Author: Peter Todd 2013-11-07 20:31:23
Published on: 2013-11-07T20:31:23+00:00
The current Bitcoin consensus protocol rewards larger mining pools with lower costs per KB to include transactions, and this is a fundamental issue that will persist regardless of the block size or network speed. An unlimited block size will only worsen the problem by increasing fixed costs, but keeping the block size at 1MB forever doesn't solve the underlying problem either. Regardless of how parameters are adjusted, being a larger miner has a significant advantage because lower fees can be charged for transactions, resulting in more earnings. However, this creates a disaster for decentralization, as smaller miners cannot afford the high bandwidth, low-latency internet connection that larger pools possess. This leads to orders of magnitude differences in cost and perverse incentives to publish blocks to only a minority of hashing power.
Updated on: 2023-06-07T19:55:29.520968+00:00