Hi folks,

As BTC gains in popularity, we might have a discussion about increasing the block size limit. Less block space means higher transaction fees which could reduce BTC’s utility. More block space could increase the cost for running a full node. As of now, the limit does not accomodate the needs of the users. We could solve that problem by having an adjustable block size cap.

If we assume that the avg fee per vbyte and the block size limit are inversely correlated;

If we assume that the the demand for block space is constant;

If we assume that the block occupancy rate is constant;

Then we can stabilize the fees with this equation:

new block size limit = (fee revenue / avg fee on the previous block - block size) / block occupancy rate + previous block size limit

We’ll explain the equation step by step.

Step 1:

(fee revenue / avg fee on the previous block

We calculate the amout of space that would have been provided at the previous price.

Step 2:

Quantity supplied - block size)

We calculate the excess demand/supply without considering the block occupancy rate.

Step 3:

/ block occupancy rate

We calculate the excess demand/supply considering the block occupancy rate.

Step 4:

+ previous block size limit

We adjust the limit for the next block.

This system could reduce the wait for confirmations in peak periods while allowing miners to generate income when there’s a low activity on the network.