1MB-block supporters have 2 major arguments: decentralization and block space scarcity. By considering ONLY these 2 factors, however, the BEST solution is to limit a block to only 2 transactions:
Gee. And yet no one is suggesting that. Perhaps this should suggest your understanding of other people's views is flawed, before clinging to it and insulting people with an oversimplification of their views and preventing polite discourse as a result? :-/
but 1MB is definitely not a good one.
At the moment it seems fine. Forever? not likely I agree, and on all counts. We can reasonable expect available bandwidth, storage, cpu-power, and software quality to improve. In some span of time 10MB will have similar relative costs to 1MB today, and so all factors that depend on relative costs will be equally happy with some other side.
Some of the 1MB-block supporters believe we should keep the limit forever, and move 99.9% of the transactions to off-chain. I just want to point out that their logic is completely flawed.
Had he chosen 2MB instead of 1MB, I am pretty sure that Bitcoin would have worked in exactly the same way as how it works now.
Maybe, we've suffered major losses of decentralization with even many major commercial players not running their own verifying nodes and the overwhelming majority of miners instead relying on centralized services like Blockchain.info and mining pools. Even some of the mining pools have tried not running their own nodes but instead proxying work from other pools. The cost of running a node is an often cited reason. Some portion if this cost may be an illusion, some may be a constant (e.g. software maintenance), but to the extent that the cost is proportional to the load on the network having higher limits would not be improving things.
I've been maintaining a node with my 100Mb/s domestic connection since 2012. It takes less than 800MB of RAM now which I have 24GB. CPU load is <0.5% of a Core i5. Harddrive space is essentially infinite. I don't anticipate any problem even if everything scales up by 10x, or 100x with some optimization.
Therefore, people are not running full node simply because they don't really care. Cost is mostly an excuse. From a development and maintenance standpoint it's just easier to rely on Blockchain.info than running a full node. People are not solo mining mostly because of variance, as only pools could survive when the difficulty is growing by 20% every 2 weeks. This may sound bad but majority of the commercial players and miners are here for profit, not the ideology of Bitcoin.
At the end of the day, theoretically, we only require one honest full node on the network to capture all the wrongdoing in the blockchain, and tell the whole world. I'm pretty sure we will have enough big bitcoin whales and altruistic players to maintain full nodes as long as the cost is reasonable, say $100/month. I don't think we will hit this even by scaling up 1000x
The real problem for scaling is probably in mining. I hope Gavin's O(1) propagation would help a bit.
What we saw in Bitcoin last year was a rise of ludicrously inefficient services ones that bounced transactions through several addresses for every logical transaction made by users, games that produced a pair of transactions per move, etc. Transaction volume rose precipitously but when fees and delays became substantial many of these services changed strategies and increased their efficiency. Though I can't prove it, I think it's likely that there is no coincidence that the load has equalized near the default target size.
If the limit was 2MB, the load would be higher, but not doubled. Some people have to shutdown their bitcoind but we should still have more than enough full nodes to maintain a healthy network. Core developers may have a different development priority (e.g. optimization of network use rather than payment protocol). These are not questions of life or death.
I hate those spams too but I also recognize that a successful bitcoin network has to be able to handle much more than that.
Assume that we aim at paying $1 million/block ($52 billion/year) to secure the network (I consider this as a small amount if Bitcoin ever grows to a trillion market cap). The current 7tps llimit will require a fee of $238/tx, which is way too expensive even for a global settlement network among banks.
This is ignoring various kinds of merged mining income, which might change the equation somewhat... but this is hard to factor in today.
Merge mining incurs extra cost, with the same scale property of bitcoin. I'm not sure how bitcoin mining could be substantially funded by merge mining.
I think a reasonable choice, with the implications for centralization considered, would be around 100MB/block. That takes 1.5Mb/s of bandwidth in a perfect scenario. That would be a better equilibrium in technical and economical terms.
I think at the moment based on how we're seeing things play out with the current load levels on the network I think 100MB blocks would be pretty much devastating to decentralization, in a few years likely less so, but at the moment it would be even more devastating to the existence of a fee market.
I'm just trying to set a realistic target, not saying that we should raise the limit to 100MB today. However, the 1MB limit will become a major limiting factor much soon, most likely in 2 years.