Quote from: 420 on March 08, 2013, 06:10:09 AM

Quote from: Nagato on March 08, 2013, 05:59:34 AM

Quote from: hazek on March 08, 2013, 03:31:38 AM

It's not wrong, because it's not the entire solution. I forgot to add that you also determine fees by checking every 2016 blocks what the average fees per block were. Now miners can't manipulate the fee anymore because they don't know who will find the next block, well unless they unanimously decided to insert fees enough to raise the limit, something really hard to achieve since if just one big miner doesn't agree the rest would be paying him to raise the limit.

It can still be gamed upwards. A miner can mine a block with a transaction paying 1000BTC in fees without relaying the txn. If he mines the next block, he pushes up the average, else he doesnt lose anything.

As has been pointed out, there are disadvantages to both extremes.

The primary cost of mining should be hashing power, not bandwidth/storage costs in a datacenter.
In the ideal situation, the gross mining income with an ASIC should not change regardless of whether it is run on a home connection or a datacenter.
Fees are primarily paid for hashing power to secure the network, not for processing/verification, a single low end smartphone could do that. Once you start requiring a Google datacenter to even enter the mining industry due to gigabyte blocks, you have lost control of your currency to a few, but you will have far higher transaction rates and low cost transactions. What is to prevent this large miner from not charging what Visa does? The barrier to entry has become so high that competing would be a very risky proposition.

Don't get me wrong, decentralisation is expensive, very expensive. Bitcoin in its current form vastly more inefficient and expensive than centralised systems like paypal/Visa due to the need for redundancy in storing/processing/verifying.

The question boils down to what level of mining centralisation are we looking for to drive down fees and increase maximum transaction rates.

We need to find a middle ground which supports as many transactions as possible while ensuring that independent hashing(decentralization) remains viable.

uh how is it more expensive................are you saying because the pool controls little miners?

a $600 ASIC is about the same cost as 3x regular GPU's previously bought for mining

I assume you mean how Bitcoin is more expensive.

You have to understand that any full node, could be your home PC, can alone process/mine/verify all bitcoin traffic today singlehandedly. It does not matter if every other miner out there disappeared, the bitcoin network will still function as smoothly as it did.

Every other Full node, be it a miner or full client, is redundant and incurs a cost to the economy in hardware/bandwidth costs. If there are 100k people running full nodes, the cost of the Bitcoin network is ~100k times more expensive than Paypal/Visa(Just goes to show how much money they actually make without competition). What these redundant nodes provide is dencentralisation and in the case of miners, hashing power to secure the network.