We can discard our private keys after each payment and expect other people to do the same but with the LN we have to hold our keys even if we have no balance in our wallets which is bad for privacy.

Also, the merchants can't use the LN to pay their employees/suppliers because the amounts are too high, so how can they unload their channels to receive more payments? I finally think that a block size increase based on technological progress makes sense.

You're probably right about the block size limit (that the expansion of the blockchain should be under controlled). But I'm not convinced about the LN. One of the main issue is that it requires users to create long term links which doesn't make sense if we consider that bitcoin transactions are supposed to be "pseudonymous". And I think Visa has already solved the problem you're talking about a few decades ago. 


It's probably because of security and privacy concerns.

Higher transaction fees means less people can use bitcoin as a medium of exchange which is a pretty good reason to assume that it would reduce it's utility.


I think it's obvious that bitcoin will never replace the dollar/EUR/YEN, etc or even come close to that but it could be useful for some type of transactions (espicially when it is not possible to use a credit card). Since scability is not a real issue, the LN doesn't accomplish anything. Changing the rules of the game when the game has already started will always be controversial, so if there was a fork to fix that problem I would believe most people would bet on that fork.

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.

Users will always have the option to offer a commission on their transactions, which gives the miners an incentive to include those transactions in their block. I hardly see how miners could collude to prevent that.


In the case of btc, inflation is part of the payment system, it is not the case for the traditional banking system where account balances' and payments are separate. I guess there are different ways of seeing it.

According to https://ycharts.com/indicators/bitcoin_average_cost_per_transaction, for bitcoin, the avg cost per transaction was 231.90 USD/tx yesterday, which is a lot higher than the avg cost for a CC transaction.

Actually, you're wrong. The merchants will usually not charge the transaction fee to the customers.

I think a block size limit increase based on demand is more sustainable than a block size limit increase based on "what everone can pay to run a full node" which doesn't make sense to me.

As you said it is not a common practice, therefore it shoudn't have a significant impact on the result of the equation.


Yes, I think function is the right word, ultimately we want to find a function but for that we need to have an equation!

Absolutely, we can calculate the next limit without applying it and see if it seems to work in theory. If it does seem to work then we can give the system a test run, we would set a floor and a hard cap in the testing phase.

I'll just explain my equation to make sure everyone understands it:

total fee in the last period / avg fee in the previous period = quantity supplied (Qs) at the previous price for the total amount that was paid in the last period

Qs - space used in the last period = excess demand in the last period before considering the block occupancy rate (a negative value means there was an excess supply)

(Qs - space used in the last period) / block occupancy rate = excess demand in the last period after considering the block occupancy rate


It's an interesting proposal but it doesn't address the "market inefficiency" problem. I think this is where I and ranochigo have a disagrement, I don't think Bitcoin will ever scale as a medium of exchange because our credit cards are just too convenient (and we generally don't have to pay any conversion/transaction fee to make a purchase) but I do believe that it can answer a particular need and the block size limit can be high enough to answer that need without being too high.

Just found a simple equation to balance supply and demand that could be easily introduced in btc source code:

total fee in the last period / avg fee in the previous period - total supply in the last period = change in demand

new block size limit = total supply in the last period + change in demand

Now I challenge you to find an equation based on "not centralizing bitcoin too much".

Alright, alright, guys I'll reveal some facts that may shock you..

1.A shortage of supply (block space) forces many people to leave their coins on their exchange which is a lot more dangerous than a few people not being able to run a full (who do not own a wallet anway).
2.Running a full node does not give you a vote, you can "listen" to what others have to say but nobody cares about what you have to say (unless you have large holdings but you guys don't seem to like PoS).
3.A faster block propagation with less transactions per block does not allow transactions to be confirmed more quickly.
4.A miner who finds a new block has an advantage on his competitors as he will start mining the next block before them but all miners have that advantage when they find a new block (which makes the orphan block argument pretty worthless).
5.A higher block size limit may increase miners expenses but it may also increase miners income, therefore small mining farms are not kicked out of the game.
6.Network congestion is no bigger problem than many transactions not being picked by a miner/paying to much fees.

So.. I can only ask, what now?

If you're worried about a congestion attack with a higher limit then you should also be worried about a DDoS attack with a lower limit. Idk what the exact limit should be, but I know that it should be updated more than once every 10 years. 

I didn't expect this thread to turn into a capitalism vs. communism debate (those who believe in free market and those who believe that everyone should run a full node). The only thing I can tell you is the customers will always go to whoever can give them what they want.

Since we're talking about the possibility of a new consensus and not a vector of attack, I think we should discuss the technical details and see if it works in the first place. I've seen a potential flaw in the model I proposed, although it is very unlikely to happen, in theory the excess supply could exceed the actual limit which means the block size limit in the next epoch would be below 0. We can easily fix that problem by introducing a minimum of 1MB which is the current maximum (that would be our starting point).

Open for discussion!

I understand your point but if the limit is not high enough then many people won't even be able to spend their coins which is another problem.


It is to protect the network and I think we must have a limit. I just think the free market should decide what that limit should be and the miners should adapt accordingly.

I believe you prefer a block size increase based on technological progress and I favor a block size increase based on demand. I proposed a way to calculate the block size limit, so far you haven't. I'll briefly explain how my equation could balance supply and demand..

new limit = (current total fee - previous total fee) / current avg + previous size limit

We calulate the excess demand or excess supply relative to the previous period then we calculate the new block size limit to meet a new equilibrium (assuming that the demand is constant).

Could you tell us how would you determine what the block size limit should be in the future?

As you mentioned earlier..


Unless the block size limit is decided at the protocol level we will have to have this debate over and over again! By having a self-regulated system we wouldn't have that problem. So what is your solution?

I'll just bring some adjustments to mine;

new block size limit = previous block size limit + (current total fee - previous total fee)
                                                                                           current avg fee               

I know this calculation may not be very accurate but that's a starting point. I don't think we should forbid people from owning BTC because some miners aren't able to keep up with the demand.   

The miners are the ones securing the network and I think most of them can easily afford to buy more storage/bandwith. In this regard, less people running a full node isn't really a threat...
If the demand for block space increases more than the supply then eventually the transaction fees will become so high that only the rich could afford them. Here's the problem and one solution..

In theory, the sender does not have any incentive to pay more than the "min fee" if there's no excess demand as he doesn't have to compete against other people for block space. If there's an excess demand then the block size limit willl determine how many transactions will pay more than the min fee, therefore the block size limit and the avg transaction fee are inversely related. We can balance the supply and demand with this simple equation:

new block size limit = previous block size limit x (current avg fee / previous avg fee)

We know that the avg fee depends on the amount of transactions that are waiting to be confirmed AND the block size limit, the demand for block space shouldn't change much in the short term.

I get your point but as franky1 pointed out it may not be worth the hassle of running a full node if you do not make a lot of transactions, you may in this case use some third party services to verify your transactions. If you do make a lot of transactions then you could as well pay a lower fee on your transactions and spend more money on your storage and bandwith. I want to emphasize the fact that the cost of storage and bandwith can be shared between multiple persons, the cost of a transaction can hardly be shared so transaction fees may have a bigger impact on centralization than the cost of running a full node.

I'd like to remind you that any miner with a lot of hashrate can inflate the fees by choosing to not pick the transactions that pay a low fee. It is actually easier for a miner to do that with an inelasic supply, if the supply was elastic then inflating the fees would also increase the block size limit which would ultimately reduce the fees (it would then be pointless to inflate the fees in the first place).
I see but what factor would you take into account to calculate block size limit? I believe scaling can only be done by increasing the network's throughput, I don't think the LN is a viable solution but that's another topic...

My apologies, I think you missed the point I was trying to make and it's probably because I did a spelling mistake. Here is the correction..


So what I was trying to say is 10 persons sharing the same computer is more decentralized than thousands of people using the same server. I think the majority of the community would agree with that.


I'm still not convinced, what is your vision?


I agree with you but I also think that the size of the block chain should automatically adjust to the need of its users.

Scaling is increasing the currency's utility by allowing more people to make transactions or allowing people to make more transactions.

The equation I found may not be accurate but I'll explain my reasoning;

If we assume that the user base is not going to change much in the short term AND people's habits are not going much in the short term then;

a) the volume of transactions on the network is proportional to the block size limit.

b) the price people are willing to pay to make a transaction when the limit is reached stays the same.

I'd rather have 10 persons running a full node and sharing the cost then have thousands of people using a third party service to make their transactions. The system we have now benefits to speculators who do not use bitcoin as a currency but does not benefit to the real customers of the currency, if bitcoin has no utility then sooner or later the price of the coin will drop down to zero (or it will fall drastically to it's true value).


In my view the inflation is a flat fee that is charged to the hodlers, it won't affect you if you don't hold your coins.


If btc's price is high then everyone has more money to outbid each other so I believe that the transaction fees will also increase (on top of that people tend to make more transactions when the price is high)...


For someone who wants to move funds around the world OUTSIDE the banking system I think 1% is a good price.

In this case the network's hashrate will increase and it will be harder to maintain the attack. If the avg fee goes above 1% then the block size limit will increase in the next epoch.

The problem with this proposal is that we don't know the real value of the fee, if the price of btc is high then the fee will be too expensive, if the price of btc is low then the price per vByte will be too low, we can determine a percentage but we can't determine btc's price.