Segwit eliminates the size limit and replaces it with a weight limit. The weight is computed so non-witness data (e.g. the above outputs) count 4x as much towards the limit as witness data (signatures). The fixes the incentives by balancing the costs of signatures vs outputs to be roughly equal. It's also how segwit achieves a capacity increase in a way which is fully backwards compatible with old nodes.
I'm really confused on this, can you clarify?
As far as I understand it, segwit does not eliminate the size limit. The size limit is still 1mb. It just adds a weight limit of 3+1=4mb. Correct?
And the witness discount is only used for relative fee prioritization, right?
So in that light, miners could easily decide they can earn more by modifying the code to prioritize transactions differently, primarily by the limit that gets hit first(probably the 1mb limit). Right?
It seems to me that the witness discount is an inherent property of the lower blocksize limit versus the higher blockweight limit. And in the decade-long persepctive, there would/should be no cost for the witness data, as that isn't the constraint the miners have to prioritize on (unless blockweight is consistently hit before blocksize). Am I confused on how this works? Does witness data weight actually count against the blocksize limit itself?