It is the fact that block propagation is slow that makes it costly for a miner to even attempt to produce an 8 MB block. I estimate that, given the current network propagation impedance, a miner would only be wise to attempt to publish an 8 MB block if it contained 3 to 6 BTC of fees (due to his increased risk of orphaning).
As block propagation improves, it gets cheaper for miners to build larger blocks. There is a natural balance that occurs without the need for a tight limit. This is how Bitcoin has always worked. The free market solves the block size problem without centralized intervention.
Emphasis mine.
1) The key word here is "current network". The 1MB limit was baked into the brand by Satoshi himself, that's why miners don't even dare to think consolidating on higher bandwidth lanes, because if they do they will simply go and fork themselves out of the system.
2) A "natural balance" might begin shifting towards higher and higher bandwidth, but because the process is smooth and slow, it will push home users one by one without them even noticing it. By the time they are almost all out, they will have already lost their favorite toy forever.
3) Bitcoin has "never worked" without there being a single static hard limit (of 1MB) firmly cemented into the brand itself. The challenge we are currently facing is how to melt it carefully, shift it far but safe enough and let it solidify all without the original founder of the project. It's our call. We really need to agree.
1) This is not correct, Satoshi had always intended to increase the blocksize, the one megabyte limit was only meant as a temporary measure.
2) Increasing the blocksize will not effect home miners whatsoever because home miners do not run full nodes for mining. A home miner could literally mine over a 56k connection anywhere in the world even with 8GB blocks.
3) This is also incorrect since Bitcoin has also worked without this limit, since the limit was set at 32 megabyte earlier in its history. Furthermore Bitcoin has never operated under an economy of completely full blocks, this would be a radical departure from the original vision and promise of Bitcoin.
1) Of course he did, but the limit in question forces current big miners to target the "current network" only because the rules say so. If we relax that, they might as well begin shifting their operations onto the higher bandwidth layers, where they can extract more profit. So we must be honest with ourselves here.
2) I was talking about home users who run non-mining full nodes (not home miners). The miners (operating full nodes) are profit-driven and therefore will move themselves wherever they see fit, while non-incentivized other full nodes will likely just stop operating if it becomes too inconvenient for them to continue.
3) I would consider the period when Satoshi was still around as "birthing of Bitcoin" and the moment he left was when Bitcoin was "born". So, in that terminology the 1MB limit has always been there and I argue, that it had more of a psychological effect (to target a particular bandwidth layer) than anything else.
Now, I'm not saying that we shouldn't increase the block size cap. I personally believe that increasing it to 8MB (or a more gentle 2-4-8 approach) is the best way moving forward if we decide to change it at all. If our highest priority, however, is to protect home-based full nodes (which already find it somewhat inconvenient to operate), then we probably shouldn't touch the limit any time soon, but that will have other consequences as competitors will begin catching up.
It's an interesting time in Bitcoin's history.
It's a question of whether it will stay at home (bandwidth-level) or move out into the unknown, face the uncertainty, survive and redefine itself.
