Author: Jared Lee Richardson 2017-03-31 15:59:19
Published on: 2017-03-31T15:59:19+00:00
The context revolves around Bitcoin and its security model. The discussion begins by noting that SPV wallets trust miners fully, and in the event of a hardfork, they will blindly follow the longest chain. It is argued that exchanges should run SPV nodes as the cost of running a node that could handle 300% of the 2015 worldwide nonbitcoin transaction volume today would be a rounding error for most exchanges even if prices didn't rise.The role of full nodes in defining the network and how they protect against non-functional chains is also discussed. It is noted that the value of Bitcoin lies in the ability for users to retain power through full nodes, which protect them from changes they do not agree with. This power keeps miners honest and prevents them from changing Bitcoin's rules. The ability for a user to run a node is also what makes Bitcoin uncensorable, gives confidence in the 21 million limit, and makes transactions irreversible.It is argued that increasing block size has nothing to do with utility but only affects the cost of on-chain transactions. Debates around block size are deemed a waste of time as even if the block size is increased to 2MB, 5MB, or 10MB, it will still not be enough for global usage in the medium to long term. Lightning potentially offers a couple of orders of magnitude of scaling and will make block size a non-issue for years to come.Despite its risks, the market stores billions of dollars in Bitcoin because it offers more than just everyday transaction use cases. While increasing transaction fees may allow competitors to gain market share for low-value use cases, the primary proposition of Bitcoin - removing limitations of Cash/Visa - is at risk if block size is increased. The market will continue to innovate solutions when there is money to be made.
Updated on: 2023-06-11T22:51:19.701408+00:00