Topic: Is a fixed small block size long term sustainable? (Read 862 times)

This is one of the main reasons I believe that pushing for a block size limit increase with the hopes that bitcoin adoption will grow and will have to be contained in the blockchain is faulty rasoning. That in addition to the fact that most adoption bitcoin has had up until now was thanks to some kind third party technologies that made it more accessible, usefull, or somehow appealing to use. To say that a lightning network or any third party technology to support innovation and more transactions per second on top of the existing technology would be bad while praising existing adoption and wanting more is highly hypocritical. We haven't even had a good chance to judge those possible future solutions and FUDsters are already calling the death of bitcoin if it's block size limit doesn't increase. Funnily enough, when not under a stress test, even the 1Mb limit seems big.

The thought behind a larger block size is that more users would be able to benefit from extremely low fee of bitcoin transaction, thus drive it to mainstream adoption

But based on my observation, the low fee and fast transaction does not contribute too much to the adoption. Adoption rate always rise when the exchange rate rises (In a fiat money flooded world, no one really need bitcoin to buy groceries, majority of people treat it as investment/speculation, rest are money launderers, drug dealers and gamblers...)

In fact, the exchange rate risk is magnitudes higher than the fee, so spending 0.0001 bitcoin or 0.01 bitcoin for fee really does not make any difference since the biggest cost comes from exchange rate risk

IMO, right now the 1Mb limit is just ok under the current conditions. Although It's not performing great during stress tests. The suggestion that we're going to need a bigger block size cap is based on the assumption that bitcoin's use will grow, and that this use will have to be housed in the bitcoin blockchain.

If you are given 2 choices:

A. bitcoin's price will increase 10x every year, but you will only be able to do one transaction per year

B. bitcoin's price will increase 19% per year, but you can do as much transaction as you want

I guess most of the people will select option A

However, although scarcity creates value, it is difficult to prove that limited transaction capacity will work as a catalyst to boost bitcoin's value. If the core devs can prove that the scarcity of transaction capacity will raise bitcoin's value, then maybe a fixed block size will gain more support

This has been discussed before, suppose that chinese government confiscated all the chinese miners in China, then fork the chain with more than 75% of hash power, their fork will just become an alt-coin that no one cares about

It is the bitcoin user who decide what version they would like to use, not the core devs

But why do we want to impose restrictions upon ourselves to live and adjust to suit the limitations of the systems? Isn't that counterproductive when we can actually turn it the other way round to make the systems convenient for us to use? In effect we are actually asking people to go back to fiat money.

I think it's not. Because at the beginning, people make small amounts of tx, and then nowadays people are making 1 tx per second, which used more than half of the system capability...

That is incorrect.  It has nothing to do with the number of nodes at all.  Approximately 75% of the global bitcoin mining hash power needs to report, in the valid blocks that they broadcast, a version number in support of BIP101.

It won't be sustainable for long because future bitcoin applications will need to make many and small transactions. Like exchanges and wallets need to  make hundreds if not thousands of transactions each hour, this leads to long confirmation times.

I should say the system should serve the needs of the people using it, not the other way around. We have had enough manipulation from governments and banks based on what they think you should need.

We have a programmable currency, where consensus is needed to make changes, based on what the people need and not what the Reserve banks wants to force.

Let's just adapt according to the need of the mayority of the people using the network. Centralized control is so ....yesterday. 

Not necessarily.
As mentioned above, the banks will serve the public.
These "banks" will have their own ledger which will report to the "Federal Reserve" (Bitcoin blockchain).

Why would there be any rallies if this happens? Value of bitcoin depends largely on how useful it is and its prospects of growth.

Or the most wealthy parties would make all the transactions, while normal people would be completely blocked out by fees. Though I think that such expensive to use network would just die as even the wealthy players would move elsewhere.

So you 're saying that Bitcoin should act like the Federal Reserve and serve the banks who in turn will serve the public?
If yes, can't we just have Bitcoin act like Bitcoin and nothing like ANY bank or monetary system has ever done before?
I mean, we have seen how all types of money failed until now.

BitcoinXT can only become the dominant fork if at least 75 per cent of Bitcoin nodes adopt its Bitcoin Improvement Proposal (BIP) 101. This will be determined to have happened when 750 of the most recent 1,000 mined blocks support BIP 101. After this, the Bitcoin community will be given two weeks to update en masse to the new version or employ an alternative solution.

Enough with theoretical calculation, we need some real world examples that show how people will react when they are facing a hard limit. Humans are adaptive, they will always create solutions to adapt

I'm still not convinced that a designer of a monetary system should think like a service provider. A service provider always try to satisfy its customer since he need to make money from his customer. But designer of a monetary system has a totally different sets of concern than a service provider

If you look at Federal Reserve's dual mandate, they are low unemployment and low inflation. They never worry about transaction capacity, since that is a too low level of concern: Humans have been transacting slowly for several hundred years and central banks have never tried to improve on that area, it is the mission of commercial banks and payment processors

Of course bitcoin is different, it is decentralized, thus require different priorities than a centralized monetary system. But still, the way of thinking matters

It will be interesting to see a simulation that reducing the block size to under 256KB, thus every block are full of meaningful transactions, and see if a small block size is long term sustainable

The system might still work, because everyone will reduce their transaction frequency thus they can afford a higher fee to get ahead of the queue

This is similar to credit card cash withdraw: For each withdraw you have to pay a flat fee of $5. Then you would never withdraw $20 bills every day, but withdraw once a month for $500, thus the fee becomes less significant

With bitcoin, if your 0.1 BTC transaction with a 0.0001 btc fee is not able to get confirmed, you would wait until you do a 1 BTC transaction with 0.001 fee, which will more likely to be confirmed in 10 minutes

But this also means that you are not able to spend bitcoin for anything that worth less than 1 BTC. Of course those small daily spending are best to be done with fiat money, because people will always spend fiat money first due to its long term inflation potential

So the consumption in bitcoin economy will more likely to be this: Everyone buy bitcoin once a while, hold it for sometime, and send 10+ bitcoins to exchanges during the next rally, sell or mortgage them for large amount of fiat money to spend

If everyone make one transaction per month, then current 4TPS will make 10 million people possible to use bitcoin. For 100 million people they would only be able to do one transaction per year. Still fits some people's style but definitely not majority