If the block size is to raise to avoid a suddenly formed fee market, then fee will always be small relative to block reward, at least for decades to come.

This is because fee is an effective measure to compensate orphan risk, as long as orphan risk stays below 10%, the fee will always be less than 1/10 of the block subsidy, no matter how small the block subsidy is. I'm not sure what kind of orphan risk miners are willing to take today, but I think there is an optimum range: They could include thousands of transactions in a block and become orphaned 50% of time, thus get only half the block subsidy and rest must come from fee; or collect no transactions thus only receive block subsidy with minimum orphan risk. There is a middle ground somewhere they can feel comfortable with, e.g. the maximum transaction that they can include without incur a high orphan risk

Is there any chance the fee will rise to replace block subsidy?

I think 2 is almost guaranteed, anyway this is bitcoin's anti-inflation promise: given same demand, the price will at least double every 4 years due to supply cut by half

The block reward halving is a 100% sure thing, the market will already price in it several months before, when it arrives, almost nothing will change, this has been proved by 2012 reward halving

Of course months following that event, some dumb miner which have done nothing will feel diminishing return thus start to shut down their rig, but the new miners with higher efficiency will be quickly deployed to compensate the loss in hash rate. Bitfury just announced that their new chip is 5x more efficient than the last generation, so a reward halving would still give them 2.5x increase in efficiency, resulting in higher difficulty

Second, many miners are not mining bitcoin for profit, they mine it for transfer value. Mining equipment company currently are not regulated by financial regulations, unknown capitals can enter bitcoin mining and leave it in form of fresh mined bitcoin without any trace. I guess the large bitcoin bubble in china and forever increasing hash rate regardless of exchange rate has something to do with large scale capital fleeing China. If you think about the nature of these mining operations, the fee is the least concern for them

So, difficulty will continuously rise due to fast changing mining tech, while total mining cost will still get higher and higher due to more capital entering mining and exchange to transfer value, these will all raise bitcoin's price, to more than enough compensate the loss in block subsidy

It is not as safe as most of the people believe, see here:

Is your bitcoin safe in cold wallet?

Besides a protocol change, I have seen people who downloaded fake multibit wallet and get their coins emptied, and who can guarantee the bitcoin.org site you used to download your bitcoin is not a fake one?

Currently there are not so many hackers hacking websites since they basically worth nothing, but bitcoin websites are really worth hacking so I'm not surprised to see more and more fake clients and services

Similar to oil, Gold's value is mainly decided by supply and demand dynamics, and mining technology is improving every day. If some deep mining technology is gaining momentum, you might see much larger amount of gold dig out everyday, sending its value down

Bitcoin however, supply is fixed schedule, never changes, very predictable, but its demand is uncertain right now

These are all banker's industry, not enterprise, FED of course represent the banker's interest

It has been proposed before that each miner contribute part of the mining income to pay the core devs, but the proposal was not further discussed

FOMC members get the highest motivation since they got keep all the money printed, this makes sure that they won't make stupid decisions just for their personal interest

This is because bitcoin is money or capital while rest of the open source software is just a tool which can be replaced at will if not good enough. When you have invested money in the bitcoin ecosystem and become the stake holder, there will be many different actors showing different interest, a chaos. This is especially true when developers are representing the interest of enterprises  

I think core devs should be forbidden from joining any enterprise. Have you ever seen any of the FOMC member working for Microsoft or PayPal??? They are even independent from the government just to make sure to be free from political influence

I just had a thought today: If everyone read this theory and do exactly as it described voluntarily, e.g. long term holding and slowly cashing out, then the anticipated result will be guaranteed, it does not take more than ground school mathematics skill to verify this theory

What is this means? If every participants agree to join this pre-defined investment plan, then they can have a good retirement scheme or long term saving plan which defeat the return of all the retirement/mutal fund in the world. Bitcoin is just a tool to make this plan happen, it is user's behavior drive it to success

Currently this behavior is half unconscious, people have a feeling that holding it long term will be good since it is deflative, but they can not tell exactly why

It's time. Given same amount of time, you can only become an expert in a specific area, this unavoidably limited your view. Or you can select to be a generalist thus giving up details (The smallest project I managed had 100+ developers, I seldom go below system integration level to check the codes)

I say this again: Bitcoin is a monetary system. To design and maintain a monetary system, you need at least the view of the central bank, not the view of programmers, because the programmers are in the lower part of financial industry, and they lack of overview of whole financial world

If in your eyes bitcoin is just a payment system, then naturally you are aiming to defeat paypal and visa, which is the industry leading solution. But this is almost the lowest level of concern for central banks

The problem is that time is the only precious resource that is constantly reduce for anyone. If you can not present a system that is simple enough for others to fully understand in a couple of days, they will just ignore it

In a centralized organization you don't need other's understanding to enforce a change, but here ...

The biggest difference however is that Linux is only an operating system while bitcoin is a monetary system, they are at totally different level economic and political wise

An operating system is just a tool, Linux is free for anyone and people can throw it away at any time. A monetary system is about value and trust, bitcoin is not free and people won't throw them away because that is money

It seems that's the main reason here, so let's drop Lightning Network

If a clearing based solution, require so much change to bitcoin's architecture, then it must be able to provide lots of benefit to worth the risk. Currently I don't really see a big difference between lightning network and traditional clearing solutions, which require no changes for bitcoin at all

BTW, I just heard that Adam Back said that you need insurance for lightning network to work properly (https://www.reddit.com/r/bitcoinxt/comments/3wty7s/dr_adam_back_believes_that_insurance_may_be/)

Ok, if lightning network need insurance to work, and traditional clearing solution also works perfect given insurance, then why don't just use existing mature clearing based solutions? I thought the biggest benefit Lightning network has against traditional clearing solution is that it requires no trust, but it seems not the case. If you need insurance to be trustworthy, then there must be some fundamental weakness with the design of lightning network. I have not looked into details about this statement, too low signal to noise ratio there, but it is very natural that LN like any new system have many security problem which only time will tell if it is a robust design

In my not-so-deep understanding of LN, they are using a similar design as NashX exchange's mutually assured destruction model to keep it trustless, however, that model does not work well under certain circumstances. That's also the reason those so called P2P exchanges can not gain any momentum against localbitcoins: You eventually need an authority to solve a complex dispute, blockchain can not be this authority since it lacks judgement

Ok, everyone can go home and sleep, no work needs to be done, bitcoin is perfect, just raise the block size limit to 2MB for the time being  

Simply put, since most of the investor money always first go to mining (the lowest cost of acquiring bitcoin), if the mining difficulty continuously climb, it means there is new capital inflow, price will get higher. Mining cost basically works as a baseline for bitcoin value, similar to other commodity

The demand however is not easy to evaluate, but you can guess, if the demand get lower, the first thing you will notice is that the mining difficulty going down, means smart capitals are not interested in acquiring bitcoin anymore

And we just had several difficulty jump, so I guess the demand is still rising fast 

This is not very likely to happen. Software only provide utility, so users lose nothing by abandoning one and switch to another one with better utility. But bitcoin is capital. Once everyone have invested so much in this capital, they will incur a huge loss if they leave it, so it is more likely they will continuously injecting new investment to make sure their investment not losing value

Besides, there are other reasons prevent an alt-coin from replacing bitcoin:
Alt-coin is inflation, which against the basic rule of bitcoin
Any coin must be time tested to have enough recognition, and by the time a new coin get recognized, bitcoin's popularity is even higher, new coins can not break the barrier of time

If you are talking about spending, most of my transaction in bitcoin already done between large institutions like web wallet and exchanges, I have not touched my client for a long time, simply because it's more convenient and secure to use web based services with 2FA enabled. Of course there is no FDIC for those institutions, but for coffee money, they are more than enough

Anyway you have to go to exchanges to convert to fiat money to spend, then why don't just directly use exchanges as your wallet? (In fact the world earliest banks evolved from exchanges) For merchants, being able to download a software and directly accept customer payment is great, but the consumer does not benefit from a light weight wallet at all due to all the security issues they have to manage

True, the fundamental reason of a split always comes from politics and economics. That's why we should put enough effort to research user's behavior. You can see my signature to get some statistics I did, obviously majority of the users are using it to store value, that decided the major use case and the corresponding block size strategy


Bitcoin does not need to be spent constantly to maintain its value

It is not about expertise here, it is about time. Given two developers commanding same level of skill, A write a code and B want to make sure it is bug free and secure, the time it takes for B to validate the code will be much longer than the time that A spent on writing codes. Of course you can validate all the security holes of SW given enough time, but that will be months/years and we have not seen the code yet

You can make a poll to see how many people understand BIP101 and how many people understand SW

Actually I don't understand why Gavin showed so much positive attitude for SW and even push it as a hard fork, maybe because he knows it will fail, then people will run into his XT as he planned

I can give you a 10 pages proposal written in ancient chinese + arabic, and tell you this one can solve all the problems for bitcoin, would you accept my proposal? You need to first go into some university for 10 years before you understand what I'm talking about, or you simply ignore it?

Same thing here, if a proposal is too complex for average people to understand, it will just be ignored. In fact, BIP101's problem is just because it introduced a very radical scheme of block size increase that people don't fully understand the consequence of that change. Suppose that it promoted a 2MB block size increase, it should have much larger support than today

But at least you understand that BIP101 will increase the risk of centralization. However for SW proposal, I totally don't understand anything at all: By changing the bitcoin architecture, Pieter essentially change it to something else, an alt-coin. So all the talks about SW should go into alt-coin section, not here. And all this large degree of deviation from Satoshi's original design for what? A mere one time increase for capacity of light nodes, not even helping full nodes?

Nassim Nicholas Taleb: "Solutions need to be at least as simple as the problem they solve. Anything else brings multiplicative unintended side effects."

From the title I thought he was talking about fiat money, what a genius I thought 

Good to hear this, and thanks for sharing the video from Vinay Gupta. I suddenly understand lots of thing in the latest HongKong consensus conference. Why Gavin was not there, why Pieter was rush to push in a strange soft fork proposal and why Jeff said you should not be afraid of hard fork. It seems there are still very strong political struggle inside

Although I do not run XT due to my personal perference (I'm the conservative type that prefer change nothing unless definitely necessary), but it is good to hear different voice since bitcoin should be politically neutral, not presenting any single faction's interest

However, any decision will make you either tilt to one side or the other, you can not really be 100% neutral. And because participants all have different interest, it is very difficult to reach agreement in a decentralized community

Typically in a open source project, people with the most knowledge get to decide what code should go in, what should not, this kind of governance structure has been existing since GIT was born. So from a political point of view, the governance structure is very centralized and hierachical. Then if we have two lead designer do not agree with each other, we have this XT branch, similar to a civil war in a centrally organized country

I think eventually there is a need for some kind of code like ten commandments in Bible, although you don't need government in anarchist community, but you still need some kind of basic principles to guide everyone. But so far I have only seen Nick Szabo mentioned a little about 4 priorities, and that also need completion/debate