1MBCON Advisory System Status: Yellow Alert ELEVATED

[solex]

                        

Introducing the 1MBCON Advisory System which gives a quick overview of the risk conditions against timely transaction confirmations into the blockchain.

The debate has been thorough and extensive. Now the status of the risk needs to be tracked: average size of 1000 blocks (7 days) as a percentage of 1MB

End of Q1, 2015

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[googs84]

Guarded looks the best to me.

[DooMAD]

At first I was tempted to go with "guarded", but after looking more closely I'd agree with "elevated".  There have only been a few brief occasions in the last 60 days when we've been below 0.3MB, so on this scale we are indeed in the yellow.  Also this is something that could escalate quickly and at short notice, so I'm pleased people are taking note of this.  Perhaps the wording of the scale might need tweaking, though.  At 30%-45%, I don't know if I'd call that a significant risk of delay.

Maybe bump them all up one and add a new category above 90%, so:

0-15% = Very low risk

15-30% = Limited risk

30-45% = Some general risk

45-60% = Significant risk

60-75% = High risk

75-90% = Severe risk

90%+ = Bottleneck

[solex]

At first I was tempted to go with "guarded", but after looking more closely I'd agree with "elevated".  There have only been a few brief occasions in the last 60 days when we've been below 0.3MB, so on this scale we are indeed in the yellow.  Also this is something that could escalate quickly and at short notice, so I'm pleased people are taking note of this.  Perhaps the wording of the scale might need tweaking, though.  At 30%-45%, I don't know if I'd call that a significant risk of delay.

Maybe bump them all up one and add a new category above 90%, so:

0-15% = Very low risk

15-30% = Limited risk

30-45% = Some general risk

45-60% = Significant risk

60-75% = High risk

75-90% = Severe risk

90%+ = Bottleneck

Fair points, but I really don't think 75%+ presents simply just a "risk". At that level there will be clear and present time periods of delays because not all miners will fill blocks even when unconfirmed, fee paying, tx are backing up by the thousands. Near-empty blocks are churned out at random intervals by many different miners. Also, as soon as a pool solves a block new work requests are often met with an empty block template. So 90%+ is unlikely to be seen, yet the bottleneck will be happening.

The risk of a flooding attack also grows as the cost of executing one drops as the average block size increases. It becomes very cheap in the end.

[spartacusrex]

WHEN'S THE HARD FORK!! ? 

I need time to get enough popcorn..

Bring it on.

[odolvlobo]

Brownout

The intention is for blocks to be full so that transactions bid for space with transaction fees.

Ultimately, transaction fees alone will pay for the security. If nobody pays transaction fees (because they don't have to), then there will be no incentives to mine and and 51% attack will be possible.

[DooMAD]

The intention

Who's intention? 

is for blocks to be full so that transactions bid for space with transaction fees.

Ultimately, transaction fees alone will pay for the security. If nobody pays transaction fees (because they don't have to), then there will be no incentives to mine and and 51% attack will be possible.

Someone might actually think this through to conclusion one of these days and stop spouting the same tired old nonsense.  When the time finally comes that there's no more block rewards and the network has to survive on fees alone, it will need to have far more users than we're currently capable of supporting.  More users = more fees.  It's not rocket science.  The fees generated by the current number of users would be entirely insufficient even to be considered an incentive at all, let alone a good incentive.  The userbase must increase as the block reward diminishes.

If the intention is to have a slow network where your transaction may not get included in the next block even when paying a fee, there will be even less incentive to mine when people switch to another coin that does confirm their transactions in good time.  If anything, full blocks will result in a smaller userbase and less fees to support the network.  I just can't take people seriously when they say full blocks will somehow add security.  Please stop.   

[odolvlobo]

is for blocks to be full so that transactions bid for space with transaction fees.

Ultimately, transaction fees alone will pay for the security. If nobody pays transaction fees (because they don't have to), then there will be no incentives to mine and and 51% attack will be possible.

Someone might actually think this through to conclusion one of these days and stop spouting the same tired old nonsense.  When the time finally comes that there's no more block rewards and the network has to survive on fees alone, it will need to have far more users than we're currently capable of supporting.  More users = more fees.  It's not rocket science.  The fees generated by the current number of users would be entirely insufficient even to be considered an incentive at all, let alone a good incentive.  The userbase must increase as the block reward diminishes.

If the intention is to have a slow network where your transaction may not get included in the next block even when paying a fee, there will be even less incentive to mine when people switch to another coin that does confirm their transactions in good time.  If anything, full blocks will result in a smaller userbase and less fees to support the network.  I just can't take people seriously when they say full blocks will somehow add security.  Please stop.    

Simply increasing the user base is not sufficient.

As the subsidy diminishes, if there is no restriction on the number of transactions in a block, then a miner will include any transaction with a fee* because excluding a transaction paying a fee will lower their profit. That means that the fee that people pay will drop to 1 satoshi because there is little incentive to pay more. Even if every block contains a million transactions, then with a 1 satoshi fee it is only worth $2.50 (at current rates) to mine.

Furthermore, Bitcoin's "slowness" may be a problem for certain types of transactions, but it is not a problem for all types. It is not necessary for everybody to adopt bitcoin for everything. Any widespread adoption whether mainstream or niche will result in a user base that it much larger than today's. Bitcoin doesn't have to be the only currency in order for it to succeed.

Finally, full blocks increase mining revenue, which makes it more expensive to launch a 51% attack. That is why full blocks increase security.

You may disagree, but calling that "nonsense" only highlights your ignorance and your arrogance.

* There may be a lower bound to transaction fees because the marginal cost to process a transaction may be more than 1 satoshi.

[Buffer Overflow]

The intention is for blocks to be full so that transactions bid for space with transaction fees.

Intention or is this just your opinion?

[spartacusrex]

I'm all for SOME block size limit.

But 1mb is just tooooo small..

[odolvlobo]

The intention is for blocks to be full so that transactions bid for space with transaction fees.

Intention or is this just your opinion?

Perhaps "intention" was the wrong word. The "benefit that was realized early on" of having a fixed block size is to support transaction fees. It makes sense to me.

Here is a discussion from 2011: https://bitcointalk.org/index.php?topic=6284.0

[DooMAD]

is for blocks to be full so that transactions bid for space with transaction fees.

Ultimately, transaction fees alone will pay for the security. If nobody pays transaction fees (because they don't have to), then there will be no incentives to mine and and 51% attack will be possible.

Someone might actually think this through to conclusion one of these days and stop spouting the same tired old nonsense.  When the time finally comes that there's no more block rewards and the network has to survive on fees alone, it will need to have far more users than we're currently capable of supporting.  More users = more fees.  It's not rocket science.  The fees generated by the current number of users would be entirely insufficient even to be considered an incentive at all, let alone a good incentive.  The userbase must increase as the block reward diminishes.

If the intention is to have a slow network where your transaction may not get included in the next block even when paying a fee, there will be even less incentive to mine when people switch to another coin that does confirm their transactions in good time.  If anything, full blocks will result in a smaller userbase and less fees to support the network.  I just can't take people seriously when they say full blocks will somehow add security.  Please stop.    

Simply increasing the user base is not sufficient.

As the subsidy diminishes, if there is no restriction on the number of transactions in a block, then a miner will include any transaction with a fee* because excluding a transaction paying a fee will lower their profit. That means that the fee that people pay will drop to 1 satoshi because there is little incentive to pay more. Even if every block contains a million transactions, then with a 1 satoshi fee it is only worth $2.50 (at current rates) to mine.

Furthermore, Bitcoin's "slowness" may be a problem for certain types of transactions, but it is not a problem for all types. It is not necessary for everybody to adopt bitcoin for everything. Any widespread adoption whether mainstream or niche will result in a user base that it much larger than today's. Bitcoin doesn't have to be the only currency in order for it to succeed.

Finally, full blocks increase mining revenue, which makes it more expensive to launch a 51% attack. That is why full blocks increase security.

You may disagree, but calling that "nonsense" only highlights your ignorance and your arrogance.

* There may be a lower bound to transaction fees because the marginal cost to process a transaction may be more than 1 satoshi.

Let me put it another way, then.  If, hypothetically, there was no block reward right now, based on the transaction volume we are getting now, how much fee would need to be paid on each transaction to give at least the current average level of fees plus the 25 BTC reward?  We're currently averaging about 750 transactions per block.  By my figures, each transaction would have to have a fee of about .034 BTC just to cover the 25 BTC reward, plus a bit extra for the current fees that are already being paid (so there's no loss of mining revenue).  How many people are going to pay about $9 USD in fees for every single transaction?  If people aren't willing to pay that much, there will be less transactions and that cost will then rise further.  Again, there is no conceivable way this is going to make the network more secure in the long run.

But increase the number of transactions in the block, rather than limiting it, then you can spread that cost over a greater number of users, making it more affordable.  Obviously we can squeeze in a few more than the 750 we're averaging at the moment, but we genuinely do need more users than the system will currently support to make this thing sustainable in future. 

[Zangelbert Bingledack]

This alert system may apply if fee bidding market dynamics haven't been fully implemented.

But if they have, there should never be delayed transactions, just a rise in transaction fee versus speed. I think that is much less severe and much less urgent concern.

Even a third-party centralized website where users and miners could quickly check the recent fee rates for a given desired confirmation time would work, if the clients took an API from it. In fact, something like this will almost certainly pop up if blocks start getting full and the clients haven't figured out fee markets yet, or the blocksize hasn't been raised yet.

For that matter, get nodes and miners working out payment deals as well so we can remove the blocksize limit once and for all and rely on market dynamics. But I guess this will happen naturally as we approach those critical levels, as an antifragile response.

[solex]

This alert system may apply if fee bidding market dynamics haven't been fully implemented.

But if they have, there should never be delayed transactions, just a rise in transaction fee versus speed. I think that is much less severe and much less urgent concern.

Even a third-party centralized website where users and miners could quickly check the recent fee rates for a given desired confirmation time would work, if the clients took an API from it. In fact, something like this will almost certainly pop up if blocks start getting full and the clients haven't figured out fee markets yet, or the blocksize hasn't been raised yet.

For that matter, get nodes and miners working out payment deals as well so we can remove the blocksize limit once and for all and rely on market dynamics. But I guess this will happen naturally as we approach those critical levels, as an antifragile response.

Transaction fees are already the major factor keeping the block size under control, and so is the consensus dust threshold. Without improvements in this area the 1MB would have been maxed out in 2013 based upon the growth of traffic from SatoshiDice (and similar sites). I fully agree that market dynamics is most important, but the market is not as efficient as it could be because non-mining nodes are not directly rewarded for their overhead (only indirectly, by the value appreciation of BTC savings).

There is a serious concern with limited block sizes even when they are not full. The probability of tx confirmation within a given time period decays rapidly once they are usually half-full.



http://hashingit.com/analysis/34-bitcoin-traffic-bulletin

Probably the first thing to realize here is that the traces for 0.1%, 10% and 20% are so similar that the 20% line hides the other two. The 30% line is only slightly different. This tells us that up to now we've not really seen any real effects as a result of transaction rate. At 30% loading we'll still see half of all transactions confirmed within 434 seconds, as opposed to 415 for 0.1%. That gap really starts to widen at 40%, however, where it now takes 466 seconds and at 80% we're up at 1109 seconds (18.5 minutes)! At 100% we're up at a huge 7744 seconds (more than 2 hours)! If the network were ever to reach this 100% level, though, the problems would be much worse as 10% of all transactions would still not have received a confirmation after 22800 seconds (6.3 hours).

I find this worrying, because Bitcoin's strong network effect could be seriously damaged through long tx delays resulting in bad publicity, collapsing price, then persistently falling hash rate. If people who want to use Bitcoin are priced away from it and forced to use alternatives then it is the beginning of a long decline.

[Zangelbert Bingledack]

As for node incentivization, what do you think of Justus's idea?

Larger blocks (after the limit is raised) kept in check by something I roughly understand to be nodes agreeing to give priority to certain miners for pay.

[solex]

As for node incentivization, what do you think of Justus's idea?

Larger blocks (after the limit is raised) kept in check by something I roughly understand to be nodes agreeing to give priority to certain miners for pay.

I like the concept, and the thinking behind the potential different node services which could be priced in a networked market. Whatever crypto is dominant in 5 or 10 years time will need to have a functional implementation of this to maintain its no.1 position. I hope it is Bitcoin.

However, time is too short to see the coding done, and a node services market develop, before the existing block size limit has major negative effects.

[oblivi]

If Bitcoin makes it as a global payment system that wants to rival the current electronic payment leaders, not even 20MB will be enough... what are going to do then?

Right now it is a problem, if the fork happens, 20MB will last for a couple of years, then we'll meet the same problem ad infinitum...

What can be done about this? Didn't Satoshi predict this? What was his take on this matter??

[Kazimir]

If Bitcoin makes it as a global payment system that wants to rival the current electronic payment leaders, not even 20MB will be enough... what are going to do then?

Right now it is a problem, if the fork happens, 20MB will last for a couple of years, then we'll meet the same problem ad infinitum...

What can be done about this? Didn't Satoshi predict this? What was his take on this matter??

If this ever becomes an issue, we could agree on redefining the block limit dynamically. For example, let the maximum block size increase 1½ % at every 2016 blocks (i.e. right along with the difficulty retarget). This way, the max block size will roughly double every two years.

Furthermore, there's tons of other stuff we can do to keep the blockchain smaller, such as pruning old blocks, or discarding public keys from signatures (saves quite some tx size).

Nothing but a minor practical problem, than can be easily overcome whenever the need arises.

[Zangelbert Bingledack]

20MB will last for a couple of years, then we'll meet the same problem ad infinitum...

1) Not ad infinitum. Once we reach mainstream adoption growth will slow to roughly the global economic growth rate.

2) All that really needs to happen is exchanges have to make a few infrastructure changes to allow instant hard fork arbitrage. They have to make it so that in the event of a hard fork it will be really easy to trade old BTC for new BTC, and vice versa. To me that's a perfect solution. Hard forks should not be a major issue. If they are, then whatever is making that so is what needs to change. Bitcoin needs to be able to adapt easily, on a dime, as the market sees fit. Note: This doesn't imply changes will be less conservative than they have been; the market price will reflect the valuing of conservatism and the precautionary principle, only favoring changes when absolutely needed, and only favoring sudden radical changes in the event of a dire emergency. It's basically the entire wisdom of the market ready to make the best decision that reflects all the luminaries out there.

You've heard of prediction markets and how amazingly accurate they are? Well with Fork Arbitrage (FA) exchanges function as prediction markets for which fork will succeed. If you have insight, you stand to make a lot of money. If you have no insight, sit tight and whichever fork wins your money is worth the same as it was before. Even in the unlikely event of, say, a 70/30 split between old and new this remains true, because you automatically own an equal share of both ledgers.

[smooth]

This alert system may apply if fee bidding market dynamics haven't been fully implemented.

But if they have, there should never be delayed transactions, just a rise in transaction fee versus speed. I think that is much less severe and much less urgent concern.

That's assumes people don't want delayed transactions, which is probably wrong. A subset of transactions will accept delays for a lower fee.

I don't think monitoring delays alone is meaningful (nor fees alone). What would be meaningful is a monitoring a cost curve of delays vs. fee.