(also posted to the -dev email list)

-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA256

It has been suggested that we leave the decision of what the blocksize to be
entirely up to miners. However this leaves a parameter that affects every
Bitcoin participant in the control of a small minority. Of course we can not
force miners to increase the blocksize if they choose to decrease it, because
the contents of the blocks they make are their decision and their decision
only. However proposals to leave the maximum size unlimited to allow miners to
force us to accept arbitrarily large blocks even if the will of the majority of
Bitcoin participants is that they wish to remain able to validate the
blockchain.

What we need is a way to balance this asymetrical power relationship.

Proof-of-stake voting gives us a way of achieving that balance. Essentially for
a miner to prove that the majority will of the poeple is to accept a larger
blocksize they must prove that the majority has in fact voted for that
increase. The upper limit on the blocksize is then determined by the median of
all votes, where each txout in the UTXO set is one vote, weighted by txout
value. A txout without a corresponding vote is considered to be a vote for the
status quo. To allow the voting process to continue even if coins are "lost"
votes, including default votes, are weighted inversely according to their age
in years after 1 year. IE a vote with weight 1BTC that is 1.5 years old will be
recorded the same as a <1 year old vote weighted as 0.67BTC, and a 1 day old
and 6 months old UTXO are treated equivalently. The 1 year minimum is simply to
make voting required no more than once per year. (of course, a real
implementation should do all of these figures by block height, IE after 52,560
blocks instead of after 1 year)

A vote will consist of a txout with a scriptPubKey of the following form:

OP_RETURN magic vote_id txid vout vote scriptSig

Where scriptSig is a valid signature for a transaction with nLockTime
500,000,000-1 spending txid:vout to scriptPubKey:

OP_HASH160 H(OP_RETURN magic vote_id txid vout vote) OP_EQUAL

vote_id is the ID of the specific vote being made, and magic is included to
allow UTXO proof implementations a as yet unspecified way of identifying votes
and including the weighted median as part of the UTXO tree sums. (it also
allows SPV clients to verify the vote if the UTXO set is a Patricia tree of
scriptPubKeys) vote is just the numerical vote itself. The vote must compute
the median, rather than the mean, so as to not allow someone to skew the vote
by simply setting their value extremely high. Someone who still remembers their
statistics classes should chime in on the right way to compute a median in a
merkle-sum-tree.

The slightly unusual construction of votes makes implementation by wallet
software as simple as possible within existing code-paths. Votes could still be
constructed even in wallets lacking specific voting capability provided the
wallet software does have the ability to set nLockTime.

Of course in the future the voting mechanism can be used for additional votes
with an additional vote_id. For instance the Bitcoin community could vote to
increase the inflation subsidy, another example of a situation where the wishes
of miners may conflict with the wishes of the broader community.

Users may of course actually create these specially encoded txouts themselves
and get them into the blockchain. However doing so is not needed as a given
vote is only required to actually be in the chain by a miner wishing to
increase the blocksize. Thus we should extend the P2P protocol with a mechanism
by which votes can be broadcast independently of transactions. To prevent DoS
attacks only votes with known vote_id's will be accepted, and only for
txid:vout's already in the blockchain, and a record of txouts for whom votes
have already broadcast will be kept. (this record need not be authoritative as
its purpose is only to prevent DoS attacks) Miners wishing to increase the
blocksize can record these votes and include them in the blocks they mine as
required. To reduce the cost of including votes in blocks 5% of every block
should be assigned to voting only. (this can be implemented by a soft-fork)

For any given block actual limit in effect is then the rolling median of the
blocks in the last year. At the beginning of every year the value considered to
be the status quo resets to the mean of the limit at the beginning and end of
the interval. (again, by "year" we really mean 52,560 blocks) The rolling
median and periodic reset process ensures that the limit changes gradually and
is not influenced by temporary events such as hacks to large exchanges or
malicious wallet software. The rolling median also ensures that for a miner
the act of including a vote is never wasted due to the txout later being spent.

Implementing the voting system can happen prior to an actual hard-fork allowing
for an increase and can be an important part of determining if the hard-fork is
required at all.

Coercion and vote buying is of course possible in this system. A miner could
say that they will only accept transactions accompanied by a vote for a given
limit. However in a decentralized system completely preventing vote buying is
of course impossble, and the design of Bitcoin itself has a fundemental
assumption that a majority of miners will behave in a specific kind of "honest"
way.

A voting process ensures that any increase to the blocksize genuinely
represents the desires of the Bitcoin community, and the process described
above ensures that any changes happen at a rate that gives all participants
time to react. The process also gives a mechanism for the community to vote to
decrease the limit if it turns out that the new one was in fact too high. (note
how the way the status quo is set ensures the default action is for the limit
to gradually decrease even if everyone stops voting)

As many of you know I have been quite vocal that the 1MB limit should stay. But
I would be happy to support the outcome of a vote done properly, whatever that
outcome may be.
-----BEGIN PGP SIGNATURE-----
Version: GnuPG v1.4.11 (GNU/Linux)

iQEcBAEBCAAGBQJRtVFBAAoJEEWCsU4mNhiP6EAIAMjq4UgXxmEjOgHWf0KcmwmH
Ra/I3oY7krvg/lu1YCa+ACMBdoca9WODySUIe7R3niphKXEnknHGUIf8tm/Vrq4H
gPF4cgYEr18EYTVtvT9J1pZUB4f5dxkXXNpcQ60juaz9KervFQMOGnpr6Fyxi3dS
ghObNYcr3D2v1fjx56sp7BCNn0XHxTb1ZLUJB0BZhDKlamfgcxruKMbpsZmACJUj
gTNLNweaAomBIH++j7cnXeB0jZc/1ilv8qLA/f3TGb43FDkAQcvvSjGijI+OJOm6
Fh/WRBav1BJiV6PKs9xuHXsaxZ/T7Fb8Wg8EynSi0mSj47QXdKZgeZCi3XlSyxM=
=aKBD
-----END PGP SIGNATURE-----