When historians look back they might well conclude that the 1MB limit resolution was Bitcoin's "betamax moment", the most important decision point determining its ultimate fate.
I'm in justusranvier's camp on this one. Not raising blocksize, *at least* roughly allowing for Moore's Law, seems insane, and would just drive some alt to gain significant marketshare. I think most of us in this thread realize that an alt achieving a significant portion of bitcoin's market-cap for an extended period would be a major detriment to long-run health of the entire crypto-ecosystem. It'd empirically refute the notion that bitcoin is a good store of value, giving a lot of fuel to the argument that bitcoin isn't scarce due to alts. That'd reduce investment-in/monetization-of crypto in general since none could be considered a decent parking place for capital, and that hurts everyone (which is the core point alt-boosters miss).
We need to allow bitcoin itself to fulfill its basic promises, and one of those is cheap global transactions. Part of the path to mainstream use (and the trojan-horse that widespread bitcoin ownership represents) is through demonstrating feature superiority versus fiat (sidenote: Chamath on this:
https://www.youtube.com/watch?v=6AoPHNsX2x8 ). Transaction-cost is one of the most direct, most easily understandable, and most easily usable of bitcoin's "features" for new users.
Back to blocksize, I'll just drop the obligatory Satoshi quote to directly refute the notion that blocksize was always intended to remain fixed (though JR's and Peter R's orphan-cost-dynamics arguments upthread are obviously the proper args):
It can be phased in, like:
if (blocknumber > 115000)
maxblocksize = largerlimit
It can start being in versions way ahead, so by the time it reaches that block number and goes into effect, the older versions that don't have it are already obsolete.
When we're near the cutoff block number, I can put an alert to old versions to make sure they know they have to upgrade.
So, the cryptocurrency market is effecting pricing a >93% probability of Bitcoin dominating this new asset class - long term. An asset class of such importance that many crypto investors consider could make all fiat obsolete and perhaps even demonetize precious metals as well.
I think significantly demonetizing PMs comes before making a significant dent in fiat.