Also I find this explanation very good, also taken from BU's home page under FAQ section:
Will unlimited size blocks actually result in no fee market?
No. Intuitively you can understand this by realizing that it will take a lot longer to propagate a gigantic block across the network than a small one. Therefore a gigantic block has a higher likelihood of being "orphaned" -- that is, a competing block will be found, propagated across the network and supplant the gigantic block. In this case the miner of the gigantic block will lose the block subsidy and transaction fees. Therefore miners are incentivised by limitations in the underlying physical network to produce smaller blocks, and incentivized by transaction fees to produce larger ones.
Finding the balance between these forces is where the free market excels. As underlying physical networks improve or fees increase, miners will naturally be able to produce larger blocks. The transaction "supply" (space in a block) therefore depends directly on the fundamental capacity, rather than relying on some centralized "steering committee" to properly set maximum block size. Bitcoin is all about disintermediation, and this is another example of it working.
Bitcoin Unlimited is a vote for free markets. SegWit is like a communist centrally planned economy.
Although that sounds logical to a n00b,
who ever wrote that and believes that must have forgotten or flunked their high school (or perhaps as late as 2nd year university) probability and statistics math class.
Reminds me of when I found a high school level probability error in the masternode security model in Dash's InstantX white paper, not to mention how egregiously flawed the Dash the Instant X design is. Evan Duffield replied, but then ran away. Even the economic arguments for Dash's flawed design were refuted. Note that Dash's required premixing (and even not premixing if not employing homomorphic encryption of transaction values, i.e Monero before RingCT) eliminates the possibility of merging UTXO balances and thus causes an exponential blowup in UTXO, which is an issue for scaling to trillions of microtransactions given that performance requires keeping UTXO in RAM.The probability that another block solution will be found within the propagation time
t (not to be confused with
at the time t) is
the Poisson process (λt)e-λt where
n = 1 (i.e. only one or more occurrences required). Which as
λt becomes smaller than roughly
¹/₁₀₀ then
e-λt is closely approximated by
1 - λt or approximately
1. Thus, we can see the probability that another block solution will be found within the propagation time
t approximates a linear proportion
λt when
λt is less than roughly
¹/₁₀₀.
So with a block period (aka block time)
λ of 10 minutes and a propagation time
t (for finding a second block) of less than 6 seconds (and propagation will usually be less than 600 milliseconds so that is even a more linear relationship at
¹/₁₀₀₀), then presuming roughly (on average) that doubling the block size doubles both the transaction fees and the propagation time, then the miner has the same income on average with the largest possible block they can make because doubling the risk of another miner finding a block also doubles the miner's income per block statically speaking. If you don't understand this, then read it over and over until you grasp the mathematical (statistical) point that
the quoted statement above is incorrect and there is no free market limit on block size and no fee market. The point being that yes the risk of another miner winning the block increases, but the miner's income commensurately (proportionally) also increases, so statistically the miner loses nothing by creating a larger block and thus is leaving tranactions fees on the table for some other miner to take if the miner doesn't make a larger block. However presuming some transactions pay less per byte than others (and higher valued transactions can afford to pay more per byte), the economic converse effect occurs wherein the miner has the incentive to make the smallest block possible or below the size where propagation latency is linearly proportional to block size (i.e. the latency that is a constant factor independent of data transferred), which is again
not a free market limit on block size and not a fee market. So the same Tragedy-of-the-Commons occurs that has always been argued as the problem with unlimited block size, in that the power vacuum must be filled by a collusion of miners which pool their (at least 33% of the systemic) hashrate and selfish mine against the rest of the network enforcing a block size which maximizing their profit which is basically the highest level of fees x volume the market will bear. I had even argued (I claim successfully) against @ArticMine that Monero's algorithmically adjusting block size suffers from a similar Tragedy-of-the-Commons outcome (ultimately due to the power-law centralization of mining economies-of-scale). No matter how you slice and dice it, Satoshi's PoW will become centralized so choose your poison how you want to get there,
Bitcoin Core (aka Blockstream) funded by banksters or Bitcoin Unlimited (with insufficient developer resources) lead by technical incompetents such as Roger Ver. This is why I designed (a yet unpublished) solution for blockchain consensus which is not PoW and not PoW (something totally new, which I am working on now).
Even if you try to argue that propagation out to the minority hashrate can take up to minutes, the most profitable (i.e. winning) economics models
selfish mining wherein only the minimum propagation time to only 33% of the hashrate is relevant, thus it is likely to be (and
currently is even to the average network diameter, i.e. the majority) less than 6 seconds.
Bitcoin has taken a big hit because of Bitcoin Unlimited. Roger Ver with his recent affiliation with the technologically flawed Dash (and his Dash pump) and attacking Bitcoin with big blocks is really trying to shake things up, but as
I had explained Roger Ver is somewhat technically myopic. Also perhaps some people may be speculating Winkervoss twins might liquidate.
P.S. I liked
@gmaxwell's explanation of why cryptocurrency fundamentally must rely on cryptography.
Edit:
@aklan made me aware of a Bitcoin Unlimited white paper, which I am reading now and will respond soon.
