Re: How a floating blocksize limit inevitably leads towards centralization

Quote from: misterbigg on February 22, 2013, 02:03:11 AM

Quote from: solex on February 22, 2013, 01:57:08 AM

...the 1Mb limit is reached and transaction delays occur to such an extent that the chaos and negative press stops enough people from using bitcoin that it can limp along with saturated 1Mb blocks.

I already outlined the likely scenario describing what happens when transaction volume reaches the max block size limit:

Quote from: misterbigg on February 20, 2013, 08:09:15 PM

Quote from: Gavin Andresen on February 20, 2013, 07:38:16 PM

we should see what happens as we run into the soft blocksize limits...what do you predict will happen?

In this order:

1. Most blocks are at or near the 250 kilobyte soft limit.
2. The memory pool of transactions grows due to insufficient space in blocks.
3. Users notice trend of transactions taking longer to confirm, or not confirming at all.
4. Fees increase as users pay more to improve confirmation times.
5. Miners (or mining pools) modify code to select transactions with the highest fees per kilobyte to fit into blocks. They remote the 250 kilobyte soft limit. Some miners disallow free transactions entirely.
6. Transactions clear much more quickly now, but fees decrease.
7. Blocks increase in size until they are at or near the one megabyte hard limit.
8. Fees start increasing. Free transactions rarely confirm at all now.
9. Small transactions are eliminated since they are not economically feasible. SatoshiDice increases betting minimums along with fees. The volume of SatoshiDice transactions decrease.
10. Users at the margins of transaction profitability with respect to fees are pushed off the network.
11. Many people, most non-technical, clamor for the block size limit to be lifted.
12. Fees reach an equilibrium where they remain stable.
13. Spurred by the profitability of Bitcoin transactions, alternate chains appear to capture the users that Bitcoin lost.
14. Pleased with their profitability, miners refuse to accept any hard fork to block size.

There will be no "chaos" or long transaction times, just high transaction fees. Users for whom it makes economic sense to utilize the Bitcoin network will pay the fees. Everyone else will use alternatives which are guaranteed to appear for economic reasons. If Bitcoin's transaction volume requires fees that are so high that some people get pushed off the network (like SatoshiDice) there is clearly a market for payment networks.

We should be so lucky that we get transaction volume sufficient to drive up fees to where users look for alternatives. It means Bitcoin is doing something right!!!

What about step 15? The fact that if an alternate chain starts being used and gains value.. and that chain can do everything bitcoin can do but also doesn't have the artificial limit... or maybe it has a smarter limit that dynamically adjusts... would bitcoin cease to exist? Because some people seem to think that expensive transactions will kill bitcoin. I realize that in order for transactions to get that expensive... to an extent that means bitcoin has to "succeed" to get to that point.

what if a transaction costs the equivalent of 10 dollars? It's going to push more than just 10 dollar and less transactions off the network. Even if you use a payment processor you have to send your money to the processor. And then what? Right now I can spend money for instance and send some to the reddit tip bot. Or I can donate to wikileaks. If I'm forced to use a payment processor then in order for me not to kill myself financially I would have to move everything I own to it all at once and leave it in their hands. I'm no longer in control of my own wealth. Exchanges are a weak link because governments or criminals can attack them. If they go down... that hurts.

So just to be clear it seems to me this is the case: Gavin and Mike hearn want to "wait and see what happens" . But it sounds like they want to raise the limit somehow and do it in an intelligent way. It sounds like Jgarzik wants to leave the cap in place and never move it.

Maybe we shouldn't worry about it.......... because in order for it to be a problem bitcoin has to succeed. But I don't want it to collapse after it succeeds. I realize that "microtransactions" like satoshi dice will inevitably have to be done off the blockchain. But that still doesn't justify 10... 15... 20 or even higher transaction fees.