Quote from: misterbigg on March 07, 2013, 03:52:35 AM

Quote from: jmw74 on March 07, 2013, 03:18:28 AM

At step 13, transactions (and the fees they would have paid to miners) are fleeing bitcoin in droves.

I'm not saying that Bitcoin will shrink, I'm saying that it will reach an equilibrium where there is no more growth in terms of new users operating directly on the block chain. Instead, there will be an industry of companies that do things off the block chain and settle up once a day or every few hours. Of course miners would love that, since the fees will be maximized. And anyone using Bitcoin as a store of value will be happy with it as well, since the network hash rate will be maximized.

This is so fucking naive.

1) The network hashrate will not be maximized in a global context. Restricted number of transactions equals a supply ceiling. A supply ceiling prevents the supply / demand curve from being maximized. A non maximized curve means that total transaction revenue per block will ultimately be lower. This is also ignoring that BTC to local currency rates will be lower, further reducing economic incentive to invest in mining resources

2) Bitcoin will be less valuable as a store of value. Less total transaction revenue per block, fewer users, less overall commerce done using bitcoins, smaller economy represented in bitcoins, BTC to [your currency here] rate is lower, fewer mining resources, LOWER TOTAL HASH RATE. Lower total hash rate equals a less secure store of value

Now pay attention to this last one

3) A declining BTC to other currency price means a terrible long term store of value. Declining types of potential use cases (resulting from more expensive INDIVIDUAL transactions), means smaller total economy represented in bitcoins, which then means a stagnant or declining BTC price. A bitcoin never grows into the $1000s without Bitcoin representing a significant portion of the global economy. A transaction limit never allows Bitcoin to do that.