bitcoin miners received a subsidy of 3.125 BTC for each block mined, compared to 6.25 BTC in the previous halving cycle. However, Gray argued that lower issuance did not translate into weaker incentives for miners, as the rising price of Bitcoin more than offset the decline in block rewards.

He pointed to an raise in miners’ average daily revenue, which has increased from about $26,300 during Bitcoin’s first halving cycle to more than $40.2 million today. “Despite declining issuance, incentives for miners – and therefore network security – have historically strengthened along with the price of Bitcoin,” Gray wrote.

The average daily income from Bitcoin mining has increased significantly during halving cycles. Source: Fidelity Digital Assets

Related: Nvidia’s $20 billion debt boom boosts Bitcoin miners’ artificial intelligence

Public Bitcoin miners are facing increasing financial pressure

While Fidelity says Bitcoin’s long-term incentive structure remains intact, many publicly traded mining companies continue to face short-term financial pressures. Some industry analysts have described the current environment as one of the most challenging in history, citing lower mining rewards, rising costs and increasing competition.

In response, several miners have expanded into artificial intelligence and high-performance computing, leveraging existing energy infrastructure and data center resources to meet the growing demand for AI workloads rather than relying solely on Bitcoin mining.

A recent VanEck report estimated that publicly traded miners could need up to $50 billion in additional capital to fully transition to AI infrastructure, underscoring the scale and cost of this shift.

Public mines face a gigantic funding gap when it comes to realizing their AI ambitions. Source: Mining Weekly

“Bitcoin mining can operate with relatively simple buildings, modular infrastructure, and ASIC fleets that tolerate rapid mining caps,” Blocksbridge Consulting wrote in a recent Miner Weekly publication. “AI and HPC facilities require higher standards for uptime, cooling, electrical redundancy, networking and customer service.”

Related: Crypto Biz: Is Artificial Intelligence an Exit Strategy for Miners?