

Bitcoin Network Capacity Analysis – Part 1: Macro Block Trends - TwoFactor
https://tradeblock.com/blog/bitcoin-network-capacity-analysis-part-1-macro-block-trends

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deweller
The block size debate is very active among the Bitcoin community right now.
There are strong opinions for and against raising it.

Here is a good podcast episode with opinions representing both sides (Gavin
Andresen and Peter Todd):

[https://letstalkbitcoin.com/blog/post/lets-talk-
bitcoin-217-...](https://letstalkbitcoin.com/blog/post/lets-talk-
bitcoin-217-the-bitcoin-block-size-discussion)

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barracuda16
why wouldn't every miner optimize to accept up to the hard 1mb cap so they can
get more fees?

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FatalLogic
The reward for solving a block is 25 bitcoins, but the fees, which are added
to that, are usually less than 1 bitcoin. Fees are only a few percent of
miners' income, and the miners have several factors to weigh up when they
decide how many transactions to put in a block

\- The risk of making orphan blocks. A larger block may take slightly longer
to propagate across the network, and that slightly increases the chance that
another miner will generate a valid block during that delay and propagate it
faster. When that happens, the first miner misses out on the block reward and
fees, about $5500 today

\- A miner could put no transactions in a block, and still get the 25 bitcoin
block reward, but if they do that, they are hurting confidence in the bitcoin
network, and devaluing their investment into hardware and skills and the value
of bitcoins they own. If you drag the chart left to see the history at
[https://tradeblock.com/blockchain](https://tradeblock.com/blockchain) then
you may see some miners who put zero transactions in a block or very few
transactions, but it is not so common

Orphan blocks are an important issue in the debate about block size increases
which the article linked to is discussing. Increasing the block size is likely
to increase the rate of orphaned blocks, though there are proposals that might
mitigate that risk.

The ratio of fees to block reward is likely to change in future, influenced by
many factors including block size, and there are many competing theories about
what will happen as that ratio changes, which run the gamut from doom to
success. The block reward is automatically cut in half every 4 years, and the
long term plan for bitcoin seems to be based on the fees increasing in value
to eventually replace the block reward

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the_mitsuhiko
> A miner could put no transactions in a block, and still get the 25 bitcoin
> block reward, but if they do that, they are hurting confidence in the
> bitcoin network

I don't think that's true at all. Even if some would not clear any
transactions people would still be okay with that for as long as the rest
does. And there are definitely some zero transaction blocks being minted.

~~~
FatalLogic
_And there are definitely some zero transaction blocks being minted._

Yes, there definitely are. As I said, if you read my comment.

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Animats
While the number of Bitcoin block chain transactions is increasing, their
total value is not.[1] Volume in US dollars has declined slightly over the
last year. We may be past "peak Bitcoin".

If blocks fill up, transactions with higher fees get through first. So the
free market will solve this problem when necessary. It's in the interest of
miners that fees go up, and the big miners control the block size, so a block
size increase is unlikely.

Bitcoin's block reward halves next year, which instantly halves mining income.
Bitcoin was designed so that when it became large enough, fees would support
mining. Next year, fees become more important, and pressure for higher fees
will increase. The system is functioning as designed.

[1] [https://blockchain.info/charts/estimated-transaction-
volume-...](https://blockchain.info/charts/estimated-transaction-volume-usd)

~~~
bduerst
This is a red herring to the issue of the current block size, which currently
limits the network to only be able to perform 2.7 transactions a second.[1]

This means that if the country of Greece (11m) were to use Bitcoin, each
person would only be able to make 1 transactions every 48 days.

That's also assuming no competition with the fees. The "Free Market" design
that prioritizes blocks with larger fees would mean that some blocks stay in
the queue for much longer than 48 days. Just for the country of Greece.

[1]
[https://bitcointalk.org/index.php?topic=941331.msg10360199#m...](https://bitcointalk.org/index.php?topic=941331.msg10360199#msg10360199)

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bduerst
This block-size hurdle isn't new and is one of the ongoing examples of how
Bitcoin is suffering from _Tragedy of the Commons_.

The offshore miners control Bitcoin, and they are independently and rationally
aligned with their own self-interest and profit (as they should be). When it
comes to forking changes that are not directly beneficial to the miners (block
size), it's nearly impossible to get a consensus, even if it means making
Bitcoin a better currency.

When you consider a change that makes it more difficult for a miner or cuts
into a miner's profits, like increasing the supply to counteract deflation and
hoarding, then you start to realize why Bitcoin is still having these issues.

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wyager
You're inaccurately oversimplifying the mining market.

The most important thing that refutes any notion of "miners control the
network" is that, if some miners adopt a ruleset unfavourable to users, users
will simply stop accepting whatever that miner is mining as Bitcoins, and
their profits will go to zero (because they're mining some Bitcoin-Like but
not really Bitcoin currency). If users start using a different ruleset than
miners, the miners have to switch over or they will have no one to sell their
coins to.

~~~
bduerst
Nope. It's neither inaccurate or oversimplified to say the miners have
control, when the forked fix to the issue in the article requires a 51%
consensus amongst the miners.

To say that the entire bitcoin userbase will band together to form a concensus
to avoid miners is to turn the same blind eye to rational human behavior and
_tragedy of the commons_. It's just as much wishful thinking and hand waving
as thinking the miners will act solely out of benevolence for Bitcoin.

~~~
brighton36
It's not a tragedy of the commons. Whether we grow the blocks or keep them the
same, the network continues to function just fine. It's a matter of values and
how to grow the network. If the miners do nothing, Lightning Network and off-
chain networks will route most transactions outside of the blocks. Some in the
network want Bitcoin only to be used for settlement, instead of for every
payment. We've actually had larger blocks in the past (32 MiB I believe) and
it was reduced to combat spam.

~~~
bduerst
That's not a counter-argument to _tragedy of the commons_.

You just described off-chain transactions which aren't considered Bitcoin, and
if anything are only a temporary fix to the block-size problem.

Tragedy of the commons exists because _any_ of the solutions to a number of
problems in the Bitcoin implementation need to be directly profitable for the
miners in order to happen. For block-size and supply, they are the opposite of
profitable for the miners.

