Topic: the blocksize debate - page 2. (Read 5488 times)

Great write up and its really to the point. This should be in a blog post and should be posted to Reddit

People must understand at any time when blockchain forks one altcoin is born. The only issue is deciding which one is altcoin.

Bitcoin protocol says the valid fork which has longest work ( measured in terms of difficulty ) at any point of time is correct one. People give this argument and say Bitcoin has already answered it. IMHO this is theory. Practically its much more difficult and can have devastating ( fatal, IMHO ) effect on both chains.

All coins and transactions and balances before fork are safe and will be honored by both chains. The issue is new transactions and mining rewards after fork.

When I think more about this problem in philosophical manner, I always end up with answer to question "Why we need governments"

The whole movie is interesting if you think Bitcoin as experiment but its scary as hell if you think bitcoin as payment network or investment (I  dont have guts to brainstorm the currency part )

Regards

The way bitcoin works is that there are people running 'nodes' which is a copy of all the transactions that have happened in entire bitcoin history, also relaying them to other nodes and there are people running 'miners' which do some energy consuming work to get the right to write to the ledger maintain by nodes for which they produce new bitcoins. So whenever you do a bitcoin transaction, the fact that your address actually holds the right to so many bitcoins is verified by going through that ledger held by the nodes.

Say your address is A which holds some bitcoins. The fact that A holds those coins can be verified by checking all the transactions that led to A holding those coins right back to the transaction block where they were generated. And this verification alone is the guarantee to the value of your bitcoins.

The algorithm looks all fine, but in reality, practical considerations kick in. There is a practical limit to how much data we can transfer among ourselves imposed by the bandwidth and space limitations of our current state of technology.

When bitcoin started there was no limit to the block sizes that miners could produce. But many services produced huge number of tiny transactions and that kinda swamped the network. But there was an another, much bigger, issue than this.

In the mining race, where miners are all racing to find the next block, the one who finds it first wins, and then everyone around the world give up and start racing for the next block. But how does everyone know that someone worked a successful block? The winner announces it to everybody. The one who successfully solved the block sends it over to the network for everyone to see for themselves that the winner indeed did the work required and hence they come to know they should give up the race for this block and start working on the next.

But what happens if the block solved was of a huge size?

It has two effects. Due to the practical limits, a big block takes a lot of time of propagate in the network. During this time maybe another miner also successfully solves the block only to realize after a while that he isn't the first one. The second effect, and a very important effect, is that the winner gets a headstart. He starts working on the next block while the rest of the world is still working on the previous one while waiting to download the successful solution. As mining has now gone big, the effect of this headstart is huge and increases with more mining power a miner or a pool of miners have.

The bitcoin protocol is anti-fragile. By that it means that whenever any factor of the system tries to rise, there is some other inbuilt factor that kicks in to keep it in check.

When a miner starts getting headstarts and thus economically more successful, the other miners would go at a loss since they are spending energy and would eventually close shop. This further makes the headstarter more powerful and so on until they start own the majority of mining power and that means they can do various kinds of attacks on the system, spending their own money twice easily, is one of them. And that would mean the death of bitcoin goose.

So huge block sizes are clearly a big problem. But what if we keep the block sizes small?

It would mean that each block, limited in its size, can only accommodate a limited number of transactions. This again has its own effects.

A limited number of transaction going through would mean that either a transaction would have to wait a long time for its turn to be included or that it would have to pay high fees to get preference over others. This means scalabilty problems because only a number of people would be able to use bitcoin. This clearly goes against the vision of a worldwide currency that we all have.

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This is bitcoin blocksize debate & the community is divided into two.

There are 5 people in the world who have the commit rights to the original software program called 'Bitcoin core'. But since it is open-source anyone can copy the software and start their own version. The bitcoin core developers want to keep the block sizes small but other renowned people in the bitcoin community, namely Mike and Gavin, want to increase it to 8 mb from the current 1 mb and so on over the years. As expected, the big miners also want this increase since that would eliminate the small miners giving them more power. They have started another copy of bitcoin with this change called 'Bitcoin XT'.

The American majority is backing Bitcoin XT because they want to see widespread adoption but I am not aware how do they plan to contain the miners becoming powerful over time. The core developers want to keep it working correctly even if it means its usefulness to a smaller population. Hence bitcoin is forking.

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What does this mean for the users?

As explained earlier the value of bitcoin is guaranteed by its verifiability in the ledger. But with the fork there will be two versions of the ledger. This means that anyone excepting bitcoin will have to decide which ledger they prefer - the one used by bitcoin core or the one by Bitcoin XT.

I don't know how this would play out and can only see confusion in the future. Effectively this means there is now a bitcoin core coin, earlier called bitcoin, and a Bitcoin XT coin also earlier known as bitcoin. The major forum moderators are siding with bitcoin core and have begun treating BitcoinXT as an altcoin. The english speaking majority it seems will move to Bitcoin XT and will treat Bitcoin core as an altcoin.