inflate bitcoin or keep 1MB cap. your decision

[tiberium]

The blocksize debate seems much more intricate than many of you are all led to believe. My simple understanding of economics reduces us to two decisions:


Inflate bitcoin, e.g. remove the hard cap and allow for greater block rewards to sufficiently incentivize mining
or
Reduce block size/slow block size growth in order to encourage fees.


By 2024, approximately 94% of all bitcoin's will be mined, and block reward will stand at 6.25btc. Unless a massive adoption event occurs that causes TX volume to jump exponentially, it is possible that by 2024, or past 2024, miners will no longer be sufficiently incentivized to "mine" as good actors.


The issue is that no one knows how bitcoin will be used in the future, but in order for it to successful in any capacity, miners must be incentivized sufficiently. Blowing the cap off the blocksize is a good way to disincentivize people from submitting TX fees, and the only people in the world who probably would be willing to mine at a loss are the trading engines that operate stock exchanges, countries that adopt bitcoin, and banks that are using sidechains.

In order to support a massive blocksize increase, you have to have a lot of faith that in the future (within 10 years) bitcoin's transaction volume + TX fees experiences a possibly brief but exponential increase. We've made a lot of inroads in the industry, but we've so far failed miserably as a currency since 2013. If blockchain technology is our own avenue for increasing transaction volume, I don't think there should be any rush to increase the block size.

We should only increase the blocksize when absolutely necessary. E.g. when we know that there is transaction volume that will never leave the network--- industries entering side chains to obfuscate their transactions-- country x adopting bitcoin-- x country's stock exchange moved to blockchain.

blocksize (today) at 1mb filling up (today) and forcing people to submit 0.0002 btc, or 2000bits as a TX fee does not warrant a block size increase.

[iGotSpots]

Increases will only further force layman users with limited internet speed or bandwith to use insecure third party services to use the chain. It's a terrible idea; there are many more effective ways to deal with the issue than this lazy increase

The people who can benefit most from BTC do not have the crazy powerful Internet connections that most of us have. It's a short sighted solution that only puts a bandaid on a gunshot

[monsanto]

By 2024, approximately 94% of all bitcoin's will be mined, and block reward will stand at 6.25btc. Unless a massive adoption event occurs that causes TX volume to jump exponentially, it is possible that by 2024, or past 2024, miners will no longer be sufficiently incentivized to "mine" as good actors.

Well there's always proof-of-stake.

In all seriousness though if they're able to push through the increased block size it will set a precedent and other possible future changes like POS might not be unthinkable.

[LFC_Bitcoin]

Surely increasing block sizes to 2MB will help to a certain extent & not change things too much or make things worse?
There must be a compromise because I don't trust Hearn & Gavin at all. I worry what will happen if there's a conflict of interests.

[medUSA]

We should only increase the blocksize when absolutely necessary.
<snip>
blocksize (today) at 1mb filling up (today) and forcing people to submit 0.0002 btc, or 2000bits as a TX fee does not warrant a block size increase.

The blocks are filling up. Some may be spam, but most are legit transactions. Not every block is full, but we are pushing the average higher and higher. The need for a higher fees during peak hours is a symptom that blocks are becoming full. Sidechains could be a solution, but how close are we to actaully using them? Do we have to wait until all the blocks are full before we raise the limit?

[Kazimir]

Inflate bitcoin, e.g. remove the hard cap and allow for greater block rewards to sufficiently incentivize mining

This is bound to happen sooner or later, but there are still many variables with this option.

Personally I would be in favor of this:

increase max block size to 2Mb in the near future, and increase the limit with 50% every 52596 blocks (≈about 1 year). But any of the proposed solutions currently being discussed is WAY better than ongoing debate and no solution at all.

[DooMAD]

I don't think the other outcome would be inflation.  It's more likely that the outcome would be Bitcoin becomes a niche plaything for the wealthy and hash rate drops dramatically when there aren't enough fees generated.  If Bitcoin can't accommodate a global userbase, some other coin will come along that will.  If that other network generates more in fees, miners will flock to secure that blockchain instead.

I'm in full agreement that miners won't continue securing the blockchain if the network doesn't generate enough fees, but I disagree that increasing the blocksize would remove the incentive for including a fee.  People included fees with their transactions before the 1MB limit was enacted, they continued to include fees when we were nowhere near hitting the cap and they would still continue to include them if the cap was raised.  Further, you can't argue with the rationale that the best way to increase the quantity of fees generated is to increase the quantity of transactions we can include in a block.  More transactions equals more fees generated equals more incentive to mine.  Conversely, imposed limits to the number of transactions is also an imposed limit on the number of fees generated.

Given the choice, which network is a user going to elect to transact on?  The artificially crippled one where blocks are constantly full and either they gamble with fluctuating fees and hope it's the right amount to make it into a block or going off-chain into a third party service because of an arbitrary bottleneck?  Or the one where they simply get included on a blockchain with a consistent fee?  I know which one I'd go for.  And that's also the one miners will elect to secure because it will give them a better income.

Bitcoin might look like it has a monopoly here, but it doesn't.  Either you compromise and provide a system that supports everyone, or you forfeit your top spot to another coin that can.  The market will decide, so you better stay competitive.

[hinchy]

People included fees with their transactions before the 1MB limit was enacted, they continued to include fees when we were nowhere near hitting the cap and they would still continue to include them if the cap was raised.

Can you please explain this to me?

Why do people include fees if the blocks aren't full? I thought the fees are meant to ensure transactions are included in the next block. If the blocks aren't full can't every transaction be included for free?

[DooMAD]

People included fees with their transactions before the 1MB limit was enacted, they continued to include fees when we were nowhere near hitting the cap and they would still continue to include them if the cap was raised.

Can you please explain this to me?

Why do people include fees if the blocks aren't full? I thought the fees are meant to insure transactions are included in the next block. If the blocks aren't full can't every transaction be included for free?

Paying a fee does ensure priority, but it's also a thank-you for the miners, much in the same way it's common in some places to tip the person serving your food at a restaurant.  You can certainly send transactions without a fee, but it's not very polite.  Also, over time, the network will become more reliant on fees as the block reward for miners continues to halve.  If we don't provide adequate incentives for miners, they won't continue securing our transactions and that will cause problems.  This is something that sidechains, lightning network and other third party "solutions" fail to address.

[dreamspark]

People included fees with their transactions before the 1MB limit was enacted, they continued to include fees when we were nowhere near hitting the cap and they would still continue to include them if the cap was raised.

Can you please explain this to me?

Why do people include fees if the blocks aren't full? I thought the fees are meant to insure transactions are included in the next block. If the blocks aren't full can't every transaction be included for free?

Yeah they can be included for free and a lot of the time they are. However its all about incentive and priority. A miner can choose to ignore all TX's that are below a certian fee if they wish even if they only produce 1/10 full blocks.

[hinchy]

Paying a fee does ensure priority, but it's also a thank-you for the miners, much in the same way it's common in some places to tip the person serving your food at a restaurant.  You can certainly send transactions without a fee, but it's not very polite.  Also, over time, the network will become more reliant on fees as the block reward for miners continues to halve.  If we don't provide adequate incentives for miners, they won't continue securing our transactions and that will cause problems.  This is something that sidechains, lightning network and other third party "solutions" fail to address.

Yeah they can be included for free and a lot of the time they are. However its all about incentive and priority. A miner can choose to ignore all TX's that are below a certian fee if they wish even if they only produce 1/10 full blocks.

Thanks guys. Appreciate it.

[Lauda]

The title is pretty bad IMO. My first impression is that OP was going to talk about inflation, i.e. increase of the supply which would be horrible. I'm not sure how many more threads is this debate going to need.
Obviously if we keep the cap fees are going to be eventually so high that Bitcoin will lose that advantage that it has over other methods. Keeping the cap is a horrible idea and will hinder possible adoption increases.

Surely increasing block sizes to 2MB will help to a certain extent & not change things too much or make things worse?
There must be a compromise because I don't trust Hearn & Gavin at all. I worry what will happen if there's a conflict of interests.

I still wonder why we do not go with some compromise plan for starters and focus work on other solutions? The 20 MB proposal didn't work, okay then we scaled down to 8 MB. However, it seems that people are still unable to agree on this matter. Just go with BIP102 for now and work on other solutions. 2 MB blocks are still better than no increase at all.

[gentlemand]

I think BTC has a pretty narrow window of opportunity to address its problems before it becomes a dinosaur. There are plenty of very bright people busy learning what it's doing wrong and how to improve it while this community is frozen in bickering.

Many people involved in it have a wee perspective problem. They rarely realise that very few beyond their little puddle would give the slightest shit if it was usurped and died.

If the small blockers/ settlement network believers think that the rest of the world will be enchanted by a monetary system that costs them 0.1 BTC to send a smudge of change to another wallet then they need to leave their computers and go talk to real humans.

[AtheistAKASaneBrain]

The ideal solution still requires both actors joining forces. We need the 8MB incremental blocksize model and we need gmaxwell's and co efforts with the Lightning Network. We need literally everything. Let's just hope internet connections keep getting improved. I just upgraded my connection myself because they've installed better cable recently, so progress is happening.

[BitTooMuch]

I agree that progress is key. I think the main issue is the belief that decisions should only be made with consensus. This, in my opinion, directly opposes progress.

For example, imagine a government that required a 90% majority to be elected. There would be very few decisions ever made as it would be hard for anyone to claim power.

But it gets worse. Imagine now that 90% of people must agree on every new law passed, ever. How often do you think laws would be passed?

I don't know the alternative to this, and I think hard forking is to revolution as consensus-based decision-making is to republicanism (not the same thing, but of similar nature, disruption, consequences...)

What do you think?

[BillyBobZorton]

I agree that progress is key. I think the main issue is the belief that decisions should only be made with consensus. This, in my opinion, directly opposes progress.

For example, imagine a government that required a 90% majority to be elected. There would be very few decisions ever made as it would be hard for anyone to claim power.

But it gets worse. Imagine now that 90% of people must agree on every new law passed, ever. How often do you think laws would be passed?

I don't know the alternative to this, and I think hard forking is to revolution as consensus-based decision-making is to republicanism (not the same thing, but of similar nature, disruption, consequences...)

What do you think?

It's impossible that whatever happens to bitcoin is not achieve through context. If anyone tried that, then the fork that contained that the hardfork would happen without consensus reached, would never get supported and no one would use nodes for that, so we are safe from that since the code is open source.

[LiteCoinGuy]

Every few weeks, someone involved in Bitcoin writes the following somewhat breathless blog post:

1-Block rewards account for almost all mining rewards

2-Block rewards are going to drop (next drop in 2016/2017) and drop by 50% every four years forever

3-There won't be enough rewards for miners leading to insufficient hashing power

4-Therefore either (a) Bitcoin is in trouble (anti-Bitcoin camp) or (b) block rewards / inflation   will have to be increased to keep miners incented (pro-Bitcoin camp)


Points 1 and 2 are true.  Points 3 and 4 are an exercise in ignoring all data that you can't model, like the old cliche of the drunk looking for his keys under the lamppost because that is the only place he can see...

First, let's recall how rewards in $ terms to miners are calculated because that is what matters for hashing rate since silicon and electricity are priced in $, not BTC.

[# of bitcoins in the block rewards] x [price/bitcoin] + [# of transactions] x [fees per transaction]

Things to ask the author when you read the inevitable Concerned-About-Hashing-Rate-In-The-Future-But-Sanguine-About-Hashing-Rate-In-The-Present Blog Post.

What is your assumption for BTC price at the time of the block reward drop?  Also, in the long-future (2020s before it drops again!), what are your assumptions about transaction volume and fees?

As a general rule, nobody has any defensible assumptions because if you can predict the BTC price in 2017 and 2021 (note, you can't), you would have more lucrative pastimes than predicting hash rates!

I will declare upfront that I have no idea what BTC price will be 1/5/9/13 years from now (same goes for transaction volume) and I have never read any credible analysis suggesting anyone else has a clue either.
    

http://ledracapital.com/blog/2015/8/9/bitcoin-series-35

[Holliday]

In the absence of a block size cap miners can be supported using network assurance contracts.

Totally agree that we want fees to be zero for as long as possible (or forever).

I don't know how anyone can support BitcoinXT (whether they support bigger blocks or not).

[tiberium]

Every few weeks, someone involved in Bitcoin writes the following somewhat breathless blog post:

1-Block rewards account for almost all mining rewards

2-Block rewards are going to drop (next drop in 2016/2017) and drop by 50% every four years forever

3-There won't be enough rewards for miners leading to insufficient hashing power

4-Therefore either (a) Bitcoin is in trouble (anti-Bitcoin camp) or (b) block rewards / inflation   will have to be increased to keep miners incented (pro-Bitcoin camp)


Points 1 and 2 are true.  Points 3 and 4 are an exercise in ignoring all data that you can't model, like the old cliche of the drunk looking for his keys under the lamppost because that is the only place he can see...

First, let's recall how rewards in $ terms to miners are calculated because that is what matters for hashing rate since silicon and electricity are priced in $, not BTC.

[# of bitcoins in the block rewards] x [price/bitcoin] + [# of transactions] x [fees per transaction]

Things to ask the author when you read the inevitable Concerned-About-Hashing-Rate-In-The-Future-But-Sanguine-About-Hashing-Rate-In-The-Present Blog Post.

What is your assumption for BTC price at the time of the block reward drop?  Also, in the long-future (2020s before it drops again!), what are your assumptions about transaction volume and fees?

As a general rule, nobody has any defensible assumptions because if you can predict the BTC price in 2017 and 2021 (note, you can't), you would have more lucrative pastimes than predicting hash rates!

I will declare upfront that I have no idea what BTC price will be 1/5/9/13 years from now (same goes for transaction volume) and I have never read any credible analysis suggesting anyone else has a clue either.
    

http://ledracapital.com/blog/2015/8/9/bitcoin-series-35

here's what you fail to understand:

Miners must be incentivized to secure the network. We cannot assume that fintech companies will move to the blockchain via side chains and be willing to secure the network at a loss. We cant assume that a country will adopt bitcoin, that nasdaq or nyse will transact on the blockchain. We can only assume that bitcoin as a currency and store of value moves forward. If this is the case, we have to cater to the miners.

Because no one knows how bitcoin will scale in the future, relative to today, it becomes very difficult to model TX fees. Bitcoin TX volume, and thus fees, can explode for many different reasons, each drawing a different preferred blocksize and fee structure.

If this is the case, we should delay the hardfork as long as possible so that we collect as much data. I am not opposed to hardforks because most of the hashing is generally transparent and accessible (e.g. bitfury, 21e6, knc).


The biggest issue I have with 64mb blocksize is that what happens in 2024 if bitcoin has never experienced an exponential adoption event? If TX volume continues to increase linearly, fee models that we create today may be incorrect, irrespective of bitcoin price. So if we miss on fee projections, along with 6.25 btc block rewards, we risk the security of the network. It is far better to underestimate bitcoin adoption than it is to overestimate.

[tss]

In the absence of a block size cap miners can be supported using network assurance contracts.

Totally agree that we want fees to be zero for as long as possible (or forever).

I don't know how anyone can support BitcoinXT (whether they support bigger blocks or not).

agreed.  if we don't post then others will think the opinion of support is a majority and other idiots will join the bandwagon.  also feeding the new troll in the never ending discussion is quite futile.  i wish there was a vote to delete topic button but that's another issue.