Max block size limit - why I'm not worried about miner centralization or attacks

[WiW]

So I understand the worry that increasing the max block size limit will make mining a professionals-only game, and eventually lead to centralization. But mining will be a professionals-only game for many reasons,  not just because of max block size. Let's not delude ourselves.

Professional-only business... Get used to it
If it leads to only a few players playing, well, what were we expecting? Each and every person with a computer to help with building the blockchain forever? There's a reason transaction fees are an integral part of the blockchain - it costs electricity - it's a business, an essential one, and not everyone wants in on this business. Give it up. Arbitrarily limiting the max block size means we don't trust the market to figure out the nitty gritty details. Let the miners deal with it.

I don't grow my food, and yet it's an absolutely most essential business that I rely on. Why don't I grow my food? Because I don't want to be a farmer... But limiting the max block size is like limiting the size of supermarkets. Make sure everyone is just hungry enough to make sure that farmers make money. It's just dumb. If miners won't make enough money then they'll stop mining and if they stop mining we'll have to start paying larger transaction fees. It's just how it works. Same thing with farming - if farmers stopped making money they'll quit and we'll simply have to pay more to get farmers back to work.


Network security! Pay those miners premiums!
Now you're saying "but if miners quit the game (which I just proved they won't) then the hashrate will drop and we'll be vulnerable!"
High hashrate is really important, I agree. Especially now that bitcoin is still hated by very big players (governments, banks, etc.) At the moment we're dumping loads of money into the mining business thanks to the block reward which is huge. I don't remember what we're currently paying miners with inflation, but there's so much money in mining now and that's why the hashrate is as high as it is. A quick back of the envelope calculation tells me that we're mining roughly ~1.3 million bitcoin/year * current mtgox price = ~$60,000,000/year at current prices. That's more than 10% of the ENTIRE BITCOIN MARKET CAP per year for miners. This is important because bitcoin is not the world's most favourite currency, so we're paying premium to keep the network safe while governments and banks still hate it. And when the market saturates (i.e. when new governments and new banks will start using bitcoin as well)? Well, then bitcoin will be the world's most favourite currency and the hashrate will be even higher. And who's gonna want to attack the world's most favourite currency?

I never understood why people are worried about bitcoin attacks after it takes over. If it took over it's because everyone wants it. And if someone has over 50% of the hashing power, they must be rich in bitcoin so why would they want to destroy it? And if they're rich in something else, it will only work if that something else is more favourable than bitcoin anyway... I don't care if bitcoin survives or not, I want to be my own bank. If the network goes down it's probably not because it's not secure, it's probably because there's something else that's better. If we're not paying enough to secure it, it's probably because there's a new/more evolved network that costs less to secure (cheaper transaction fees, yay!).


So why YES abolish the max block size?
What do users want? Secure network or a no-third-party payment system? Since I don't care if some other aternative coin takes over, to me the latter is far more important.

Here's why I can't sleep at night: if you artificially make an unregulated market more profitable than it naturally is (limiting max block size), you're making a market ripe for abuse. Off the top of my head I have two examples for this. The computer OEM market (not regulated and internationally competitive) - a deep, saturated market - is shipping millions of computers each year, even though the OEMs keep changing: some are losing money, others are rising in profit, the natural forces of supply and demand simply work. On the other hand, the "illegal" drug market (not regulated, but artificially more profitable by law), has huge drug cartels pretty much controlling the whole scene. I mean complete control as in no new business allowed (you'll be killed if you get too big) and all prices are entirely manipulated by central authorities (the drug cartels themselves). Even though anyone can grow whatever they want (decentralized) just like the drug cartels (yes, you will both still have to run away from authorities).

If we keep the max block size limit, we're making small transactions on the blockchain - be your own bank - virtually impossible on scale, and we're making the mining business way more profitable than in needs to be and we'll get miner cartels. This scares me.

[jgarzik]

Sorry, "impossible to scale" is factually incorrect, as has been pointed out in other threads.

[misterbigg]

The comparison to drug cartels is invalid. What are they going to do, shake down honest miners at their house and threaten them with violence if they don't "quit the business?"

[WiW]

The comparison to drug cartels is invalid. What are they going to do, shake down honest miners at their house and threaten them with violence if they don't "quit the business?"

Yup. What would you do if you were a multi-billion dollar corporation with a threat to your vast income in an unregulated market? What are American corporations doing to secure their inflated income? (hint: America wages many wars around the world in countries it couldn't give less of a fuck how much "freedom" they have) Remember, this business is very important for them - they're making boatloads of money thanks to the max block size limit!

However by making mining absolutely competitive with no arbitrary and unregulated limits (and hence uninflated margins), you get an industry where it's not worth sending goons to put others out of business. Do you think that if drugs were legal the drug cartels would go through all the hassle of drug wars in order to secure tiny margins? The reason drug cartels are so violent is because there's lots of money involved. Computer OEMs don't have the incentive to start wars because there isn't that much money in it anyway.

Sorry, "impossible to scale" is factually incorrect, as has been pointed out in other threads.

Please point to me how I can be my own bank while retaining a universal limit of 7tps. I'm entertaining all clever ideas how to scale bitcoin, but it's becoming evident to me that if you're off the blockchain then you're compromising some important stuff you only get with the blockchain. Such as getting the network's permission to transfer wealth instead of a third party which is rich enough to move stuff on the blockchain.

[jhansen858]

Can someone explain the issue with the block size or refer me to a good explanation if one exists.  I have been reading up on it but I cant seem to figure out what the crux of the matter pertains to?

What I understand thus far is that the block size can only accomidate so many transactions per block and that everything beyond that would have to wait till the next block.

I also understand that transactions that have a fee attached to them get prioritized and will be placed in a blockchain above free transactions?  Am I doing good this far? 

[cypherdoc]

1MB is sufficient for roughly 2400 transactions (or 4tps). The exact size of an individual transaction depends on the number of in/out addresses.  some ppl are extrapolating the current growth in #tx into the future and envision them outgrowing the size of the block and thus driving up the fees required to get a tx into the block which then might make it too expensive for smaller players to "afford" using Bitcoin.

[WiW]

1MB is sufficient for roughly 2400 transactions (or 4tps). The exact size of an individual transaction depends on the number of in/out addresses.  some ppl are extrapolating the current growth in #tx into the future and envision them outgrowing the size of the block and thus driving up the fees required to get a tx into the block which then might make it too expensive for smaller players to "afford" using Bitcoin.

It's worth noting that the limit is an arbitrary limit that (as far as I understand) was supposed to be temporary so that people don't spam the network. However, now that we're reaching the limit, it was meant to be lifted but some people are becoming quite paranoid about the whole thing.

Bitcoin is designed to be, and I'm quoting Satoshi here:

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution...

If you limit the amount of transactions to 4-7 per second, then you're not allowing this. You're building a backbone and then relying on other third parties to allow online payments to be sent directly from one party to another.

[drawingthesun]

If Bitcoin will always remain at 7 transactions per second, the people that decided this have already doomed Bitcoin because another will replace it. I know these 1MB allocator's point to Bitcoin being a storage for wealth and there will be no need for VISA/MasterCard like transaction volume, however what they don't realise is Bitcoin serves multiple purposes:

• Storage for wealth
• A transaction network global and distributed
• A unblock-able and irreversible transaction network

If we strike "useful transaction network that can handle several thousands of transactions every second" of the list of Bitcoin functions, then another will destroy us eventually. Why on earth anyone here wants to cripple this young network really confuses me, but some get an idea in their heads and nothing will change their mind. They are right the network will become irrelevant and our wealth will eventually be destroyed because of them.

[solex]

Excellent thread.

Some centralization is inevitable while Bitcoin growth outpaces Moore's Law, meaning that individuals will be much more likely to require lightweight nodes of the type presented here: https://bitcointalk.org/index.php?topic=88208.0

Perhaps Moore's Law will catch up when Bitcoin market saturation occurs (in a couple of decades?) so that an individual can easily have a full node again. But why some people want to choke off its long-term potential for short-term ideological purity - is beyond me.

[Zangelbert Bingledack]

In summary, market-induced centralization is not a kind of centralization to be feared, because it is self-limiting.

People who think the centralization will continue to dangerous levels are guilty of static thinking and treating miners as robots. The incentive structure for miners is dynamic, not static: it changes as the consensus blocksize limit increases, automatically curbing any over-centralization.

Remember most of all that the current level of decentralization is arbitrary, because the blocksize limit is arbitrary. If more decentralized is always better, why not make the blocksize even smaller? There is an optimal amount of decentralization, but no one knows what it is, and letting go of the blocksize limit will allow the market to find it.

[justusranvier]

There will be no centralization if the max block size is removed.

Once Bitcoin starts processing as many transactions as PayPal the fee revenue will match the block subsidy. From that point on increased transaction volume growth will create noticeably larger block rewards which will attract more miners, not fewer.

[Technomage]

I mostly agree with the OP. The block size limit must be raised. I'm not certain that I agree with removing it entirely, but I'm strongly in favor of increasing it at some point. Bitcoin is certainly capable of more tx/s than it is now due to this fairly artificial limit.

The kind of centralization we would get if we don't raise, let alone the inefficiencies of being forced to use another platform for any transactions that aren't huge, is a much bigger worry than the non-problem of raising it. The only real issue is that enough of an incentive to mine remains at all, centralization of mining is a non-issue.

[samurai1200]

Eliminating the block size ceiling is asking for a network (D)DoS.

Actually, just one person could do it, and do it very cheaply. S/he would have an address send single satoshis to many other addresses (and vice versa). To overcome the DoS, avg network tx fee would have to rise above the attacker's, putting the tx's off indefinitely. This would raise the avg tx fee to a higher, artificial level.

Unlessssss... tx priority takes time into account? Going to read up....

[solex]

Samurai, read up this one:
https://bitcointalk.org/index.php?topic=148211.0

[Littleshop]

Eliminating the block size ceiling is asking for a network (D)DoS.

That is few people are thinking about elimination.  Maybe 4x to 10x the current space.  Combine with an intelligent fee structure and blockchain spam will pay for itself.

[WiW]

I'm not certain that I agree with removing it entirely, but I'm strongly in favor of increasing it at some point.

I've been hearing this opinion and it seems very popular. Why? By increasing the limit but not removing it, you're simply making a new arbitrary limit. Bitcoin will grow to hit the new limit just the same...

The whole point is that without a limit, there is zero artificial inflation of profits for miners. With any limit you'll have some degree of artificial profit inflation and hence some degree of cartel-like behaviour.

[samurai1200]

Unlessssss... tx priority takes time into account? Going to read up....

Herp derp, rtfm:

Code:

priority = sum(input_value_in_base_units * input_age)/size_in_bytes

where input_value is # of satoshis, input_age is number of confirmations.

I feel like there's an attack in there, somewhere.