Another reason that transaction fees don't work.
I finally had a spare moment to contemplate the variables.
A key factor is the block size. If the block size is unlimited (and bandwidth is an insignificant cost), then unless miners have a monopoly they will accept transactions with fees as low as don't constitute a DoS attack, in order to maximize revenue.
In other words, they would have no pricing power at all (a Tragedy of the Commons) and the system would devolve into a partial-monopoly in order to gain pricing power.
A partial-monopoly in this case is enough % of the network hashrate to delay transactions (by that % of blocks) which do not include a sufficient fee.
If we limit block size, then the system doesn't scale.
If we let the Bitcoin foundation decide when to increase block size, then they control the economic market function, i.e. we've centralized Bitcoin.
Let us assume unlimited block size and partial-monopolies. Thus the transaction fee can always be forced higher in order to generate more revenue for the miners. Thus Bitcoin devolves (as coin rewards diminish) to a system that presents spenders with a choice between include a very high transaction fee or accept an ever increasing delay for confirmation. This will exacerbate as coin rewards diminish and volume of transactions increase.
If we instead assume limited block size, then the Bitcoin foundation will set the transaction fees, not the market.
Bitcoin is a broken design.
So, going from what you're saying, if the blocksize was unlimited as to increase bandwidth (as opposed to the artificially-imposed 1MB block-size limit), a reliable anti-trust mechanism/protocol would have to be in place to prevent collusion, nefarious or accidental. It seems to me that miners lack a check on their power, at least as of present in the current crop of cryptocurrencies. Currently, the only possible solution seems to be forking the chain, but without a fundamental anti-trust check, that does nothing to prevent future intra-blockchain monopolies and weakens stability.
So, how to check against the ability of mining monopolies to delay/reject transactions of their choosing:
if they're artificially raising the costs of transactions through monopoly power?
if they're targeting/censoring transactions by means of blacklists (for instance, MasterProtocol, Counter-Party, ColoredCoins)?
Does this mean that we have to scale the ability of small miners to be as relevant in proving a block as a monopoly is, am I thinking in the right direction here? It seems that solo miners in the Bitcoin mining scene though probably have just as good a
chance of profiting if not better through lack of pool fees (tradeoff: variance increases the smaller the % a miner is of the total hashrate), consequently in a democratic setting, they have as much power as a minority does in any given democracy, which is almost none (though they may have voice).
Instead of the gamble for one entity to receive the one block reward which allocates disproportional power to leading pool operators, how can the nature of the block reward be changed to promote decentralized mining as opposed to the centralization that the current schema promotes?
I apologize for any immaturity of these musings, I just wanted to get these questions out so as to flesh out the details with you all.