How do you differentiate real demand from spam demand?
If someone like Ver decides to dump millions of dollars worth of spam transactions in order to make the blockchain huge, how do you stop this? since if it's automated, the blockchain will just adapt to this demand (even if its fake) centralizing the nodes as a result.
I just don't see how flexible blocksize schemes aren't exploitable.
As d5000 mentioned, it only accounts for transactions that made it into previous blocks, it would have to be spam with a hefty fee to be counted. Plus, the conditions are set so that the blocksize can only increase if the total tx fees collected in the latest diff period are higher than the last diff period, so they'll have to pay more and more over time if they want to keep spamming, otherwise it remains at the same level and doesn't increase. And even if they did manage to achieve that level of continuous spam for several consecutive fortnights, they get an extra .01MB each time for their efforts and as soon as they can't maintain their attack, it will drop again. Spam can never be prevented but can be heavily disincentivised, which this proposal does well.
Mathematically, assuming an average block time of ~10 minutes, there are a maximum of ~104 difficulty adjustments over a 4 year period, so even if there was a .01 MB increase at every difficulty re-target (the chances of which are negligible), the base blocksize would still only be ~2.04 MB after 4 years.
Is this a compromise most of us could get behind?
For me, maybe
But bear in mind, saying 2.04 MB after 4 years conceals the fact that the real total blocksize would be 8.16MB when you include the signatures in the witness blocks, Segwit is a part of this deal you're proposing.
Indeed, but that's only if an increase is actually achieved every diff period. The threshold is set rather high if at least half of the blocks in that period need to be at least 90% full to qualify for an increase (but again, if people want to query those numbers we can look at that collectively and debate pros and cons). In reality it could take far longer than 4 years to reach that sort of size. I'm sure many pools will still be mining largely empty blocks just to grab the reward, so because of that and other factors there probably won't be an increase every time. I'm reasonably certain that the total blockchain size won't experience any dramatic growth as a result. Lastly, and obviously, even if the maximum size increases, miner's don't necessarily have to fill it. They're still quite welcome to release <1MB blocks after an increase if that's their preference.