Scalability - because it's good to have stretch goals

[acoindr]

However, there are several reasons to think that a completely unlimited block chain capacity (or even one that's only limited by hardware capabilities) will destroy the decentralized nature of Bitcoin mining. It's not worth discussing those reasons in this thread (there are other threads for that), but if one of those reasons is true/plausible, that would justify a limitation of the block chain capacity in my opinion, even an "artificial" one. "Artificial" isn't as bad as it sounds: the 21 million BTC limit is equally "artificial", and nobody wants to get rid of that, for good reasons.

Call me biased if you want, but I'm afraid that completely removing the block size limit will make mining a centralized business, thereby destroying (nearly?) all advantages Bitcoin has over fiat currencies.

I don't care if you are or are not biased - all I care about is whether or not your concerns have a basis in reality. I've asked for this several times already, but nobody has ever been able to answer this: please show me a historical example where imposing a production quota results in decentralization.

All evidence I am aware of shows the exact opposite happens: production quotas aid the formation of cartels.

Ker-ist it sounds like cjp is saying having no size limit results in forming cartels and justusranvier is saying imposing a limit aids forming cartels.

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[tvbcof]

However, there are several reasons to think that a completely unlimited block chain capacity (or even one that's only limited by hardware capabilities) will destroy the decentralized nature of Bitcoin mining. It's not worth discussing those reasons in this thread (there are other threads for that), but if one of those reasons is true/plausible, that would justify a limitation of the block chain capacity in my opinion, even an "artificial" one. "Artificial" isn't as bad as it sounds: the 21 million BTC limit is equally "artificial", and nobody wants to get rid of that, for good reasons.

Call me biased if you want, but I'm afraid that completely removing the block size limit will make mining a centralized business, thereby destroying (nearly?) all advantages Bitcoin has over fiat currencies.

I don't care if you are or are not biased - all I care about is whether or not your concerns have a basis in reality. I've asked for this several times already, but nobody has ever been able to answer this: please show me a historical example where imposing a production quota results in decentralization.

All evidence I am aware of shows the exact opposite happens: production quotas aid the formation of cartels.

When something becomes so difficult that only a small fraction of entities can do it, there will be at most only a small fraction of entities doing it.  This is utterly common sense and examples abound.

For instance it is technically difficult and expensive to become an MSB and consequently there are relatively few entities doing it and thus it is possible to exert significant pressure on them from a centralized authority.  Failure to comply with requests will result in forfeiture of a significant investment and opportunity so it is not common to push back sufficiently.

Do you think that those who choose to operate in China (Microsoft, Yahoo!, etc) wish to hand over their customer info to the govt?  No, they do it because that is how the real world works.  Unfortunately we don't live in some fantasy la-la-land where Gordon Moore swoops in and makes everything OK.

[markm]

I don't think production quota is the correct model, the model seems to me to be more along the lines of strategic arms limitation.

-MarkM-

[justusranvier]

Lots of chatter and speculation, but still no real-world examples of how a restrictive quota for the quantity of services a producer is allowed to provide results in increased decentralization.

It is amusing, however, to watch tvbcof confuse cause and effect and argue for the opposite of his conclusion.

[markm]

A nation wants to provide police/army/government (control-over) services for an entire continent or several continents. Citing a specific example from history runs into the risk of invoking a classical thread-killer argument/political-party.

Failure to prevent them results in them ruling / controlling the entire continent or several continents or world.

You seem to be arguing maybe that the only way to prevent them is by exceeding their own quota of armed forces? They cannot be stopped except by failing to observe the quota yourself?

There is a line between usefully large blocks and denial of service sized blocks. The line tends to vary in position depending on how vast a service you have, the larger you are, the harder it is to DoS you with larger blocks.

Or take strategic arms again. Has limiting the amount of nuke you into oblivion service the providers of nuke-you services can provide resulted in more or less nuclear powers?

-MarkM-

[tvbcof]

Lots of chatter and speculation, but still no real-world examples of how a restrictive quota for the quantity of services a producer is allowed to provide results in increased decentralization.

It is amusing, however, to watch tvbcof confuse cause and effect and argue for the opposite of his conclusion.

Not at all.

Your argument would result a very significant and very real 'quota' enforced on the number and flavor of 'peers' in the p2p solution.  That would indeed provoke the 'centralization' that you (maybe) disfavor and the associated ills that I describe.

[justusranvier]

Your argument would result a very significant and very real 'quota' enforced on the number and flavor of 'peers' in the p2p solution.  That would indeed provoke the 'centralization' that you (maybe) disfavor and the associated ills that I describe.

You described the situation of MSBs wherein the costs to start a business in this industry is artificially high because an external agent has created artificial barriers to entry. Because of this excessive cost, competition is limited and the relatively few companies in this space are easily controlled by that agent.

You then go on to imply the solution for this lack of competition is for that same agent to intervene again and impose supply quotas in order to correct the problem it caused when it intervened by imposing barriers to entry.

Typical government apologist "logic", swapping cause and effect by pretending that the effect of bad policy was actually the reason the policy was enacted in the first place.

[tvbcof]

Your argument would result a very significant and very real 'quota' enforced on the number and flavor of 'peers' in the p2p solution.  That would indeed provoke the 'centralization' that you (maybe) disfavor and the associated ills that I describe.

You described the situation of MSBs wherein the costs to start a business in this industry is artificially high because an external agent has created artificial barriers to entry. Because of this excessive cost, competition is limited and the relatively few companies in this space are easily controlled by that agent.

You then go on to imply the solution for this lack of competition is for that same agent to intervene again and impose supply quotas in order to correct the problem it caused when it intervened by imposing barriers to entry.

Typical government apologist "logic", swapping cause and effect by pretending that the effect of bad policy was actually the reason the policy was enacted in the first place.

I used the MSB example as simply an illustration of something which is, for whatever reason, difficult and expensive.  Politics can be left out unless your goal is to muddy the waters.

Every kid has a bike, most adults have a car, and very few people have an airplane.  It is obvious that this has to do with the barrier to entry.  If being a 'peer' requires that one have an airplane because Bitcoin choose to expand to cover a roadless area, it may have been a better to choose ahead of time to not expand into the roadless area.  This is especially the case in Bitcoinland since now everyone artificially MUST use an airplane for any transportation, and usually they must pay an air carrier which are few and highly regulated.  Furthermore, a storm can ground everyone for long periods of time.

The hard and soft limits were inserted by someone, and for a reason.  Just as was the 21x10^6 cap.  The solution is becoming distinctly less 'peer2peer' (as I and many others define 'peers') even with growth staying safely below the hard limit.  That intuitively bothers me.  IIRC, Garzik mentioned as a concern for him as well a number of months ago in a warning that those who think the system is secure against certain forms of attack are probably mis-guided.

[justusranvier]

I used the MSB example as simply an illustration of something which is, for whatever reason, difficult and expensive.  Politics can be left out unless your goal is to muddy the waters.

This is not a valid approach because reasons make all the difference.

Bringing a new smartphone to market is difficult and expensive because the high demand requires significant resources to supply. It works though because since the demand is driven by the customers there is enough profit available to pay for that infrastructure. We see healthy variety and competition in the smartphone market.

Banking is a difficult and expensive market to enter because of artificially imposed barriers to entry. Those extra costs do not pay for services that the customers want - in fact they are used to provide the exact opposite of what customers want. Because of all this we see stagnation and cartels.

I could go on all day citing examples of industries that are difficult and expensive to enter but remain decentralized and competitive because there is little-to-no intervention. Every one of your examples of a market with centralized cartel will have the smoking gun of government intervention in the middle of it.

The intervention is and always will be the problem, not voluntary trade.

[Peter Todd]

I could go on all day citing examples of industries that are difficult and expensive to enter but remain decentralized and competitive because there is little-to-no intervention.

Alright, lets hear your list of such industries.

[justusranvier]

Alright, lets hear your list of such industries.

Not until I see some reciprocity in the form of answering the question I already posed.

please show me a historical example where imposing a production quota results in decentralization.

[marcus_of_augustus]

Watching.

[tvbcof]

Alright, lets hear your list of such industries.

Not until I see some reciprocity in the form of answering the question I already posed.

please show me a historical example where imposing a production quota results in decentralization.

It would be counter-productive and absurd to even come up with an example since your rhetorical question is a straw-man which does not map to the reality of the situation.

The block size is not a 'quota' but simply a number chosen to effect a design goal or the Bitcoin system.  Namely, provoking miners to mine for a reward.  I don't think there is much dispute about that, at least in a qualitative sense...notwithstanding thoughts on how to subsidize the world's masses and assertions that Bitcoin could function just fine if the full block-chain was held by just six corporations/governments.  Although I don't claim to be a historian or have been involved from the early days, these philosophies strike me as afterthoughts and I didn't spot them in the whitepaper.  (It's still on my todo list to read the historic mailing list archives though.)

[justusranvier]

It would be counter-productive and absurd to even come up with an example since your rhetorical question is a straw-man which does not map to the reality of the situation.

The block size is not a 'quota' but simply a number chosen to effect a design goal or the Bitcoin system.  Namely, provoking miners to mine for a reward.  I don't think there is much dispute about that, at least in a qualitative sense...notwithstanding thoughts on how to subsidize the world's masses and assertions that Bitcoin could function just fine if the full block-chain was held by just six corporations/governments.  Although I don't claim to be a historian or have been involved from the early days, these philosophies strike me as afterthoughts and I didn't spot them in the whitepaper.  (It's still on my todo list to read the historic mailing list archives though.)

Transaction processing is a service. It has a supply curve, and a demand curve, and an equilibrium price. A cap on the block size is a production quota that will have deleterious effects that we haven't seen yet only because the equilibrium demand is below the current cap.

When Bitcoin was first released it had no specific limit on the block size. This was only added on later as a means of preventing an attacker from sabotaging the network before the infrastructure was ready to handle high transaction rates. That's the reason it was set so high above the typical block size of the time.

Now that block size is approaching the limit it's time to take the training wheels off and implement the technical measures needed to support the next phase of growth. It needs to be started early because it will take time and the adoption rate is exponential.

[Peter Todd]

Alright, lets hear your list of such industries.

Not until I see some reciprocity in the form of answering the question I already posed.

please show me a historical example where imposing a production quota results in decentralization.

Oh that's easy: agriculture price controls.

Time and time again they've served to limit the profit and efficiency possible by creating larger, more centralized farms in favor of propping up tiny, inefficient family farms. Of course it does mean consumers pay the price with higher, often much higher, food prices than would be possible with open markets.

The Bitcoin blocksize limit does exactly that. But Bitcoin makes for an exceptionally strange, and completely unique market: the point of mining isn't so that we can give money to miners to get SHA256 proof-of-works created. The fact that mining has anything to do with hashing or even stuffing transactions into blocks is a side effect. What we're buying from miners is decentralization itself.

Of course buying decentralization with price controls isn't the least bit novel - that's often the whole point of price controls. Israel is a great example: they don't prop up their crazy farming operations making stuff grow in the desert at great expense because they have any love of family farming, they prop them up so that if their less than friendly neighbors decide they aren't going to sell Israel food they'll still have plenty of options to keep the population from starving. It's the same thinking behind countries propping up shipyards, steelmills, and a whole host of other strategic industries.

But again, Bitcoin is unique in that the only product we're buying from miners is decentralization. Ultimately you can't eat a proof-of-work, but as long as the blocksize limit production quota keeps the barriers to entry for runing a validating node and mining low enough that anyone can participate fully you can rest assured that the actions of miners will reflect the interests of the economic majority, rather than a central cartel.

[Peter Todd]

When Bitcoin was first released it had no specific limit on the block size. This was only added on later as a means of preventing an attacker from sabotaging the network before the infrastructure was ready to handle high transaction rates. That's the reason it was set so high above the typical block size of the time.

Bitcoin was released with a 32MiB blocksize limit, which was later lowered by Satoshi to the current 1MB limit for unknown reasons. (the revision control commit message when this was done does not reference the change at all)

At the time this was done the transaction rate was still low enough that almost all blocks had just the coinbase reward transaction in them.

[tvbcof]

...
Now that block size is approaching the limit it's time to take the training wheels off and implement the technical measures needed to support the next phase of growth. It needs to be started early because it will take time and the adoption rate is exponential.

I'd say implement the technical measures, then think about taking off the training wheels.  We are already seeing crack-ups before the hard limit is touched.  At this point it's more than a skinned up knee which I will suffer if things get all balled up.  And much worse, we'll piss away probably the best opportunity to rid ourselves of the bankster scourge that will come along in my lifetime.

[Peter Todd]

I'd say implement the technical measures, then think about taking off the training wheels.  We are already seeing crack-ups before the hard limit is touched.  At this point it's more than a skinned up knee which I will suffer if things get all balled up.  And much worse, we'll piss away probably the best opportunity to rid ourselves of the bankster scourge that will come along in my lifetime.

Note how the news media has been talking about Bitcoin as a store of value first and foremost; if Bitcoin fails as a payment system, it can still succeed in the long run, just as gold has, but if it fails as a secure, decentralized store of value, it will never make a good foundation to be a payment system.

The technical risk inherent in Bitcoin is huge; keep in mind the fork a few weeks ago was triggered because of a scaling problem. Every time we let the blocksize increase, we risk a whole new set of bugs related to that increase - note how in Bitcoin any performance issue that affects a subset of nodes is itself a dangerous hardfork risk. A good example is the reorganization code: any node that is keeping up with the flood of transaction data, but doesn't have much headroom, can be knocked off the network entirely by a large reorganization if transactions weren't being seen by both sides, risking further damage to the integrity of the system as a whole. It'd take an enormous reorg to cause this problem with 1MB blocks, but with 100MB blocks even just a reorg a few blocks deep could cause a sudden shutdown of large parts of the network all by itself.

[tvbcof]

Note how the news media has been talking about Bitcoin as a store of value first and foremost; if Bitcoin fails as a payment system, it can still succeed in the long run, just as gold has, but if it fails as a secure, decentralized store of value, it will never make a good foundation to be a payment system.

...

As for the media, I'd say that if they got this right it is in the same way a blind dart player can hit a bulls-eye.  Half of the articles I've read have made me laugh out loud in what they get wrong.

For a few reasons I think that Bitcoin is actually kind of a shitty exchange currency.  One of them is the latency which would make native Bitcoin noncompetitive with other solutions.  Another is the permanent ledger which is a huge privacy issue to me.  Yet another is the lack of charge-back support (in simple form at least...and I strongly prefer stone-ax simplicity when possible.)  OTOH, all of these are exactly what I want for a rock solid and reliable reserve currency.

edit: bold italics to be more clear.

[cjp]

Bitcoin was released with a 32MiB blocksize limit

Cool! Do you realize this is exactly the number I mentioned in an earlier post in this thread?
Can you give a link that shows this 32MiB limit?