Hello, many here know of Roger's essay published on the reputable website of the Foundation for Economic Education:
https://fee.org/articles/time-to-end-the-block-size-blockade/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?
Original Reddit Post HereThere 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.
Imperfect analogy is imperfect, obviously. But there is something to be learned from the idea that if capacity is fully saturated... any additional demand prices out
some of the old users and
some of the old use cases, as long as they are willing to outbid their competitors (other Bitcoin users). Yes, increasing throughput increases resource demand on full nodes, but so does segwit, moreso than a simple 2MB upgrade. (3MB increase in potential max load with 0.8MB throughput gain). Yes nodes can ignore segwit and consider it an altcoin, they can prune, they can reject inbound... I'm talking about
full archival nodes. It's important to recognize that hardware and internet bandwidth has improved over the last 7 years.
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).
Now we get to the heart of the matter. You say that miners would include any non-zero fee transaction just because they can. This is where the philosophical difference comes to a head. Some feel that without a production quota on blocksize, set by a priesthood of Core devs, miners would simply bloat blocks to infinity. They would willingly destroy the independent node network, simply because they're dumb? or they only care about this week's profits?
Others find this argument ridiculous, and counter to the very "core" principles that govern Bitcoin: Where free market incentives, and CPU consensus, rule the system... not centrally ordained software ministers.
Miners are uniquely placed [and designated by satoshi via the consensus mechanism] to best determine the size of their own blocks because they are
directly beholden to the market, unlike devs with ambiguously disclosed stock options in VC startups.
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.
I suppose this is the point where you should produce a chart where blocks were constantly at 1MB for the last 6 years... because free globally replicated storage. The reality would probably be more like what we've experienced so far... a steady rise in the use of Bitcoin, and a commensurate increase in blocksize. Not an immediate jump to the new max.
Again with the argument that miners bloat to infinity without a central authority stopping them... all records of blocksize statistics refute this position.
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.
- Miners do face a supply curve, and a propagation cost to larger blocks. The distinction of fee paying/spam is non-functional, as zero fee transactions are already ignored by miners and most nodes. Median fees are 8 cents or more, up from 2 cents a couple months ago, a 400% increase.
- He doesn't have to. It's obvious to an honest observer that 8 cents for the smallest tx possible is already greatly diminishing potential use cases. Blockstream says this is fine. Because (not currently available) payment contracts in LN will handle all that.
- It's not really up to Roger, or the most influential developers, to determine the dynamics of a fee market. It would and will exist with miners facing the free market and subsequently setting their own production levels. Beware the dangers of a centrally planned economy.
I could mirror your petulant conclusion, but, meh.