Re: Bitcoin XT - Officially #REKT (also goes for BIP101 fraud)
Of course if bitcoin becomes too much expensive to use other cheaper systems will get their shares of the market reducing the usage of bitcoin. I don't see how this could be good for bitcoin in any possible way.
If the economic pressure is relieved by people leaving (or never entering) the economic system, then I think this would result in a decline (or a levelling out) of Bitcoin's market cap.
So again, if the "economic pressure from deadweight loss gets relieved somehow" theory is true, then not only does it mean that we can't use the protocol to artificially increase fees, but it also means that any attempt to do so will instead have either no effect (the code will fork around it) or a negative effect (growth within the Bitcoin economy will stall or reverse [rather than fees increasing]).
Food for thought!
Oh, that one is simple!
The PoW nature of systems in question must prevent their uncontrolled duplication, so there will be only a few worth considering switching to. Plus the network effects of money in general will preserve the economic pressure from leaving the strongest networks in the field (which is again defined by manageable costs of running a full validator from home networks without permission).
And other security models aren't real honey badgers to be of any interest to many.
I'm not sure I'm following. Are you saying that the path of least resistance is to fork the protocol to raise the block size limit? Or that you think the system can permanently exist in a state where Qmax is to the left of Q* (economic pressure to create a fork exists yet the fork never happens)?
Ok, now we are getting to the gist of it.
The are only two LARGE limiting factors that should keep the whole crypto-ecosystem "pressurized".
1) First, is the bandwidth factor. The main target here is home networks, but I assume that we might eventually have a system one layer up from there for as long as it remains permission-less enough to operate in that space, though I'm not sure if it's going to be Bitcoin or any other system to get there (if any at all).
2) Second, is the costs to duplicate excessive hash-power to produce many successful PoW systems (and only these contribute the most into the core value proposition here as other security models gradually lose their entropy over time).
What I'm saying is that the competition within this field (of PoW coins) would force each system to fork and increase its limit in order to stay in the game, as the bandwidth factor would continue to increase due to technological innovations allowing the playing field to continue to expand.
From the perspective of any one particular system, it's like a combustion engine really, first the limit "pulls" the volume of transactions, then the volume "pushes" against the limit, as the network effect and the costs to switch (for that particular system) prevent the economic pressure from leaving. The volume should build up enough pressure and "spark" at some point in time for that system to decide to go for the higher limit (and repeat the whole cycle later in time) or risk losing its "precious"
pressure to the closest competitor. The exact timing for these kinds of events would become the most interesting part of the game to follow.