Quote from: Mike Hearn on January 31, 2013, 05:23:28 PM

It's an issue that will become clearer with time, I think.

By the way, I'm not assuming that Bitcoin will grow to rival PayPal or credit cards. That would be a wild, runaway success that would mark a major turning point in the history of money itself. And the internet is littered with the carcasses of dead attempts to revolutionize payments. It'd be presumptuous to presume future success.

However, if transaction volumes do grow to reach the block size limits, I would (for now) be advocating for a move to a floating limit based on chain history.

To recap: the primary arguments against are

1) Rising requirements for running a node make Bitcoin more centralized
2) The economics of providing for network security when block inclusion is free and inflation has dwindled

For (1), Satoshi always took the position that Moores law would accomodate us. I wrote the Scalability page on the wiki to flesh out his belief with real numbers. As you can see, even with no improvements to todays technology at all Bitcoin can scale beyond PayPal .... by orders of magnitude. It requires nodes to run on server-class machines rather than laptops, but many already do, so I don't see that as a big deal. If Bitcoin ever reaches high traffic levels, CPU time, bandwidth, storage capacity ... all very likely to be cheaper than today. I don't think the "only banks and megacorps run full nodes" scenario will ever happen.

For (2) I have proposed building a separate p2p network on which participants take part in automatically negotiated assurance contracts. I think it would work, but it won't be possible to be truly convincing until it's tried out for real. That in turn requires:

a) That there be some real incentive to boost network security, like semi-frequent re-orgs leading to spends being reversed and merchants/exchanges losing money. Inflation will likely provide us enough security for the medium-term future.
b) Somebody actually build the tool and get people using it.

Then you have to wait and see if community participants step up and use it.

In short, I can't see this question being resolved before we actually run up against the limit, which is unfortunate. I wish Satoshi had put a floating limit in place right from the start. But unfortunately there were many issues for him to consider and only limited time to consider each one, a fixed size limit probably didn't seem like a big deal when he wrote it.

Agree, (1) is not a huge issue. Moore's law will prevail. Plenty of people will run full nodes, and those that can't will run header-only or blockchain-less clients.

For (2), I feel like there's a factor I never see mentioned. In the short run (12+ years), the block rewards are more than enough to incentivize mining, especially as we're moving to a world where the variable cost (electricity) of mining is plummeting. Over that same timeframe, the cost of ASICs should also plummet to the marginal cost of production at the same time Moore's law is increasing their power. Hashing power is going to be cheap. Very cheap. I actually hypothesize that even in the case where transaction fees are negligible, if bitcoin has "succeeded", i.e. the value is much much higher than it is today, then we will have de facto proof of stake. Those people and entities with large holdings of bitcoin will have both the resources and the incentive to mine or to pay for hashing power to secure the network. Similar to how those with lots of gold tend to build massive expensive vaults and pay for large amounts of security.

I think it's a mistake to project one's vision of what bitcoin SHOULD be (high-value international transaction network) while ignoring what bitcoin IS becoming in the present. To choke off the growth in the payment network at this stage would be completely counterproductive to getting the value of bitcoin to where we all want it to be longer term. The block size limit MUST be addressed, and most likely within the next year and a half.