LN+segwit vs big blocks, levels of centralization.

[d5000]

Even though it is true that sidechains "mimick as a single transaction" on the main chain, and "represent a lot of transactions" on the side chain, and as a main chain user, you only need to see the single transaction, there is nevertheless the danger of an equivalent of "fractional reserve banking" on the side chain.

How would that be possible with a pegged sidechain where every single coin that is created on the sidechain must have been locked in the original chain? The only way I see is if the sidechain miners could add more sidechain tokens via an 51% attack that changes the consensus rules of the sidechain, but then the system is broken - that scenario must be made as difficult as possible in the sidechain design. A PoW/PoS hybrid sidechain could address that problem as it would lower the incentives for this attack - a pure PoS sidechain would be pretty difficult because of the ever-changing coin supply, but it maybe could be combinated with "PoW votes" from the main chain (I think that's similar to what Komodo does) or by a hybrid system like in Decred or Peercoin.

However, from the moment you get "cross payments" between these side chains, there's no choice but to verify everything, apart from those "books that have been closed again".  In a way, you could think of all these compartments as potentially independent and parallel block chains, but if you get random payments from one to the other, the user needs to check both chains and the crossing protocol.

Yes, but as a regular user it would be enough to use light wallets and verify block explorers on the Internet, just as most light wallet users do today. As a business, you could accept the main chain token and the sidechain tokens that fit most to your target population (see below for "regional" sidechains).

The idea of "building a tree" doesn't seem compatible, to me, with the idea that transactions are a random mesh, that is to say, that just any user can transact with just any other user.  It only makes sense if there are "user communities" that transact a lot amongst themselves, and only rarely "cross borders".  Maybe there are smarter technologies, and I don't have a clear view on them.

Exactly such "user comunities" are, de facto, geographical regions. If you live in Europe, you won't buy your daily food at the grocery in China - you would buy in your own town probably. So some sidechains could have a regional focus. Other sidechains can specialize in online payments, others on B2B smart contracts (RSK?) and so on. So I think that wouldn't be really a problem as long as you have always the possibility to fastly do an atomic cross-chain transfer to the main chain or other sidechain.

For your last point (about delegated trust) I agree.

[thejaytiesto]

Derivatives are useless. Bitcoin has objective usefulness:

There's a difference between having an objective, and realizing it. 

I don't see how you can put it at the same level of derivatives.

Because crypto is mostly a greater-fool game with a delusional grandiose story behind it that can, at first sight, sound exciting and not entirely improbable (replacing fiat / replacing contracts and law / ...).  Like derivatives, but with a nebulous underlying: "the world's payment system", or "the world's legal contractual basis" or something of a kind, rather than a more economically tangible underlying.  Yes, in principle, crypto could do useful things.  Derivatives too.  They are invented to hedge risk.  But most of the time, they are financial gambler's instruments.  Like crypto.  Yes, you can also use it to pay something if you really insist, or to run a smart contract, or to rent disk space, or to have prediction markets, or to reward blogging or .... But that's not what it is principally used for and traded for.  It is used and traded essentially to buy low and sell high ; to be a fool, and find a greater fool.  Sometimes you win, sometimes you lose.  It are essentially gambler's tokens ; like derivatives.

I never bought into crypto replacing fiat, because that would mean governments no longer exist, and I don't see how that would happen. I also didn't buy replacing contracts and law with code, which is why I think the whole ETH thing is, fascinating yes, but in practice a big bubble.

But BTC? it's as "simple" as being able to store value outside of the system and move it around. Is this vaporware? nope, it already works, has been working for 8+ years and working. How the fuck is this the same as toxic derivatives?

The price goes up and down due supply and demand, the facts remain tho: BTC gives you the unique opportunity to move value around and store it in a way that no other asset will allow you to.

[dinofelis]

I never bought into crypto replacing fiat, because that would mean governments no longer exist, and I don't see how that would happen. I also didn't buy replacing contracts and law with code, which is why I think the whole ETH thing is, fascinating yes, but in practice a big bubble.

But BTC? it's as "simple" as being able to store value outside of the system and move it around. Is this vaporware? nope, it already works, has been working for 8+ years and working. How the fuck is this the same as toxic derivatives?

I'm not saying that it is vaporware in the short term.  I have to say I was immensely enthusiastic about crypto when I discovered it, and when I slowly found out that it is just another speculative tool, to pump money out of peers (<-- because that is what it is essentially), I got seriously disappointed about it, and then I started to realize why it was that way.  Of course, this is just my opinion, but I think it is an opinion that has some grounds to it.  Take a step back, forget about what was *claimed* about bitcoin (and crypto in general), and try to see what people really do with it.  Most people speculate on it, with the idea of getting rich quickly.  Some did: early adopters that were smart enough to keep their cheaply acquired stash.  That's all you have to see.  I don't know how much this forum is representative for the whole bitcoin/crypto ecosystem (I don't want to call it a community, because it isn't - any more - it is not a set of people with a common greater good and goal, but a crab bucket of antagonists trying to rip off one another), but people are talking all the time about "making money with bitcoin/crypto" ; making a benefit ; .... When you look at some of the big overlords in the bitcoin ecosphere, they are talking about financial products like ETF.  When you look at the few ETH applications that work somewhat, they are about gambling.

Of course, you can say that these speculators are the visionaries that see today, the economic value of tomorrow.  My ass.  These people apply technical analysis to try to see where the next pump is, and try to short on the next dump.  As such, the true economic value of this crypto business exists, but is small.  The true economic value of bitcoin consists in those economic transactions it made possible, that weren't possible without it (that is to say, with fiat) - not because it was geeky and fancy to use bitcoin instead of one's credit card.   There IS such economic value (mainly in dark markets), but it is microscopic as compared to the market cap of bitcoin, and it is not what drives "investment" in bitcoin.   On the other hand, bitcoin is quite expensive: it costs about $400 million per year in mining costs.  I wonder whether the economic creation by bitcoin (that is, the extra economic activity it generated by allowing transactions that couldn't take place otherwise) even compensates its cost.  As such, all the rest is a zero-sum game: the benefits of some, are the losses of others.

That is what characterises financial speculation, like the whole (indeed toxic) derivatives market.  This is why I see big parallels between both worlds.  It is mainly a huge zero-sum game, where participants try to rip off one another.  In as much as one is counting on a systematic rise, it is a greater-fool game (early entrants ripping off latecomers: the greater fools).  In as much as one is just exploiting volatility, it is a zero-sum game (smart traders ripping off less smart traders).

And now, why is it that way ?  Because its design is that way: the emission curve, the PoW difficulty adaption, the hard limits in it and the delusionally promises (doing away with banks, replacing fiat...). Whether by mistake or on purpose, this is designed to be a speculative tool, and not a currrency.

[deisik]

Andy buys bag of apples for £10 from Bob, who then buys bag of onions for £10 from Clare. Velocity is 2.
Clare buys a chair for £10 from Dave = velocity is 3 and so on.
The higher the velocity = higher transactions made.

You should consider the situation with reference to time

The inflationary effect follows from the changing relationship between the time it takes to produce some good (which remains constant) and the velocity of money (which increases). For an outside observer it looks as if more money is chasing the same amount of goods per unit of time, which causes inflation (producers raise the prices). Henry Hazlitt explains it pretty well in his book (in the part on the dangers of excessive saving, i.e. hoarding), though he considers the opposite situation, i.e. when people stop spending and prefer saving, thereby decreasing the velocity of money (which leads to deflation)

I think you have H H on hoarding, velocity, inflation misunderstood.

Inflation/deflation - increase/decrease in money stock/supply = Inflation/deflation - increase/decrease in bitcoin stock/supply. Bitcoin stock is 21m and the supply is getting lower as bitcoin approach 21m. No inflation but can have deflation via permanent lost bitcoin

I've read him literally decades ago

But he certainly didn't talk about inflation and deflation of monetary base (as you mean it), but rather about prices of goods and services. It is really hard to misunderstand Hazlitt, he is one of the most coherent and easy to understand authors. But if you continue to insist, I will find his book and quote him to you, though, I think you can easily find him yourself. In any case, this understanding of inflation and deflation is inconsequential since I made it perfectly clear that by inflation I mean depreciation of currency while by deflation, consequently, its appreciation. I guess you will have to stick to my use of terminology since this discussion (about the velocity of money affecting inflation rates) was my invention, after all

Please do so. I will await for the quote.

Yes i have read the book, plus many many other economic books. I think, over the decades your memory is playing tricks on you.

No. If everyone were to create and stick to their terminology, then the human race will not communicate clearly with each other. We should do our best to follow the dictionary and the original meaning of the word, using the correct semantics.

This is not my terminology, after all

I'm not going to brag about how many economic books I've read since this is bullshit. Books don't make you any smarter (though they can give you some knowledge), and this is not a pissing contest at that (read I don't care). Nevertheless, if you are not quite happy with me using inflation and deflation in the sense I use them, you can substitute inflation with depreciation and deflation with appreciation. I will look into Hazlitt later (the matter is not about Hazlitt, anyway)

[Dogeboi3210]

/sigh

Bitcointalk has really become a shitshow lately.

Firstly, we need both on-chain and off-chain scaling. What we don’t need is unlimited size blocks being controlled solely by the miners or any 1 group for that matter. On-chain scaling should be done as safely as possible with a super-majority of community support.

Secondly, LN is only 1 off-chain solution to scaling being worked on. The whole shill story of LN = centralization is bullshit.

Can the block size be decided algorithmically depending on the demand? Why do the miners have to control it? That would make it open to a lot of bad actors colluding.

Probably. But miners are already centralized because not just one person controls the mining.

[AngryDwarf]

/sigh

Bitcointalk has really become a shitshow lately.

Firstly, we need both on-chain and off-chain scaling. What we don’t need is unlimited size blocks being controlled solely by the miners or any 1 group for that matter. On-chain scaling should be done as safely as possible with a super-majority of community support.

Secondly, LN is only 1 off-chain solution to scaling being worked on. The whole shill story of LN = centralization is bullshit.

Can the block size be decided algorithmically depending on the demand? Why do the miners have to control it? That would make it open to a lot of bad actors colluding.

Probably. But miners are already centralized because not just one person controls the mining.

As long as the algorithm is fast enough to adjust to demand, for example looking at the mempool size. Problem is, everybody has their own unique mempool.
BIP100, if you can find it, is a terrible example of a blocksize adjustment algorithm which takes to long to adjust to demand surges.
IMO, the simplest solution is to remove the hard cap limit from the protocol. A reference dynamic block size algorithm could be provided for the miners. They will customise that as much as they do now for transaction selection. Miners are deterred from creating super sized blocks due to increased orphan risk and validation time costs, and the fact that clearing the mempool on every block will produce zero fee pressure. However, they are incentivised to make blocks big enough to keep the mempool size under control, as transaction confirmation reliability is key to the value of the bitcoin they mine.

[deisik]

IMO, the simplest solution is to remove the hard cap limit from the protocol. A reference dynamic block size algorithm could be provided for the miners. They will customise that as much as they do now for transaction selection. Miners are deterred from creating super sized blocks due to increased orphan risk and validation time costs, and the fact that clearing the mempool on every block will produce zero fee pressure. However, they are incentivised to make blocks big enough to keep the mempool size under control, as transaction confirmation reliability is key to the value of the bitcoin they mine.

Well, it seems there is more to it than you describe

You certainly underestimate miners' roguishness (or whoever acts through them). While I agree that miners might be discouraged from clearing the mempool but this just proves how rogue they are. And here's the crux of the matter. What prevents them, first, from flooding the network with spammy transactions, and, then, filling the blocks with this trash? And right then we are back to square one, or even worse, since we would have larger blocks then (read it will be more difficult for Bitcoin nodes to support the network)

[AngryDwarf]

IMO, the simplest solution is to remove the hard cap limit from the protocol. A reference dynamic block size algorithm could be provided for the miners. They will customise that as much as they do now for transaction selection. Miners are deterred from creating super sized blocks due to increased orphan risk and validation time costs, and the fact that clearing the mempool on every block will produce zero fee pressure. However, they are incentivised to make blocks big enough to keep the mempool size under control, as transaction confirmation reliability is key to the value of the bitcoin they mine.

Well, it seems there is more to it than you describe

You certainly underestimate miners' roguishness (or whoever acts through them). While I agree that miners might be discouraged from clearing the mempool but this just proves how rogue they are. And here's the crux of the matter. What prevents them, first, from flooding the network with spammy transactions, and, then, filling the blocks with this trash? And right then we are back to square one, or even worse, since we would have larger blocks then (read it will be more difficult for Bitcoin nodes to support the network)

And why would the miners do this? Because they have a fetish for buying storage? Because they want to increase their orphan rates?

[deisik]

IMO, the simplest solution is to remove the hard cap limit from the protocol. A reference dynamic block size algorithm could be provided for the miners. They will customise that as much as they do now for transaction selection. Miners are deterred from creating super sized blocks due to increased orphan risk and validation time costs, and the fact that clearing the mempool on every block will produce zero fee pressure. However, they are incentivised to make blocks big enough to keep the mempool size under control, as transaction confirmation reliability is key to the value of the bitcoin they mine.

Well, it seems there is more to it than you describe

You certainly underestimate miners' roguishness (or whoever acts through them). While I agree that miners might be discouraged from clearing the mempool but this just proves how rogue they are. And here's the crux of the matter. What prevents them, first, from flooding the network with spammy transactions, and, then, filling the blocks with this trash? And right then we are back to square one, or even worse, since we would have larger blocks then (read it will be more difficult for Bitcoin nodes to support the network)

And why would the miners do this? Because they have a fetish for buying storage? Because they want to increase their orphan rates?

It is really strange that you ask this question

As I got it from your previous post, you yourself say that miners will be deterred from creating super sized blocks because "clearing the mempool on every block will produce zero fee pressure". Miners are vitally interested in producing this "fee pressure". I agree that they risk increasing their orphan rates at that, but since we see that mempools are never left empty these days, it seems that the latter doesn't deter them much from pumping more "fee pressure" into the network

[AngryDwarf]

It is really strange that you ask this question

As I got from your previous post, you yourself say that miners will be deterred from creating super sized blocks because "clearing the mempool on every block will produce zero fee pressure". Miners are vitally interested in producing this "fee pressure". I agree that they risk increasing their orphan rates at that, but since we see that mempools are never left empty these days, it seems that the latter doesn't deter them from pumping more "fee pressure" into the network

They don't need to spam the network to create fee pressure. They can just create smaller blocks when the transaction demand is low.

[dinofelis]

It is really strange that you ask this question

As I got from your previous post, you yourself say that miners will be deterred from creating super sized blocks because "clearing the mempool on every block will produce zero fee pressure". Miners are vitally interested in producing this "fee pressure". I agree that they risk increasing their orphan rates at that, but since we see that mempools are never left empty these days, it seems that the latter doesn't deter them from pumping more "fee pressure" into the network

They don't need to spam the network to create fee pressure. They can just create smaller blocks when the transaction demand is low.

The difference is of course, that creating smaller blocks is a visible and individually lossy strategy, while spamming is a much more versatile, flexible, anonymous and (between miners) consensual way of regulating the fee market pressure.

[dinofelis]

You certainly underestimate miners' roguishness (or whoever acts through them). While I agree that miners might be discouraged from clearing the mempool but this just proves how rogue they are. And here's the crux of the matter. What prevents them, first, from flooding the network with spammy transactions, and, then, filling the blocks with this trash? And right then we are back to square one, or even worse, since we would have larger blocks then (read it will be more difficult for Bitcoin nodes to support the network)

Well, this is built into bitcoin from the first day.  After all, the diminishing bloc rewards, and the necessary transition to fees paying for mining need a fee market that can be pressurized to the level the market can bear ; that is, the highest possible fees that can be extracted from the system without making it crumble under its own costs.  Bitcoin was simply designed that way, by combining reward halvings, inflationary spiral, and PoW.  Whether that was intentional or not is a question of course, but the reality is that this is an unavoidable consequence of the design.

[AngryDwarf]

They don't need to spam the network to create fee pressure. They can just create smaller blocks when the transaction demand is low.

The difference is of course, that creating smaller blocks is a visible and individually lossy strategy, while spamming is a much more versatile, flexible, anonymous and (between miners) consensual way of regulating the fee market pressure.

I think you need to explain this logic to me. I doubt it would hold up to closer scrutiny. I doubt they care if smaller blocks are visible. Why is it individually lossy? They include the highest fee transactions, and include a few more to deal with the backlog transactions before they drop out of the mempool. A miner spam mechanism requires collusion to make it a zero sum game. A smaller miner isn't going to waste their money on spam transaction fees which the larger miners are more likely to mine in a block. It just creates larger and larger blocks for no gain since they will still be able to keep up with the mempool demands.

The whole point about dynamic block sizes, is that they can go down as well as up. If this is miner algorithm driven, it will react faster to market conditions than some slower protocol enforced mechanism.

[dinofelis]

They don't need to spam the network to create fee pressure. They can just create smaller blocks when the transaction demand is low.

The difference is of course, that creating smaller blocks is a visible and individually lossy strategy, while spamming is a much more versatile, flexible, anonymous and (between miners) consensual way of regulating the fee market pressure.

I think you need to explain this logic to me. I doubt it would hold up to closer scrutiny. I doubt they care if smaller blocks are visible. Why is it individually lossy?

If you make, as a miner, smaller blocks, you have less fees than your competitor but your effect on the fee market is limited, so there's no individual reason to make small blocks, and other miners win more and relieve the fee market pressure at your expense.  If you spam the pool, you increase the fee market pressure uniformly, and you get back your hash rate fraction of the fees you spend ; moreover, nobody knows that you are the "nasty miner": you mine what you can, with full blocks.

If you have 25% of the hash rate, and you decide to make 200K blocks, you can only diminish the available room on the block by some 20%, and you waste 80% of the fees you could obtain.  If you spam the pool, you can pressure the fee market as much as you like, and it costs you about 3 times the fees you obtain (you spend 4 times the fees if you fill all the blocks, but you get back 25% of it) ; if you are the only spammer.

So essentially, instead of diminishing the room only by 20%, you can diminish the room by almost 100%, for 4 times the fee price you would have had with low pressure ; but given the high fee pressure, the fees will be higher too, filling up the mem pool.  When the mem pool is full of "large fee desperate transactions", you can mine them and reap them in.  Maybe next time, another colleague miner will do that.

Spamming gives you, as a miner, hence a flexible way to contribute to the fee market pressure, where you can pressurize the market entirely, at a cost that you can mainly get back by the pressurized high fees when the mem pool is full.

Call it "pump and dump" of the fee market if you want.

[AngryDwarf]

If you make, as a miner, smaller blocks, you have less fees than your competitor but your effect on the fee market is limited, so there's no individual reason to make small blocks, and other miners win more and relieve the fee market pressure at your expense.  If you spam the pool, you increase the fee market pressure uniformly, and you get back your hash rate fraction of the fees you spend ; moreover, nobody knows that you are the "nasty miner": you mine what you can, with full blocks.

If you have 25% of the hash rate, and you decide to make 200K blocks, you can only diminish the available room on the block by some 20%, and you waste 80% of the fees you could obtain.  If you spam the pool, you can pressure the fee market as much as you like, and it costs you about 3 times the fees you obtain (you spend 4 times the fees if you fill all the blocks, but you get back 25% of it) ; if you are the only spammer.

So essentially, instead of diminishing the room only by 20%, you can diminish the room by almost 100%, for 4 times the fee price you would have had with low pressure ; but given the high fee pressure, the fees will be higher too, filling up the mem pool.  When the mem pool is full of "large fee desperate transactions", you can mine them and reap them in.  Maybe next time, another colleague miner will do that.

Spamming gives you, as a miner, hence a flexible way to contribute to the fee market pressure, where you can pressurize the market entirely, at a cost that you can mainly get back by the pressurized high fees when the mem pool is full.

Call it "pump and dump" of the fee market if you want.

If you have 25% of the hash rate, and you decided to make 900kB blocks, you only waste 10% of the lower paying fees, and slightly reduce your chances of orphanage. Spamming the system then won't get your fees back without collusion. Why don't the miners just collude to going back to 500kB blocks now, pushing fee rates even higher?

Essentially you are making an argument based on some arbitrary circumstances to prove your point.

[BillyBobZorton]

But if you get paid in BTC, you have a bigger incentive to buy with BTC. For example, the small amounts I get from the sig campaign, it's pretty tempting to spend them on small purchases like a videogame. In steam, it's easier to pay with BTC than to pay with the regular credit card purchase. I have to get my credit card out, put the date and pin, get the card of the bank to put the 4 numbers to verify the purchase, and I need to load the credit card if it's not loaded so it takes a bank transfer too. It can be a mess. With BTC is just a click, of course, a click if you don't first have to buy it, then it's just stupid.

Yes.

To take advantage of BTC, you need to be paid in it, so the circle is closed.

But this is the vicious circle: bitcoin will be handy money, when bitcoin is handy money.  This is a "symmetry breaking" problem, in a way: once you're in one equilibrium (that of fiat), it is essentially impossible to flip to the other equilibrium (that of bitcoin), because there is a huge "mountain of inconvenience to go from one equilibrium to the other one, but on top of that, bitcoin is entirely designed to be deflationary, which is, by itself, a "repulsive" for being used as a currency (you don't want to SPEND something that will grow in value, do you !).

But anyway, BTC will never be a proper mainstream payment system without segwit and lightning network, until then it's a better gold, and that makes it undervalued.

I don't see it as "gold".  I see it as a financial speculative product, like complicated derivatives, that are too complicated to try to have any fundamental analysis of, and just play greater fool games with.  The stuff the financial world is fond of, and has already cupboards full of it, 10 times the world economy.  The kind of thing that exploded in 2008.  This stuff is not under valued or over valued, as it is a speculator's token.

It is zero at t = 0, it will be 0 at t = t_something, and in the mean time, it goes sky high.

I think the "crypto as currency" part will shine once physical cash is removed, never before. Theres millions of people out there surviving by working under the radar. The typical guy doing small scale construction work like remodeling or fixing kitchens, or plumber type of jobs, tons of freelancers doing website stuff, coding etc.. I don't know, there's an endless stream of cash being used to work to avoid taxes because it's the only way those people can pay the bills.

Once cash is removed, those people will be *forced* to learn about bitcoin and use it to get paid in exchange of their services. Then word of mouth will spread and everyone will be using it as a substitute for cash that never enters the banking system.

[dinofelis]

If you have 25% of the hash rate, and you decided to make 900kB blocks, you only waste 10% of the lower paying fees, and slightly reduce your chances of orphanage. Spamming the system then won't get your fees back without collusion. Why don't the miners just collude to going back to 500kB blocks now, pushing fee rates even higher?

To do that, there's need for collusion and OPENLY SHOWN collusion, that is clearly "against" the interest of bitcoin users.  There is no *individual* financial incentive for a non-colluding miner to start mining 500 K blocs.  If you do it on your own, you can only *moderately* pressure the fee market, so the fees won't increase much, and you waste systematically 50% of the fee income.  If all miners do it, here is your proof of total centralization and collusion !  Moreover, if all miners mine 500K blocs, you still only compressed the fee market by 50%.  It would seem totally impossible for miners to mine 100K blocs and still have some ounce of credibility.  Outrage would prevail.

If you want to compress the fee market, not a little bit, but significantly, by eating up, say, 90% of the room, apart from having all miners collude and only mine 100 K blocs, you can decide that totally for yourself, by spamming the pool entirely, so that 90% of what goes on the blocs is your spam.  That will cost you fees to your competitors, but everybody can continue mining 1 MB blocs and all miners can pretend not to be involved.  

By pressurising the fee market, you have to pay the fees, true, but you will create a lot of high-fee transactions by desperation on the mem pool, transactions with fees that wouldn't, by far, be there if there was no desperation.  When the mem pool is full enough, you can start mining *those* transactions (which cannot be widthdrawn !), with much higher fees than you would have gotten if you didn't do the spamming.  So you get finally back most of what you spent on spamming, and you've gotten the market used to higher fees.  Rince and repeat.  Maybe the following spam campaign will be done by a competitor.

The idea is not so much to have gains directly from spamming, the gains are in the longer term when people get used to paying higher fees systematically.  With spamming, you can reduce the effectively available space to essentially nothing ; with making smaller blocs you can only pressurize the fee market slightly (not more than your hash rate percentage).  The outrage if you make small blocs will be much bigger than if the network is spammed, too.

[AngryDwarf]

If you have 25% of the hash rate, and you decided to make 900kB blocks, you only waste 10% of the lower paying fees, and slightly reduce your chances of orphanage. Spamming the system then won't get your fees back without collusion. Why don't the miners just collude to going back to 500kB blocks now, pushing fee rates even higher?

To do that, there's need for collusion and OPENLY SHOWN collusion, that is clearly "against" the interest of bitcoin users.  There is no *individual* financial incentive for a non-colluding miner to start mining 500 K blocs.  If you do it on your own, you can only *moderately* pressure the fee market, so the fees won't increase much, and you waste systematically 50% of the fee income.  If all miners do it, here is your proof of total centralization and collusion !  Moreover, if all miners mine 500K blocs, you still only compressed the fee market by 50%.  It would seem totally impossible for miners to mine 100K blocs and still have some ounce of credibility.  Outrage would prevail.

If you want to compress the fee market, not a little bit, but significantly, by eating up, say, 90% of the room, apart from having all miners collude and only mine 100 K blocs, you can decide that totally for yourself, by spamming the pool entirely, so that 90% of what goes on the blocs is your spam.  That will cost you fees to your competitors, but everybody can continue mining 1 MB blocs and all miners can pretend not to be involved.  

By pressurising the fee market, you have to pay the fees, true, but you will create a lot of high-fee transactions by desperation on the mem pool, transactions with fees that wouldn't, by far, be there if there was no desperation.  When the mem pool is full enough, you can start mining *those* transactions (which cannot be widthdrawn !), with much higher fees than you would have gotten if you didn't do the spamming.  So you get finally back most of what you spent on spamming, and you've gotten the market used to higher fees.  Rince and repeat.  Maybe the following spam campaign will be done by a competitor.

The idea is not so much to have gains directly from spamming, the gains are in the longer term when people get used to paying higher fees systematically.  With spamming, you can reduce the effectively available space to essentially nothing ; with making smaller blocs you can only pressurize the fee market slightly (not more than your hash rate percentage).  The outrage if you make small blocs will be much bigger than if the network is spammed, too.

Ultimately, that level of miner collusion would be a collective slaying of the golden goose. Besides, smaller miners would be incentivised to not take part, and reap the rewards from the larger miners.

[The One]

Andy buys bag of apples for £10 from Bob, who then buys bag of onions for £10 from Clare. Velocity is 2.
Clare buys a chair for £10 from Dave = velocity is 3 and so on.
The higher the velocity = higher transactions made.

You should consider the situation with reference to time

The inflationary effect follows from the changing relationship between the time it takes to produce some good (which remains constant) and the velocity of money (which increases). For an outside observer it looks as if more money is chasing the same amount of goods per unit of time, which causes inflation (producers raise the prices). Henry Hazlitt explains it pretty well in his book (in the part on the dangers of excessive saving, i.e. hoarding), though he considers the opposite situation, i.e. when people stop spending and prefer saving, thereby decreasing the velocity of money (which leads to deflation)

I think you have H H on hoarding, velocity, inflation misunderstood.

Inflation/deflation - increase/decrease in money stock/supply = Inflation/deflation - increase/decrease in bitcoin stock/supply. Bitcoin stock is 21m and the supply is getting lower as bitcoin approach 21m. No inflation but can have deflation via permanent lost bitcoin

I've read him literally decades ago

But he certainly didn't talk about inflation and deflation of monetary base (as you mean it), but rather about prices of goods and services. It is really hard to misunderstand Hazlitt, he is one of the most coherent and easy to understand authors. But if you continue to insist, I will find his book and quote him to you, though, I think you can easily find him yourself. In any case, this understanding of inflation and deflation is inconsequential since I made it perfectly clear that by inflation I mean depreciation of currency while by deflation, consequently, its appreciation. I guess you will have to stick to my use of terminology since this discussion (about the velocity of money affecting inflation rates) was my invention, after all

Please do so. I will await for the quote.

Yes i have read the book, plus many many other economic books. I think, over the decades your memory is playing tricks on you.

No. If everyone were to create and stick to their terminology, then the human race will not communicate clearly with each other. We should do our best to follow the dictionary and the original meaning of the word, using the correct semantics.

This is not my terminology, after all

I'm not going to brag about how many economic books I've read since this is bullshit. Books don't make you any smarter (though they can give you some knowledge), and this is not a pissing contest at that (read I don't care). Nevertheless, if you are not quite happy with me using inflation and deflation in the sense I use them, you can substitute inflation with depreciation and deflation with appreciation. I will look into Hazlitt later (the matter is not about Hazlitt, anyway)

Related definitions
The term "inflation" originally referred to increases in the amount of money in circulation. So yes i will stick with the original.

[dinofelis]

I think the "crypto as currency" part will shine once physical cash is removed, never before. Theres millions of people out there surviving by working under the radar. The typical guy doing small scale construction work like remodeling or fixing kitchens, or plumber type of jobs, tons of freelancers doing website stuff, coding etc.. I don't know, there's an endless stream of cash being used to work to avoid taxes because it's the only way those people can pay the bills.

This is also my view on crypto, as an underground economy money, like cigarettes in prison, to avoid state, law and taxes.  However, for these people, it shouldn't be a speculative tool, it shouldn't be used by big finance and it shouldn't be large enough to get on the radar.

Because that's the big OTHER problem of bitcoin: because it is mainly a speculative tool, speculators now want *regulation* so that their speculative asset is protected from 'a bad name', to get as many Joe Average as greater fool adopters making them rich, as possible.  Who says, regulation, means also, limitations of its use without asking questions, transparency with respect to (fiscal) authorities etc...
Japan's regulatory frame gives an idea of what is bitcoin to become: a very closely looked-at asset on which you can speculate legally as much as you want, from the moment that you can explain everything and pay taxes on your gains.

Once cash is removed, those people will be *forced* to learn about bitcoin and use it to get paid in exchange of their services. Then word of mouth will spread and everyone will be using it as a substitute for cash that never enters the banking system.

I'd rather have them learn about monero or zcash, honestly.  Bitcoin is too traceable, has too high visibility now.  But even these coins are too speculative.  Zcash did an effort to have a sensible emission curve in the beginning.  Monero, at least, has tail emission.