Post
Topic
Board Development & Technical Discussion
Re: review of proposals for adaptive maximum block size
by
TierNolan
on 26/02/2013, 14:31:09 UTC
Even if miners only can ignore transactions, they will do so - including more transactions means slower block propagation times and as already said in a different thread, bandwidth is still a limiting factor in an unlimited/virtually unlimited block size scenario.

The thing is that hashing adds directly to proof of work.  A miner's costs become proportional to his hash power.  There is an economy of scale here.  If the optimal point is at 0.01% of the total hashing power, then things stay distributed.  If economies of scale continue so that a miner with 90% of the hash power is more efficient than one with 10% of the hashing power, then you end up with a "natural" monopoly.

A situation where things might end up as a natural monopoly must be avoided.

If miners become bandwidth limited, then an entirely new dynamic takes over.

This means that the primary cost for a miner is bandwidth.  In this situation, a miner's costs are not proportional to his hashing power.  A miner with 90% of the market only needs to pay for bandwidth once and gets 90% of the fees, while a miner with 10% of the hashing power also pays the same, but only gets 10% of the fees.  This puts the 10% guy out of business.

Bandwidth usage doesn't add to the formal proof of work of the main chain, so it is just a deadweight loss, without adding security.

If most of a miner's costs are hashing power, then things are much less likely to end up in the natural monopoly situation (unless hashing ends up with massive economies of scale too).