Bitcoin Forum

Any transaction network is going to need some kind of transaction fees. Why? To prevent spam. If transactions can be spammed by bots on the network, you end up with a whole load of pointless data, that will still need to be verified, and reverified for all eternity.

The 1Mb hard limit is designed to create a LIMIT on the amount of transactions on the blockchain per unit time. This is there to create demand/limit supply, and to allow miners to collect fees for securing transactions in the network. The transactions with the highest fees (which are presumably either the largest or most important transactions) will make it into blocks, NOT the free/tiny transactions.

Eventually the block rewards will go to zero, and miners WILL NOT ACCEPT transactions that do not pay fees. Like it or not, this is the long-term prediction for bitcoin mining. As business owners they will be interested in maximizing profits (on average, and in the long run).

If the 1Mb limit (keep in mind 1Mb/block means a max size of 52.6GB/year for the blockchain, which is a ridiculous quantity) is raised, then the potential FUTURE mining revenues, namely transaction fees, are being diluted. Gavin calculates that RIGHT NOW there is only a small cost to blocks being orphaned (https://gist.github.com/gavinandresen/5044482 (https://gist.github.com/gavinandresen/5044482)see his back-of-the-envelope calculation). But in the future, when transaction fees are far larger than the block rewards, and bitcoins are at $1000/each, an orphaned block will represent a much larger cost to miners.

A bitcoin fork with 1Mb hard limit will attract more miners, and will thus be more secure than a fork with larger blocks. For this reason it is likely that the 1Mb hard limit (similar to the 21million bitcoin cap) will not be raised in the MAIN fork of bitcoin. The beauty of bitcoin is that it allows the free market to decide. Sure, some altruistic miners could raise their blocksize in a hard fork of bitcoin, and this can be used to sling change around the internet and max out some hard drives. But the main fork will stay at 1MB, will be the most secure network, and will have large transaction fees, that are dwarfed by the monetary value of transactions being much higher than they are today.

TLDR
Any fork with a larger hard block size limit will be less secure, and therefore less valuable, than the fork with the hard limit in place.

I am proponent of adaptive maxblocksize.

Transactions with fees should temporary increase current maxblocksize proportionally.

So the 1Mb limit will be only for free transactions.

OK, but why would miners accept those free transactions into their blocks?
My point here is to identify the end-game protocol that will win out in the long run. I think the 1MB version will be the one.

I think free transactions needed for miners only as kinda random entropy source for their sha2 block solving engines.

There wasn't any motive to accept free transactions from the beginning (in network algo) (as well as there is no motive for broadcasting them or store them). They accepted them as transaction pool was thin. But things gonna change.

Not true: The motivation was the block reward, despite the fact that the fees on all transactions were insignificant. If there were a bunch of people paying fees in excess of the block reward, believe me those would have gone into the blocks. One day this is what it will look like, if bitcoin really scales (in amount of value transferred, not by # of transactions) the way people want it to.

You wrong. There is absolutely no motivation for decision to include separate transaction into block.

Miner may include free transaction, or may not. Nothing will change for him as result of his decision.

Miner even can mine just empty block with coinbase transaction to his address and ignore any incoming transactions.

A bitcoin will never be worth $1000 if the Bitcoin network cannot handle more than 7 transactions per second or if the fee to send a portion of a bitcoin is high enough for most general use cases of bitcoin to no longer be competitive.

The only way that a bitcoin will be worth $1000 each is if the use of bitcoins represent significant economic activity. And that only way for that to happen is if transaction fees remain low enough for Bitcoin itself to be competitive.

We are going to run out of transactional space 120 years before we run out of the block reward incentive. Potential future mining revenues WILL NOT be diluted because revenue equals the number of transactions times the transactional rate. A supply ceiling however will limit maximum transactional revenue. In other worlds, its better to sell 10,000 apples at $0.75 each, instead of 5 at $1.25 each, especially when the variable cost of additional apples is almost zero.

No reason to start another thread on this, especially when you haven't read the ones before it.
Your premise is clearly contradicted by Satoshi's emails/posts.

Where did Satoshi mention coding the 1MB limit so that miners can collect more fees?

you are right, of course. miners up until now have been motivated largely by altruism in accepting any transactions at all.

but, the block reward will eventually go down, and eventually, transactions are going to have to have put on their fancy shoes if they want to get picked up by the network.

the point is that I doubt people are going to altruistically DL 56Gigs of half-cent gambling transactions every year (see user Psy's posts), when they could instead process a smaller, and more secure fork of bitcoin that has a realistic outlook on transaction rate limitations.

RE transactions fees making bitcoin less competitive,
You can make bitcoin transactions of $10 million dollars with a 1 cent fee right now. That's pretty competitive to me. As transaction size approaches 1 cent, the fee becomes a larger percentage of the transaction itself. In this way, the market decides how many tiny transactions it has room for (it has room for plenty right now), but it wont always. People who want to do tiny transactions will have to resort to using trusted parties (like banks/trust networks or whatever else emerges) to carry out their transactions.

Just some some points on that:

1 Mb/blocks allows for max ~180 Million transactions a year. How many people could actually use bitcoin in that case? 2 - 3 Million maybe, if they only use it rarely.

Do you think that's enough for your 1.000 Dollar coins?
Do you think business will keep accepting /add accepting BTC if this only reaches such a small group?

Also, do you think the amount for transaction fees is unlimited. Why should someone use Bitcoin if he has to pay (significantly) more when using it? There is a limit to the amount of fees people are willing to pay. At this point it would be more providable to allow more transactions.

A free marked would find a balance between fees and number of transactions.

But a hard cap is hardly free.

This will limit the value of BTC as expressed in other currencies. As that value drops, resources invested in mining will decline, and so will the total hash rate, leaving that "fork" less secure.


Read this and understand, if bitcoins cost more to spend, they are worth less relative to other currencies.  

You're ignoring that you have to pay 2 currency conversion fees because the $10 million in bitcoins is less useful (prior to and following the transaction) than the $10 million in cash. The only way to fix that is make it so bitcoins are more useful so that you don't want to / need to convert them into cash. That only happens if they are inexpensive to spend and and as a consequence are widely adopted.

Do you people genuinely not understand this?

does it matter?
My point is that a sensible version of Bitcoin will have a limit on how much data is put into the blockchain, i.e. that scarce resources (disk space and network bandwidth) are allocated in an optimal way. The optimal way will be determined by what transactions miners voluntarily include and which blocks the market considers valid bitcoin transactions.

Think about this scenario.

A hard fork is created with a self-adjusting block size limit. All users have a balance of original, authentic 1Mb-limit bitcoins, and also, a balance of 1+XMb limit, bigblockchaincoins (BBCcoins). Exchanges will be created that allow people to exchange these two types of coins between forks.

As the two forks compete, the BBCcoins will see their blockchain keep getting larger at an exponential rate, while the bitcoin blockchain is pinned to linear growth at 1MB/10mins. People will start realizing that the vast size of the BBCblockchain is leading to lots of centralization (only few nodes verifying everything, only large mining ops able to compete). Now they are wondering whether the original bitcoin blockchain is preferable to mine/verify due to its smaller data size, and the presence of less spam, and higher fees/MB mined.

Inevitably, the original bitcoin miners are less centralized, due to the smaller, spam-free blockchain. The added security makes bitcoins more valuable than the BBCcoins, and people start selling their BBCcoins. The lower fees/Mb in mining BBCcoins also makes people want to mine bitcoins for the higher fees, and over time, BBCcoins become worth a lot less, having a 4TB blockchain, while bitcoins are worth a lot more, having a 500GB blockchain. The smart investors win, the free market wins, BBCcoin holders lose, SD bots lose.

Ok, now lets talk about what's actually going to happen.

1. A new client is released and blocks are compatible between the two for months / years in advance because new clients maintain the block restriction until a specified date or event has occurred.
2. During this time, the vast majority of bitcoin users, miners, merchants, integrators, etc, upgrade their clients to support the newer block rules
3. Eventually only a small portion of the network is running old and outdated software, perhaps that even has security issues that were not patched.
4. As the "cut over" date is approaching, messages are sent to the old clients to indicate that they are out of date and require upgrades
5. The small portion of the network running old and outdated software is reduced in size further as more users upgrade.
6. The block change deadline happens and the hard fork turns out to be 95%+ already migrated
7. A portion of the remaining 5% DO start an alternative chain, without the backing of bitcoin.org or the Bitcoin foundation. However the value of the coins in the alternative chain drop rapidly as its clear that almost all of "Bitcoin" has long since migrated to newer clients and the newer chain.
8. The value of any remaining coins on the smaller older chain drops further to nearing 0.
9. The developers put in reasonable blocksize limits on the "new chain" that prevented the exponential growth you are so worried about.
10. "Bitcoin" learns how to handle a necessary hard fork.

Oh really, people are going to sell their "BBCoins" for other coins that are now less useful, more expensive to spend, artificially restricted, impossible to scale as computing resources do, and don't have the backing of any of the major parties working on or investing in Bitcoin?

Yea good luck with that.

This kind of reminds me of the "hard fork" we had in US currency by leaving the gold standard. Gold was a limited, scarce, and unwieldy currency, considered by many to be old-fashioned. Eventually it was abandoned in favor of unrestricted fiat currency which was more flexible and much more practical than the old-fashioned gold.

Nevertheless, people who stuck with the gold rather than greenbacks did pretty well for themselves, even though it is barely used as a transactional currency.

Bitcoin's value comes from its function. It functions as an inexpensive way to transfer value across the world, almost instantly.

Anything that limits its function in that capacity, damages its value.

By the way, I can trade gold for free. It has no "transactional fee".

Honestly, I'm just sick of people saying it is feasible to have a 2000tps distributed protocol, where everyone is downloading and storing half-gig blocks every 10 minutes so. (see the wiki) https://en.bitcoin.it/wiki/Scalability#Current_bottlenecks (https://en.bitcoin.it/wiki/Scalability#Current_bottlenecks)

Don't people understand that this would mean thousands of GB each year in blockchain size? How do you think this is reasonable? There are limits to data storage, and thats just one of the economic constraints that have to be faced.

Honestly, I'm sick of people ignoring all the optimizations that have already been identified and are just waiting to be coded, as if we're going to scale to 2000 tps without anyone bothering to implement any of them.

+1

There's no way to "optimize" your way out of this. People are not going to stick with a protocol if it involves lugging huge amounts of data around for no reason. Just because hardware improves exponentially doesn't mean it will improve faster than (the BBCcoin) blockchain growth rate and when the exponentially growing blockchain becomes too large, people are going to stop using the technology.

That is completely feasible to do TODAY. Would it ultimately be as distributed as you or I want it to be? Nope.

Is there a big difference between 7tps and 2000tps? Yup.

Would it require investments in bandwidth and storage to be a participant as a full node? Yup.

Is storage and bandwidth going to get cheaper over time? Ab-so-fucking-lutely

Should we forever cripple Bitcoin because of a failure to allow for reasonable scaling capacity? Sure if you hate Bitcoin and want it to fail.

Do you have any idea how valuable a single bitcoin would be if we were able to get the network to 2000tps while maintaining transaction fees in the 10ths of cents to single cents range? They would be worth thousands.

I don't need to run a full node on my watch. What I do need to do is use disruptive technology to unseat Paypal, Western Union, ACH, SWIFT, Visa, and the FED. We don't have to get there overnight. We do have to get there.

Too bad nobody has thought about how to drastically reduce the amounts of data people need to transmit and store.

Mine/verify what you like, but I think the number of nodes on a BBCcoin, or should we say FoundationCoin network is going to keep decreasing because the blockchain size is literally too damn high.

This is still just a really crappy time to go ballistic about this, because network upgrades have been stalled for about a year and the end of the stalling is not yet really in firm sight.

For good or bad, upgrading hashing hardware to ASIC technology came first, and that disrupted all upgrades for about a year because upgrading to obsolete technology is pointless and the fact that the obsoleting would not take place for a year or more was concealed.

Basically the whole network has been conned into putting off upgrades for a year or so.

There are now, at last, signs that it might not be a whole 'nother year before this ASIC upgrade phase is over, whereupon we can start on a bandwidth upgrade phase.

But until we can order ready to be shipped ASIC units to upgrade our hashing capabilities it is just too soon to start ordering more bandwidth. For all we know only a few people who ordered ASIC units during development will ever get any, all the manufacturers could yet decide they now have their development costs paid and can keep all further ASICs to themselves.

We just do not yet know whether the ASIC upgrade is even going to really happen. Until we do budgeting any other upgrades is simply premature.

-MarkM-

You bring up a very interesting and important point, that the demand for bitcoin mining could ultimately drive the expansion of internet bandwidth. I just think we are a long way away from that given the length of time it takes to install such bandwidth around the world. Basically I just don't think the hardware is going to be able to scale fast enough for FoundationCoins to work, whereas the limits in Bitcoin allow the market to develop over several years, being limited to O(time) rather than O(time^spamgrowth)

Chicken little, YOU DON'T EVEN KNOW WHAT THE NEW LIMITS ARE GOING TO BE.

It could be increased 10x, today, then maxed out, with no new optimizations AT ALL, and I can still run a full node for $20 a year in storage costs (and decreasing).


That would represent 40x the transactional capacity we are using right now, while transactional fees are already rising.

what if they are increased 10x every year for 3 years? For 20 years?

https://bitcointalk.org/index.php?topic=88208.0 (https://bitcointalk.org/index.php?topic=88208.0)

As long as the limit increase mimics the cost decrease in storage / bandwidth it isn't a problem for anyone.

As long as the limit increase does not prevent profitability for miners, it isn't a problem for them. And guess who gets to decide which transactions to include in their blocks?

You saying, what if they are increased 10x every year, is that same as you saying, what if we have no limit at all. We do, and we will, and even if it is adjustable its not going parabolic.

It wouldn't if you hadn't made it the basis of your argument. 

I was under the impression the 1MB limit was a safe guard put in place because Satoshi was worried early on someone would abuse the network.  But I believe we are now well beyond the point.  If someone tried to submit a well-above average block through the network, it would fail to propagate & be orphaned.  Of course, in time, when average bandwidths are larger & HDD space is cheaper, submitting that same block may not be a big deal because it will propagate fine.  Which is why setting a limit at all is only kicking the problem down the road to be "fixed" again.

We need to first see the effect of the 250k soft limit breaching. So far I haven't heard about any problem, means even 250K limit will work?

You haven't been paying attention. Use the search feature.

It seems you either have to be a full node or nothing at all.

Could a function be built where people can connect into a distributed node? So based on my bandwidth and space, I connect into a node that contains 1,000 computers (a node swarm) and thus I can continue to verify blocks and and be a apart of the network but only need 1/1000 the bandwidth a full node needs

Also you don't need the entire blockchain either, and these node swarms can be all different sizes so the poor can still participate.

Any ideas?

those mirror my thoughts ...I don't even need to post anymore since you do all the work

I'm sensing some serious deja vu reading this. It sounds like another 14 point plan...


<misterbigg
>totaleclipseofthebank

What an apt post to mark Gavin's 2000th

k folks, well judging by the sentiment a hard fork will probably be happening at some point... should be interesting times.

This was posted on the Bitcoin Foundation blog before you started the thread:

https://bitcoinfoundation.org/blog/?p=135 (https://bitcoinfoundation.org/blog/?p=135)

If I have to use search feature then it is not a problem, or people can solve it by themselvs, otherwise it will pop up in the hotest threads