If you are given 2 choices:

A. bitcoin's price will increase 10x every year, but you will only be able to do one transaction per year

B. bitcoin's price will increase 19% per year, but you can do as much transaction as you want

I guess most of the people will select option A

However, although scarcity creates value, it is difficult to prove that limited transaction capacity will work as a catalyst to boost bitcoin's value. If the core devs can prove that the scarcity of transaction capacity will raise bitcoin's value, then maybe a fixed block size will gain more support

This has been discussed before, suppose that chinese government confiscated all the chinese miners in China, then fork the chain with more than 75% of hash power, their fork will just become an alt-coin that no one cares about

It is the bitcoin user who decide what version they would like to use, not the core devs

If I lost my private key, I would be able to find it back 

What the block size debate reflected is a serials of consideration about the design philosophy behind a decentralized monetary system

To serve others or let others serve you, that is the question

The Federal Reserve never care about average users transaction demand, their interbank settlement system is old and slow, but they just print tons of money and people still worship them and happily use dollar everywhere. People even invented paypal, visa, master card to do thousands of transactions per second to help them to spread their money. Why?  It's effect of authority, their authority gains average people's trust, they don't need to sort out the rest of the technical details

Similarly, if bitcoin can establish such authority image in the eyes of average user, any technical problem will be solved by people voluntarily

Would more decentralization and censorship resistant raise its authority or more transaction capacity raise its authority? Kind of both, but I think decentralization holds higher priority

Enough with theoretical calculation, we need some real world examples that show how people will react when they are facing a hard limit. Humans are adaptive, they will always create solutions to adapt

I'm still not convinced that a designer of a monetary system should think like a service provider. A service provider always try to satisfy its customer since he need to make money from his customer. But designer of a monetary system has a totally different sets of concern than a service provider

If you look at Federal Reserve's dual mandate, they are low unemployment and low inflation. They never worry about transaction capacity, since that is a too low level of concern: Humans have been transacting slowly for several hundred years and central banks have never tried to improve on that area, it is the mission of commercial banks and payment processors

Of course bitcoin is different, it is decentralized, thus require different priorities than a centralized monetary system. But still, the way of thinking matters

I'm so proud that all my friends listened to me to buy at 2012 before the first reward halving at least 20xed their investment. They typically bought a couple of coins for their children to play with but now that can buy the children a car. But I still insists that they should hold it for at least 2 reward halving to see the real power of bitcoin's long term anti-inflation potential

By the way, "BLASH" is always a wisdom when it comes to investment of anything 

It will be interesting to see a simulation that reducing the block size to under 256KB, thus every block are full of meaningful transactions, and see if a small block size is long term sustainable

The system might still work, because everyone will reduce their transaction frequency thus they can afford a higher fee to get ahead of the queue

This is similar to credit card cash withdraw: For each withdraw you have to pay a flat fee of $5. Then you would never withdraw $20 bills every day, but withdraw once a month for $500, thus the fee becomes less significant

With bitcoin, if your 0.1 BTC transaction with a 0.0001 btc fee is not able to get confirmed, you would wait until you do a 1 BTC transaction with 0.001 fee, which will more likely to be confirmed in 10 minutes

But this also means that you are not able to spend bitcoin for anything that worth less than 1 BTC. Of course those small daily spending are best to be done with fiat money, because people will always spend fiat money first due to its long term inflation potential

So the consumption in bitcoin economy will more likely to be this: Everyone buy bitcoin once a while, hold it for sometime, and send 10+ bitcoins to exchanges during the next rally, sell or mortgage them for large amount of fiat money to spend

If everyone make one transaction per month, then current 4TPS will make 10 million people possible to use bitcoin. For 100 million people they would only be able to do one transaction per year. Still fits some people's style but definitely not majority

I guess no stress test will happen this time because it did not cause the panic it wanted last time, and this time every nodes is more prepared to filter out the spam transactions

It's unbelievable that there are so many people will lose their mind when their leader disappears

This chart says it all



For broadcasting large blocks, it will take 0.25 second for each KB to reach every nodes. So 1MB blocks would take 250 seconds e.g. more than 4 minutes to reach all the network, or 80 seconds to reach majority of the network

It is easy to calculate, for 8MB blocks, it will take 32 minutes to reach all the nodes, or 10.6 minutes to reach majority of nodes, it is obviously too slow, the next block is already mined before the previous one arrived, so the previous one is always orphaned, the network will be segmented

http://www.cs.ucsb.edu/~rich/class/cs290-cloud/papers/bitcoin-delay.pdf

Of course there will be workarounds to broadcast only the block header first then followed by the block, but that function is not implemented yet and have its own weakness. Currently some chinese miners try to include as little transaction as possible to increase the speed of their block's broadcasting

It's the same, you bought something stolen, or some one were cheated to pay bitcoin to you and never get any delivery, while the scammer get goods delivered from you. Man-in-the-middle attack will be very popular on this kind of platform when there is no central authority make sure the legitimacy of each transaction

When John Law first issued his fiat money, he applied real bills doctrine, later known as the "doctrine of the old Bank Directors of 1810: that so long as a bank issues its notes only in the discount of good bills, at not more than sixty days' date, it cannot go wrong in issuing as many as the public will receive from it."

Obviously today's fiat money system is a highly upgraded version of that practice, first they don't have real bill as backing any more, second those fiat money are not limited to validity of 60 days, but forever. It seems the general public are much more stupid than 200 years ago, thus larger scale of scam can be carried out without being noticed

A simple example: Someone bought 1 bitcoin from you on OpenBazaar, paid $230 to your bank account, you release the coin to him. The next day, you found out that your bank account is frozen and police called you for an investigation, because the money is hacked from another bank account

How can you mitigate such kind of risk? You must make sure the money is sent from the users own account by asking him to upload his account screenshot together with his ID card. But normally users will refuse to show their ID card to a stranger on a decentralized platform, they would only show it to a well known registered finance institution which have strict rules for customer privacy protection

IMO, decentralized trading platform has been promoted for some years but never gained enough traction. This is largely due to the fact that no one want to send the money/goods first, and there are many complex scam/theft schemes in payments, which makes the dispute impossible without the involvement of authorities, but when you have authorities that can rely on, you don't really need decentralized trading anymore

As long as there is fiat money, people will always first spend it since it is inflationary, so the scenario that bitcoin used for daily spending at large scale will never realize

Then the major usage left are long term saving and international remittance, both happens at very large size (over $100) and very low frequency (once a week/month)

In fact, majority of the transactions today in bitcoin network are pools paying miners and speculators deposit/withdraw from exchanges/gambling sites.

Gambling sites could occupy large amount of transaction capacity of the blockchain, how to move their large amount of traffic offline is a challenge, maybe they should cooperate with bitcoin exchanges and do internal settlement without direct receiving coins from individual users

History has proved that when bitcoin price is higher (deflation), people spend more, when it gets lower (inflation), people spend less and start to hoard. Many facts are against those theories from economy books, so it is very likely that those theories saying inflation is good are just excuses for banks to print themselves more money: Sounds reasonable, but never have any real world example backing them

This is very easy to understand: When there is deflation and your money worth more and more, you become richer, then you don't care spend a little bit more. On the other hand, when everything's price is rising and you can not afford them, you spend less

This is maybe the 7th time I read that side chain white paper, and I'm still not convinced that complex idea can be accepted by anyone except gmaxwell himself 

This method works because government can always pay these hole diggers' salary with newly created fiat money. And because everyone accept fiat money as payment medium, these hole diggers could in turn spend their fiat money and they will become every business' big customer

So, as long as people want to make money, these hole diggers can help to distribute the printed money. The amazing thing is that people will always work more and produce more goods and services when they see more money, so inflation is never a concern when more money is entering economy in a controlled way

The whole system works because people believe the fiat money that hole diggers give them has real value, and this belief is almost unshakable

Magnitudes better! Now all my international transactions go through bitcoin. If you are experienced trader on localbitcoins, you could even make some money on both ends of exchange

Before, when I went to abroad, I used to take my credit card, and since not all the merchants accept foreign credit cards, (VISA and Master are expanding very fast though), the best way is to use a card that is issued by a bank in that country. But it is difficult to send money into that country anyway, and I lose a lot during the currency conversion process

Now with bitcoin problem solved, I just need to open an account in a bitcoin exchange in that country (if there is one), or post a trade advertisement at that country on localbitcoins (typically you can get a better price than exchanges on localbitcoins if you are the advertiser) and let the buyer pay to your account in that country. Of course you should have some experience since some scammers might direct others to pay to your account. It is a good practice to only accepting payment from traders with good feedback

In current system, banks know all of your transactions, and I don't think majority of people have any problem with that. If you use a web wallet, the wallet operator knows your transactions, similar to a bank

There is a reason regulators want trace-ability of digital money, mostly because of lots of scams and thefts online. A digital money that can be traced will greatly improve consumer protection. Otherwise it will be very popular among criminals, thus resulting in stronger resistance from governments, and will hurt bitcoins mainstream adoption, eventually drive it underground