Hello, many here know of Roger's essay published on the reputable website of the Foundation for Economic Education:
I wrote a considered response to Roger's essay, however, unfortunately, I have not had any response, either from Roger; or from the community at-large. Hence I'm kindly asking for some commentary / responses from the people here on this forum. In particular, are there any part of my post that are wrong, invalid, or misleading?
There are many issues with this essay; really I was quite disappointed with Roger. The primary one being intellectual dishonesty from the use of a bad analogy. While this in itself doesnt invalidate Rogers other claims, it doses put the other claims in poor light.
Firstly, to address the fundamental issue with the Starbucks analogy: Bitcoin isnt like Starbucks Corporation; while there is only one Bitcoin Blockchain, there are tens of thousands of Starbucks stores.
To respond to increases in demand Starbucks can just open more stores (that operate more-or-less independently). However, with Bitcoin, we cannot just add more nodes to respond to an increase in demand; as every (full) node must carry the entire burden of the network.
Roger dose correctly state:
Any time a Bitcoin user is willing to pay a fee that is larger than the marginal cost of including the transaction in a block, it makes economic sense for a miner to include it.
However, his statement is intellectually dishonest as he doesnt analyze what the marginal cost actually is. Where in reality, the marginal cost of including a transaction in a not-full block is virtually zero. Meaning that it doesnt matter what size blocks you have, they will constantly be full. (with exception to miners who have differing policies, but the economically rational miner will include transactions that have any fee above zero).
As we continue Roger doesnt analyse the problems and benefits of blocks being full, instead, based upon his Starbucks fallacy, he just assumes that full blocks are bad. There are two main arguments of why full blocks isnt the evil that Roger plays it to be:
- It is economically unavoidable. (The marginal cost of creating and including transactions is virtually zero).
- Without full blocks there isnt any fee-pressure. Where fees are increasingly important to the long-term health of the network. As the subsidy runs down, this should be compensated by an increase in transaction fees.
Yet neither of these arguments are addressed in Rogers essay.
Thus we come to the core contention of Rogers essay: (I paraphrase) If we increase the blocksize, blocks will meet capacity again. This is namely false, as it is completely reasonable to expect that blocks of any size to be full.
Roger dose a good job of arguing how is it is possible to increase the blocksize. He completely fails to put it into a well-reasoned context of why we need to rise the blocksize limit.
The marginal cost of getting into the full blocks that are on the network now (with the 1MB limit), is only 8 cents (US). see:
https://bitcoinfees.21.co/- Roger dose not address that there is virtually no fee-curve meaning: There are only really two types of transactions on the network: spam and fee paying. (edit: in that to outbid the spam, you only need to increase your fee from 4 cents to 8 cents; suggesting there isn't a strong demand for extra block-space from real fee-paying users.)
- Roger also doesnt address the economic implications of these 8 cent fees on the network. He doesnt address at what point do fees become so large that it does have significant economic implications.
- Roger doesnt address any argument of what point we should start considering a fee market important to the future of Bitcoin (with miners being paid by fees).
Overall this essay is an embarrassment, and anti-intellectual. I can only assume that Roger didnt put this essay out to rigours peer-review before publishing it.