
Arguments in the Bitcoin Block Size Debate - notsony
http://davidsterry.com/blog/2015/06/arguments-in-the-bitcoin-block-size-debate/
======
Animats
The only people who have a vote on this are the big miners. Unless > 50% of
the miners, by hash capacity, make a change that affects the blockchain, it
doesn't happen. The top 4 mining operations control more than 50% of the hash
rate. Nobody else matters.[1]

If the blockchain runs out of capacity, the transactions with the biggest fee
attached get processed first. So the free market will solve any overload
problem.

Bitcoin volume in dollars isn't increasing.[2] The peak was over a year ago.
The number of transactions is up, but not the total dollar value. Some of the
transactions are just "mixing" transactions, to assist in money laundering.
The companies that offer such services are quite open about this.[3]

[1] [https://blockchain.info/pools](https://blockchain.info/pools) [2]
[https://blockchain.info/charts/estimated-transaction-
volume-...](https://blockchain.info/charts/estimated-transaction-volume-usd)
[3] [https://bitlaunder.com/](https://bitlaunder.com/)

~~~
beaner
> So the free market will solve any overload problem.

What do you mean by this? If 2mb of transaction data is generated every 10
minutes, but only 1mb of it is mined, what is the free market solution?

 _If_ the goal is to have bitcoin be an actual working currency for the people
(and it may not be that to you), then it would seem the goal should be to be
able to process the vast majority of transactions, instead of just those for
the richest half.

A "solution" that is economic and solved by free markets tends to be about how
to distrubute limited resources. I.e. here's a nice piece of property for sale
- who gets it? The highest bidder. problem solved.

But I don't think the challenge for bitcoin is how to auction off space in the
blockchain, it's how to make that space wide enough to be reliable as a
potential currency for common people. If, every time you bought a candy bar at
walgreens, you had to pay for the candy bar and take a guess at an extra fee
for your payment and hope it goes through 10 minutes later... it just would
not work.

So the market would be solving something, but it wouldn't be towards the goal
of bitcoin being a currency. And honestly I think that's what the opponents of
the block size increase want. As cryptocurrency tech evolves, we're seeing
that various parties have new self interests to promote. Competing
technologies, etc. And they benefit by bitcoin becoming artificially limited.
I know there are other reasons, but it's a big part of why this is even a
debate.

~~~
Animats
_" What do you mean by this? If 2mb of transaction data is generated every 10
minutes, but only 1mb of it is mined, what is the free market solution?"_

When you submit a transaction, you're entering an auction. The winners of the
auction get their transactions processed quickly. The losers don't. The market
thus sets a price on getting a transaction processed. This discourages free-
riders who expect their transactions to be processed free or for a nominal
fee. Miners are facing the dreaded "halving" next year, when the block reward
drops by half. They need higher fees to compensate.[1]

[1] [http://www.coindesk.com/new-study-low-bitcoin-transaction-
fe...](http://www.coindesk.com/new-study-low-bitcoin-transaction-fees-
unsustainable/)

~~~
beaner
This isn't an actual solution though, because space is still limited. Bitcoin
cannot be a currency if it can only fit 2,000 transactions per block. Even if
everyone is willing to pay $100 in fees for their $1 transactions, they won't
all fit, and that's broken.

The challenge is to find a way for miners to be incentivized and for them also
to process all reasonable transactions. There's no reason miner's couldn't
increase their fees independently of the block size increase.

------
simonebrunozzi
In my view, it's a great and simple short term fix, waiting for more volumes
and bigger bucks to get involved. I like it.

------
vessenes
I have a fairly reductionist view on this, one I think is helpful, so here
goes.

First, I think of almost all large-scale Bitcoin arguments as religious.
Especially if you're an outsider to Bitcoin, it will probably help you to
think of them that way, too.

People come to a belief, and then back-fill plausible arguments all the time.
When there are vigorous debates like this in Bitcoin land, we usually have
some strongly held underlying beliefs coming to conflict.

I would say the holy war here revolves around a single axiom on each side: the
"Small Block" camp fundamentally believes that there is a sort of inflation
that happens when block sizes grow. Just like they believed that increased
adoption would increase Bitcoin prices, they believe at some level that
increased scarcity for block slots will increase transaction fees, and that
the system relies on this promise to maintain its integrity.

The "Large Block" camp fundamentally believes that the value in the protocol
comes from cheap, large-scale transaction support, and that artificially
limiting right now is harmful.

You can reduce most of the arguments to comments on this. In particular, I
think the comments about centralized mining concerns are almost totally
specious. Bitcoin has long ago left behind small hobbyist miners with tiny
data connections. Block size changes would not have helped them keep up --
there are fundamental aggregation economics in mining that have pushed them
out. Any small miner that wants to mine now will do exactly the same thing
they would do with 1 Gigabyte blocks: get their work from a pool, and spot
verify they haven't been cheated.

Embedded in the world view of most "Large Block" miners if you follow out the
logic is the belief that probably transaction fees won't pay for the entire
security of the network. Ed Felten put out some calculations to this effect
while he was at Princeton. They're reasonably compelling arguments, or at
least worth thinking hard about. If you give up on the idea that tx fees have
to pay for the entire security of the network, I think large blocks become a
super obvious choice to enhance the current utility of the network.

If you do not want to give up on that idea, then any block size increase
decreases the chance that the tx fee scheme will work. Since it is currently
not working (the last two blocks as I write this had .09 and .02 BTC in
transaction fees respectively), all such changes must be vigorously fought.

At any rate, this is why the "small block" folks have a 'purity' vibe when
they argue; I think they feel they are protecting the original scheme, one
they bought into and care about.

As you might be able to tell, I don't think the tx fee scheme is working right
now and hence am a "large block" kind of guy. Forcing it to work, (e.g.
shrinking block sizes dramatically, and perhaps refusing to mine on blocks
with insufficient fees) would dramatically lower the usefulness of Bitcoin to
many people. As it is, it's super annoying to have to wonder if a transaction
will get included in the next block.

Finally, there are some possible tx fee solutions orthogonal to block size
miners could implement easily. I have thought for a number of years that
miners should just have 'express, regular, bulk' time/fee cutoffs for txs they
would include. They should publish these rates. Of course, this could only be
done by larger pools, or a consortium of smaller ones. Even 20% would make an
impact on the fee schedule.

When I think about the economics though, I ask myself 'who would it help?'
Miners are already dealing with very difficult economics at a macro and micro
level, especially if they have chip projects. Getting a little more juice out
of their mining would be nice, but is absolutely not what the large-scale
mining game is about. On the flip side, it adds cognitive load and frustration
to people transacting. It doesn't make a ton of sense to me.

If we're in a world where Bitcoin is still struggling to be useful to a
billion people daily, then cognitive load and frustration should be ruthlessly
excised from the technology until we get to critical mass.

~~~
lmm
> the last two blocks as I write this had .09 and .02 BTC in transaction fees
> respectively

What's that in real money?

Less trollishly, how does it compare to the mining reward? To the mining
reward 10 years from now?

~~~
ikeboy
>Less trollishly, how does it compare to the mining reward?

Mining reward is 25BTC, so on average 1/500.

>To the mining reward 10 years from now?

[https://en.bitcoin.it/wiki/Controlled_supply](https://en.bitcoin.it/wiki/Controlled_supply)

3.125 BTC.

------
AndrewDMcG
Does the author have any evidence for his claim "The limit was temporary"? It
was certainly commonly claimed even a couple of years ago that the coming
scarcity of blockchain space would lead to an increase in fees.

~~~
ikeboy
[https://bitcointalk.org/index.php?topic=287.msg8810#msg8810](https://bitcointalk.org/index.php?topic=287.msg8810#msg8810)

>The eventual solution will be to not care how big it gets.

[https://bitcointalk.org/index.php?topic=1347.msg15366#msg153...](https://bitcointalk.org/index.php?topic=1347.msg15366#msg15366)

[https://bitcointalk.org/index.php?topic=946236.msg10388435#m...](https://bitcointalk.org/index.php?topic=946236.msg10388435#msg10388435)

>I'm the guy who went over the blockchain stuff in Satoshi's first cut of the
bitcoin code. Satoshi didn't have a 1MB limit in it. The limit was originally
Hal Finney's idea. Both Satoshi and I objected that it wouldn't scale at 1MB.
Hal was concerned about a potential DoS attack though, and after discussion,
Satoshi agreed. The 1MB limit was there by the time Bitcoin launched. But all
3 of us agreed that 1MB had to be temporary because it would never scale.

~~~
AndrewDMcG
Ah, that's really significant, thanks

------
itistoday2
Relevant: coverage of various perspectives and positions by Ethan Heilman
along with counterarguments to each:

[https://github.com/EthanHeilman/BlockSizeDebate/blob/master/...](https://github.com/EthanHeilman/BlockSizeDebate/blob/master/README.md)

I like that it also includes discussion of the Lightning Network's role, and
the idea of making the block size dynamic. These are less heard of
perspectives that nevertheless seem significant.

