The Blocksize Issue = Doing the Dirty Dishes

[blablahblah]

Mining income can't get screwed because miners will simply charge more for txn inclusion in their blocks. Either that or all miners will quit, in which case there will certainly be no abundance of block space. Again, self-adjusting.

OK, fair point.
Even with infinite block space, miners can still charge for the service of including transactions.

Take a snapshot of "waiting transactions", and let's say there's 100s of fresh, 'normal' transactions priced from (just pulling numbers out of the air) 0.000001BTC to 0.2BTC.
On top of that let's say there's 5000 'free' transactions on the waiting list. For simplicity, let's say that special transactions with some kind of secondary fee are already covered in the normal group.

Desired situation:
A group of the largest miners continuously work hard to keep Bitcoin stable with some central banking theory. They set and continuously adjust minimum fees. This affects the flow rate of transactions in the BTC ecosystem. If there's a price shock -- some major sell-off or buy-up, or some other currency crashes, the idea is that they can always react to dampen that shock. After all, they're rich in Bitcoin so the incentive is strong.

Bad situation caused by overly abundant block space:
A relatively small miner (e.g.: <1%) decides to play by a different set of rules. E.g.: when they get blocks, they accept ALL transactions. This has a disproportionate effect on price and inflation (many people figure "for the normal fee I'd rather use XYZ-coin because it's cheaper, but because free transactions get through within 2 days anyway, I've got some extra business to do!") So basically you get a small miner potentially ruining, or even sabotaging the hard work that the large miners put in to stabilise.

So you get a sort-of "two speed economy". The large responsible miners only have control over fast ~<1 day phenomena like flash crashes and such-like. However, the slow trends are completely out of control with small miners having disproportionately more influence. OTOH maybe it's not such a bad thing. Thoughts?

[WiW]

A group of the largest miners continuously work hard to keep Bitcoin stable with some central banking theory.
...
If there's a price shock -- some major sell-off or buy-up, or some other currency crashes, the idea is that they can always react to dampen that shock.

No thank you.

Edit: just to clarify... Bitcoin doesn't need some central banking theory to keep prices stable. Bitcoin prices correlate to the value of goods they represent (both in terms of intrinsic worth and psychological value). There is no need to artificially adjust this. By not artificially adjusting this (as fiat currencies do) there will only be more transparency as to the real worth of the economy and goods, or at least your relative share of it (and bitcoin doesn't exclude competing currencies). No need for third parties to vaguely adjust things for us according to their own interests - a system ripe for abuse (as seen with fiat currencies).

If shocks happen, then they happen. It's for a reason. And if it's "artificial" then you always have competing currencies. Keep your share of litecoin or whatever coin you wish. Keep it gold. Keep it in Dollars. Keep it in whatever you trust. I trust bitcoin to be a great long term hedge, even if shocks do happen. Unless the shock entirely debases bitcoin I believe prices will adjust themselves to what they really are and I see no reason to believe otherwise. Just look at what happened after the bitcoin bubble of 2011.

[blablahblah]

Just look at what happened after the bitcoin bubble of 2011.

What happened after the Bitcoin bubble of 2011?

I heard that during the upwards 'rocket' phase, zero-fee transactions were accepted just as fast as fee-paying transactions because a) miners didn't give a shit and b) there was so little real commerce going on that block space was practically infinite.

[WiW]

In reference to my trust in bitcoin as a long term viable option even with huge price shocks, the bubble of 2011 proved that we don't need artificial stabilization for bitcoin to work. Also, that bubble will probably be the second biggest record breaking shock of all time for bitcoin seeing how volatile bitcoin is during adoption phase (each transaction represents a relatively huge percentage of the bitcoin economy atm). The biggest shock will be the one that will happen when a competitor replaces bitcoin - that's when bitcoin won't lose %90 of it's value, it will lose all of it (and that will happen some day).

But in my opinion, for the vast majority of bitcoin's lifetime, you will not see such shocks that are so disproportional to the real value of goods that the currency represents. Especially if it becomes universal to some degree. Just like you don't see huge price shocks for gold (what you actually see is huge shocks of fiat currencies against gold).


tl;dr
I trust bitcoin as a decentralized currency and I don't want to trust miners by giving them the ability to dampen shocks. Especially because allowing so is a system ripe for abuse.

[zvs]

the blocksize doesn't concern me so much... though i suppose if you're solo mining on, say, 10mbit upstream, you'd probably want to have a dozen or two really nice nodes on your addnode list, turn off listen, and set maxconnections to 20 or something.

(or alternatively just set maxblocksize to some low number in the conf file)

[markm]

I think this problem automatically fixes itself even if there is no hard-coded limit.

Then it is not the problem that the hard-coded limit is there to solve.

If someone is able to send any size block the want, how many stack overflow exploits, heap overflow exploits, array overflow exploits and so on are hacker going to find when they send a petabyte-sized block?

How about when they send a billion-petabyte block?

The max block size is about the maximum size of blockeach and evry full node has to be able to handle.

Currently, every full node right now can handle one megabyte.

Once every full node has upgraded to be able to handle two megabytes, the max could be raised to two megabytes.

The more fees you the people put in, the sooner all full nodes will be upgraded.

Show how urgently you want bigger blocks by sending larger fees faster.

-MarkM-