Yes, in fact his model indicated that in order to accept large blocks to earn more fee income, miners should use centralized large data center and relay network to speed up their communication and reduce the orphan cost. That's exactly the worst result from decentralization point of view, and his model does not calculate the value of decentralization, thus is too simplified

It is also interesting that you mentioned that all the limit in bitcoin is artificial. So if you could find a good reason why block size should be limited then that limit is possible to be accepted by the majority of the participants, similar to 21 million coin supply

Currently all the arguments that "block should not be full" borrow the typical reasoning from production and service industry: A higher cost for consumer will slow adoption. However, a monetary system does not work the same way as goods or service production, since any businesses ultimately try to earn money. So when your product is the final target of all the business, then you don't need to make profit by selling service, because people will automatically come for your product

It is similar to that central banks worry that if the fee of USD transaction is too high, then no one is going to use USD

People do not come to bitcoin to do transaction every day, they are after something that they can not find in fiat money: anti-inflation and anti-censorship and international payment, they should be willing to pay a high fee for these since they could not find these features anywhere else

In my opinion, payment function is the least important for bitcoin, if technology allow, it does not hurt to have a little bit more room for more transactions, but it can grow exponentially so eventually the blocks will be full and micro transactions will move offline. But that does not hurt bitcoin's adoption, because most of the people coming to bitcoin not to do micro transactions, for that purpose they have fiat money

"More and more business are using the hunger marketing strategy as it is simple to operate.

The business brings products to market with an attractive price to lure potential customers then restricts the supply, resulting in an imaginary shortage that can raise prices and therefore generate higher profits.

“Branding” is a factor that runs through the whole hunger marketing operation and the strategy must rely on a strong brand appeal. The ultimate effect of hunger marketing is not just to raise prices, but also to create higher added value for the brand, in order to establish a high-value brand image.
 
The best example of a “hunger marketing” strategy in action is probably Apple.

When they launched new versions of iphones and ipads, the devices offered innovation, great design and the latest technology to a trendy, fashion-conscious audience.

Apple “was not able” to provide enough supply for the market which made customers want their latest devices even more"

"The activity of competitors in the market can affect the impact of your campaign.

As such, it is important to monitor your competitors’ marketing strategies in order to ensure that you can distance your brand from the competition.

Hunger marketing works only when potential buyers cannot easily find substitutes. "

http://www.artema.co.uk/hunger-marketing/

It's a valid point, to reduce the risk of it being hacked, the design and code must be extremely clean and simple. It is much easier to compromise complex system than a simple system

You don't see the difference between train and car?  

Besides, Paypal does not move money at all, all they do is moving numbers of the client's account, like an exchange do, all these account are just some database without any money in it

If you study the case from the view of money supply theory, there is MV=PQ formula
M: money supply
V: velocity of money, e.g. how fast the money circulates
P: price level
Q: economy output

If the transaction cost is higher, people will do less transactions, thus reduced the velocity of money V. As a result P or Q would have to go down. P goes down means the price of everything is cheaper, thus money rises in value. Q goes down means the economy output goes down, thus there is less products and services available for trading. At this early stage, Q is still expanding, so it is very likely that P have to go down. means higher bitcoin value

This is reasonable, since you can imagine, when people reduced their transaction frequency due to higher fee, it means more and more coins will be stored instead of spend, resulting in reduced amount of coin supply in market, as a result the value of bitcoin will go up

Of course this is just a theory, the current deadlock situation is because everyone have different theories, no real world examples, we need more evidence

It is difficult to find a real world example because we seldom have something with limited supply in this world, thus almost everything we see basically goes down in value long term wise

Land maybe is the only thing that can compare with bitcoin due to its limited supply. As I can see, the transaction cost of land do not have direct relationship with its value, but land are not used as a payment medium, so even land does not quite fit as a real world example

This thread has been distracted a lit into the more practical questions, back to the topic, what I'm interested is, is there any prof that a rising fee will make more people quit using bitcoin?

I think as long as the fee is less than 1% of the transaction, no one cares, since they have been growing up in an environment of such similar fee, and I do feel that some people don't even care about 5% fee because that is a norm when they traveling abroad and have to use cash locally. It is more like a psychological thing, has nothing to do with profit, they just don't care because that fee becomes part of their spending, and they are there to spend those money

This is similar to say: The number of people travel by train is growing faster than number of people travel by car  

Government will do exactly like they did with exchanges, first define mining pools as a money transmitter service thus require license to run (I think BTCGUID was closed due to this requirement), and when pools get that license they become a financial institution, thus must follow AML and KYC rules, e.g. all the miners connecting to them will have to submit their id-card and el/tele bill to living address....

The purpose of democracy is still for centralized management, but bitcoin is the first time we had a decentralized management to its root. (Github is centrally controlled by the core commiter thus it is also a centrally managed system, but in bitcoin the core commiter can not push in a change without the consent of the other users of the system)

So I think the decision making process in bitcoin will be very lengthy and slow, any major change is almost impossible to carry out without super majority support. In most of the time, it will just stay at its current status and no change will be accepted by its users (as long as the current version works). But this is a good thing because it prevented its economy from being affected by change, change is bad for financial systems since it brings risk

I heard that is a fake news and the fact that someone is spreading fake news indicated that the political campaign has entered china  

Miners might not want to change because a 1MB fixed block forever will make them rich, especially now the hard competition already made their profit very thin

However, I see this as a future problem that miners overtake the control of bitcoin and there is no way to fight against it

Imagine that world government have implemented new rules to regulate all large mining pools so that they only can process non blacklisted transactions (blockchain analysis is the new trend), and all the transactions must be traceable to its owner with name and address, this will make the trace highly practical from AML and KYC point of view. As a bitcoin user, you just can not do anything about it, because all your transactions are processed by government regulated mining nodes

You can change to another algo like skrypt, then again those large mining pools will be regulated if there are just a few, and with a lower hash cost coin, the value of the coin also goes down until it reaches mining cost

So it is very important to decentralize the mining, since controlling the mining nodes is much more effective than control the other part of bitcoin ecosystem, it is equal to control the central bank of a monetary system. We know that central bank is independent from the government, in this case, large mining pools have no way to reach that kind of independence

Maybe double spend is not a good analogy, but you should do your own research instead of listen to others

The original post is here:
https://www.reddit.com/r/btc/comments/41o6sd/question_about_segwit_security_and_its_protection/

------------------------------------------------------------------------
After reading the segwit presentation of Pieter W and discussions some time ago, I'm not yet convinced it does not pose a lot of extra security risks in a lot of areas.

The main thing that is puzzling me in the proposed implementation: All transactions will be signed with "Anyone can spend", to make them compatible with older versions so this 'feature' can get forced as softfork. But the SegWit minders/nodes also will accept those transactions if they have a newer segwit version than themselves, to make implementing new features easy.

(Previously when a new feature or script type was introduced, all older nodes would reject it, so it was important the network had enough (>50%) nodes supporting the new feature before someone could start using it. As I understand it, now it will be the other way around: old nodes will accept unknown scripts by default)

BUT: doesn't that make it so that when a dishonest miner would put a malicious SegWittransaction in its block of the latest version, and lets say only 10% of all miners are upgraded to this SegWitversion, that 90% of all hashing power will accept this invalid transaction because they are programmed to not oppose it?

So instead of the >50% of hashing power you need to do something malicious with a normal bitcoin transaction, I would think you will need a lot less with SegWit?

Can somebody tell me please where my thinking is wrong?
--------------------------------------------------------------------------

LN's behavior change is the payment channel, it requires certain bitcoin to open the channel, like charging a sim card before you can make a phone call

However, for frequent private spending like phone call, those kind of pay-per-minute or charge per usage model has mostly been replaced by a fixed monthly fee regardless usage model. Because from service provider's point of view, the total sum of the fee income that all the users paid per month is a quite stable or slow changing constant, so you just divide that total sum by the amount of users and add a little bit margin you get a fixed monthly fee with unlimited usage, and that will save you huge amount of time and resource to manage the accounting of millions of user's usage, you manage the total traffic instead

If a bitstamp user send a bitcoin from his own wallet to his bitstamp account, the transaction would still use blockchain, and most of the traffic is this kind of traffic between private users against those institutions (financial hubs), so LN is not going to give too much help here, unless most of the private users are using centralized wallet services like coinbase. Then setting up LN between coinbase and bitstamp would reduce a lot of traffic on the blockchain. However, institutions still need to establish a secure communication channel to exchange information outside of blockchain (an unsigned transaction can not be broadcasted). But once they have such a communication channel, then they can setup their own clearing scheme without using LN, thus don't touch the bitcoin protocol to be on the safe side

Currently bitgo appears as a very fast advancing actor in institution solutions. Their multi-sig solution provide enough security, I predict that their model will become the popular clearing solution of bitcoin ecosystem very soon. In fact they never wanted to implement their solution based on a change of bitcoin protocol, thus they have not been stopped by this tug of war inside core devs

Gavin is radical but I have to admit he is objective most of the time: Hearn is just too pessimistic

There is a common sense in decision making process of financial products: Risk aversion

And I think that's the reason XT was not welcomed by majority of the stake holders, because it makes a too large change that could have trigger many unpredictable behavior in the system thus greatly increase the risk

This is similarly observed in SW and LN, since the amount of change in those solutions are so huge that they will impact many different parts of the whole ecosystem of bitcoin

I found Segwit to be very similar to the personal transportation device Segway. It looks very cool, only runs on two parallel wheels and it can maintain its position without moving. Then the first question people will ask is: Is this thing safe? Will I fall from it? The answer is yes, you will fall if you don't know how to operate it properly

Some people will start to play with it and learn how to control. And once they get used to it they will have some fun, and more questions followed: How long will the battery last? How fast it can go? What kind of road it can run on? What if the engine inside failed etc... because the inside mechanism is so complex that normal people will never understand how it works, so they have to ask all kinds of questions that they would never ask for a bicycle

So most of the people will just treat it like an exciting experience, but will never have confidence to use it in commercial traffic. And after learning that it can not run faster than a bicycle and not run well in a tilted condition, people will fall back to their old traditional way of riding a bicycle or moped

Back to SW, someone recently pointed out that in an environment of 75% SW nodes, the malicious users only need over 37.5% of hash power to attack the network. This is because the rest 25% of non-SW nodes will not be able to detect the double spending since what they see is only empty blocks  

This is just one example of the unpredictable behavior of the system when the system changed its way of working. There will be other problems caused by the fact that the communication between non-SW nodes and SW nodes is asymmetric. So from this point of view, SW must be implemented through a hard fork

Bitcoin's value is basically decided by its mining cost, if you change to another POW, you have to rebuild the difficulty and mining cost in that hash network before the coin on that chain would have any significant value. But as long as the original POW network is strong, few would be interested in another POW coin

A forked coin might be possible to maintain its value without corresponding hash power for a while due to demand from users. But that will be short lived, once difficulty adjust down, people will quickly realize that they can mine coin instead of buy, so they mine and immediately sell for a huge profit, until the price were dragged down to mining cost, which is almost zero at the beginning of a new POW algo adoption

Same could be said for fiat Loyalists, humans are all greedy and stupid for sure  

I just want to see the effect of a rising min relay fee. How expensive is enough to stop people from using bitcoin? For rich people moves thousands of coins, even 1 btc fee is nothing, so they will not be affected. If average people is moving 0.1 btc, then 0.001 btc would still be ok (1% fee), that's still almost 10x higher than current fee

Let it be full and see what happens 

After all, the ability to do transaction on chain is only attractive for people with enough IT expertise. I guess the number of people in this user group will be maximum 10 million people around the world. Rest of the people would rather use centralized services due to the security risk and ease of use, old habit etc... There are just so many ways to lose your coin if you are not an IT veteran

Just like they said, they want to mimic the traditional money remittance service thus failed. I also provide remittance service but I only targeting online solutions. I have to teach each of the user to go to online exchanges at local place and open account, but once that step is done, the cost saving can start to kick in

Cash to cash can also be done, but then you have to setup a local agency specially to do cash trades, like localbitcoin cash trading advertise, then the cost is down to 1-2%. You can not just use existing cash transfer network, then you end up with the same cost as them