Published on: 2015-08-20T21:29:30+00:00
The context discusses the potential consequences of not increasing the hard limit on block size in Bitcoin. One concern is that an influx of new users and transactions could cause blocks to constantly be full, resulting in a backlog of transactions that grows indefinitely. This could lead to people losing faith in Bitcoin and eventually its demise. However, changing the block size limit requires a fork, which takes too long. If the limit had been increased earlier, mining pools could have quickly adjusted their own soft limits.There are risks associated with increasing the block size limit, such as the transaction fee market taking longer to develop. However, the alternative of not increasing the limit risks the death of Bitcoin. The main topic of discussion should not be transaction fees, but rather concerns about rising fees causing lowest fee transactions to become unreliable and people migrating to systems with lower fees. There are also software problems independent of the concrete block size that need to be solved, such as Bitcoin Core's unbounded mempool size and the lack of a good way to increase the fee of a slow transaction without creating a conflicting spend replacement.Ashley Holman expressed concerns about the security of the Bitcoin blockchain as a function of block size. She assumed that hash rate is correlated with revenue generated from mining, and total revenue from fees as a function of block size should follow a curve. On one extreme of the curve, if blocks are too big, fee revenue tends towards 0 due to lack of competition for block space. However, every miner has its own mining policy, and they can choose to delay including transactions based on their fee + first seen, creating a time-based fee market. This allows users to pay high fees for quick confirmation or low fees for slower confirmation times, even if the block capacity is unbounded.The author of the context expresses concern about security (hash rate) as a function of block size. They assume that hash rate is correlated with revenue from mining, and the total revenue from fees as a function of block size should follow a curve. The curve should have a sweet spot where fee revenue is maximized, but it should change as demand for block space changes. Not scaling the block size as demand grows could result in forfeiting potential miner revenue and hence security. However, decentralization should be the primary concern.Jorge Timon suggests that concerns about block size can be classified into two groups. The first group includes potential indirect consequences of rising fees, such as unreliable lowest fee transactions and migration to systems with lower fees. The second group consists of software problems independent of concrete block size that need to be solved, often specific to Bitcoin Core. These problems include Bitcoin Core's unbounded mempool size and the lack of a good way to increase the fee of a slow transaction without creating a conflicting spend replacement.The rise in fees is a major concern as it can reduce the utility of Bitcoin, make some use cases nonviable, discourage experimentation with new use cases, and make Bitcoin more vulnerable to regulation by hindering its user base from growing. Slowing usage growth decreases the likelihood of having enough transactions to fund the network via transaction fees. There are several concerns regarding the future of Bitcoin. One concern is that nodes may choke up on a backlog of transactions, leading to losses for Bitcoin-based businesses and a potential flight of users to other cryptocurrencies. Another concern is that network unreliability could cause the exchange rate to decline, potentially leading traders to stop speculation altogether. Additionally, there is a fear that Bitcoin may become like a cargo cult, where believers wait for certain events to occur, but individuals refuse to expand the current infrastructure due to security concerns. This fear suggests that if the runway (infrastructure) is not expanded, Bitcoin may suffer while another cryptocurrency takes its place.The concerns regarding rising fees in Bitcoin can be classified into two main groups. The first group includes potential indirect consequences of the rise in fees, such as the unreliability of currently free transactions and the migration of users to systems with lower fees. The second group consists of software problems independent of concrete block size that need to be solved anyway, often specific to Bitcoin Core. These problems include an unbounded mempool size that can cause crashes and the lack of a good way to increase transaction fees without double spending, which is blocked by most nodes following Bitcoin Core's default policy. The author invites readers to suggest more concerns for these categories and other categories they think may exist.
Updated on: 2023-08-01T15:08:49.499889+00:00