Quote from: creighto on November 21, 2010, 12:54:01 AM

I'm afraid you missed the analogy that I was trying to present, and your's is more than a bit flawed as well.

Let's drop the analogies then and go straight at the problem.

The maximum block size is big, having room for all or most transactions.
Therefore, transaction fees are (close to) zero.
Therefore, total block transaction fees are also (close to) zero.
Therefore, all for-profit block generation ceases.
Therefore, difficulty drops.

If for-profit block generation was the only generation going on then difficulty would be very low and double spending very easy. The only thing that can save the system is people generating at a loss.

Now we have a lot of bitcoin holders that would lose greatly if payments become unreliable and confidence in the system drops. Will they contribute to their common good? If they do it will not be out of self interest. If you contribute to the system reliability you lose your contribution and benefit very little because the benefit is shared with everyone. If you use the system without contributing you benefit from everyone elses contributions anyway.

The usual sad result is that everyone tries to live off of everyone elses contributions, very little is actually contributed and everyone loses.

Classic tragedy of the commons.