Author: Stephen Pair 2013-02-14 12:59:04
Published on: 2013-02-14T12:59:04+00:00
In an email conversation between Stephen Pair and Peter Todd, Pair suggests that one of the benefits of Bitcoin is that miners have a strong incentive to distribute blocks widely and quickly. However, Todd argues that this is a misconception, as the optimal situation for a miner is to ensure their blocks reach slightly over 50% of the overall hashing power, but no more. He explains that this is due to orphaned blocks. Pair then raises concerns about centralization if the block size remains capped. He believes that there would be a greater risk of centralization in that scenario than if the cap were to be removed. This is because Bitcoin would only be useful for high-value settlement transactions, with daily transacting being done using centrally issued currencies. As banks and corporations learn about the utility of Bitcoin and begin to use it en masse, they would take the network off the public internet and put it on a higher speed and more reliable backbone. These corporations would establish mining agreements among themselves to ensure the system could not be taken over or compromised, while keeping operational costs low. Pair concludes that Bitcoin is now a good alternative to the wire transfer system, but has no value to the average person wanting cheap and private transactions over the internet. He suggests that Litecoin may start to fill this niche.
Updated on: 2023-06-06T10:05:03.950941+00:00