Topic: Enforcing a production quota on block space that fights the free market - page 3. (Read 2457 times)

Listen.  7 transactions per second.  Repeat that to yourself a few times until it sinks in.

7 transactions per second

Global reserve currency?  @ 7tps, for who exactly?

What a joke.

Perhaps true.  But now you're talking about wealth inequality, which Bitcoin never claimed to fix to begin with.

I think that's irrelevant to Peter's question about the economic majority even though he did use that phrase (most of us).

Peter,

In your talk @scalingbitcoin (which I enjoyed listening to), you argue that miners won't broadcast huge blocks because of orphan risks, which creates an equilibrium and the market invisible hand will find by itself a blocksize. I am fine with the economics.

But let me point out that the maxblocksize controversy is not about economics. It's about security, censorship-resistance and permissionlessness.

Let me take an example. Let's say ITBL technology gets implemented, which means basically that blocks don't need to be broadcasted anymore. Then the market equilibrium shifts completely to the right of your graph and now miners are incentivised to confirm as many transactions as possible (with fees>0) to max their revenue. Ultimately, the "free market" would end up with a one huge node, creating a single point of failure, trivial to censor, and any new Bitcoin business would need to request permission to that node to enter the Bitcoin market.

My extrem example is to show you that the free market and Bitcoin's fundamental properties aren't necessarily aligned : your economics approach is irrelevant to the blocksize debate.

To answer your question, yes anyone can fork the code, but like many people, you seem to underestimate the power of the network effect. Altcoins that desperately attempt to compete with Bitcoin, or the XT episode are good illustrations. It is extremely likely that the blocksize limit will push people to offchain Bitcoin solution rather than push them away from Bitcoin. This has already been observed with Dice users that got pushed to centralized Bitcoin offchain services when the min relay fee was implemented.

Bingo! 

 

Peter, Bitcoin is a peer-to-peer network. The consensus is between the peers. Without them it doesn't exist.

The "market" has nothing to do with this.

The demand for Bitcoin is as a store of value and a means of exchange. Transacting on Bitcoin's blockchain is certainly not the only way to transact value as it stands and as it will be in the future.

Therefore if it cannot pay for the security and the decentralization of the network this demand should find supply for transactions through a different mean of exchange.

Fortunately "the market" for transactions includes many variable and you would be surprised to know one sector of such market is very interested in the unique properties of Bitcoin and they are absolutely not deterred by transaction costs.

"will of the market" != "most of us"

Why?  Because resources are distributed by Pareto power law, not imaginary one-mouth-one-cow Rawlsian social justice.

All of your considerations of spherical blockchains fail to account for the fact Bitcoin's economic majority is composed of a very small number of very rich, very smart, and very stubborn individuals.  They don't GAF how Reddit wants to redesign their coin for the greater glory of populism (and Goldman Sachs).

I'm not surprised you lacked to the class to resist trolling the scaling workshop.  Don't be shocked when you don't get invited to speak at the next one.





The area under the line represents lulz proportional to the degree of Peter R's failure to convince anyone important that XT/101 was a good idea.

True.  I meant that someone could create a forking implementation very easily; the difficulty in getting it adopted is what I'm wondering about.  Can the consensus rules differ from the will of the market over the long term?  Who, if not the market itself, defines consensus [at least over the long term]?  

In other words, is it possible for Bitcoin to persist indefinitely with a deadweight loss enforced by a protocol rule?  Or will the pressure eventually cause a fork?

It requires consensus that's all.

Nodes run the consensus rules. If some market for transactions cannot subsist under those rules he is free to find an alternative. You do know Bitcoin is not unique? We are talking about a market for monetary transactions. If it cannot pay for Bitcoin security there will forever exist other means of exchange fit to serve it. 

its not forked so easily.  The consensus rules based on the core repository are entrenched.

OK, let's assume for a second that a negative externality exists (although I disagree).  What can be done about it?  It requires force to keep the production quota below Q*.  How could a group do this over the long term if the code can so easily be forked?

Your premise: Bitcoin consensus operates as a free market.

Why this is wrong: Bitcoin is ruled by a protocol enforced by a consensus of the nodes on the network.

The block size limit is not unlike like other consensus rules in the protocol: block interval time, 21M cap. It is indeed a security rule that carefully gages the incentives of the actor in the system and helps to align them toward an equilibrium.

It served as an anti-spam measure and still does.

The reason it is so is because the true cost of the spam is not bore by the miners but by the nodes. The block space is not a commodity produced by the miners but the effect of a limit on the costs of resources for the system.

"There's only one difference between a bad economist and a good one: the bad economist confines himself to visible effects; the good economist takes into account both the effect that can be seen and those effects that must be foreseen." Frédéric Bastiat

This is the total economic activity:



Any of you seeing a "dead weight loss"  

Clearly the "will of the market" is not clamoring for more block size at present. Especially considering surely 20% of that space is filled with spam.

More about this "free market": if it cannot pay for decentralization then it cannot afford more utility. THIS is the negative externality that gets hand waved away by Peter. While he seemingly is very able at drawing lines on charts his ability to discern game theory dynamics are poor at best.

What he is campaigning and openly support is a tragedy of the commons that would create a disproportional and ultimately tragic rise of the resources costs of becoming a peer in the network.


It should be clear then that the anti spam limit should represent a measure of the cost of running a node. http://www.truthcoin.info/blog/measuring-decentralization/

Thanks for the comment.  

The question I'm interested in, though, is more specifically if it is even possible to enforce a rule that most of us disagree with.  For example, if the block size limit were used to drive fees up, then by definition Q* would be greater than Qmax (cf. second chart) and we'd have a deadweight loss.  Can the system persist in such a state over the long term given the ease at which code could be forked?  I think this is an interesting research question.  

If you really want to represent the will of the market (people) clamouring for change, demand driven approach without any hard limit (Q_max) is the best. This is what is exactly described in BIP 106.

Question: is it possible for Bitcoin to enforce a rule that goes against the will of the market?  How can we enforce rules that most of us disagree with?

As an example, consider the block size limit.  When it was put in place five years ago by Satoshi, it served as an anti-spam measure.  It was actually 800x larger than Q* so the vertical line marked Q_max was actually 100 ft off the chart!  Since the production quota was to the left of the free-market equilibrium point, it didn't affect the market dynamics.  There was no economic pressure to change the limit.  



However, Bitcoin has grown tremendously over the past five years and I believe the limit is now serving as a political measure instead.  It is to the right of Q*, resulting in what economists call a "deadweight loss."  This is the total economic activity lost as a direct result of the quota.  It also represents the will of the market (people) clamouring for change.



If the market wants to be at Q*, but the production quota is forcing it to be at Q_max, what can a group do to continue to enforce the production quota against the will of the market?  How can the invisible hand be restrained?