Subject: Re: [bitcoin-dev] How to evaluate block size increase suggestions.

From: Mariusz Nowostawski <[email-masked]>
Date: Sat, 14 Nov 2015 17:08:18 +0100

> Date: Fri, 13 Nov 2015 11:37:51 -0500
> From: Emin G?n Sirer <[email-masked]>
> To: [email-masked]
> Subject: [bitcoin-dev] How to evaluate block size increase
> 	suggestions.
> Message-ID:
> 	<[email-masked]>
> Content-Type: text/plain; charset="utf-8"
> 
> By now, we have seen quite a few proposals for the block size increase.
> It's hard not to notice that there are potentially infinitely many
> functions for future block size increases. One could, for instance, double
> every N years for any rational number N, one could increase linearly, one
> could double initially then increase linearly, one could ask the miners to
> vote on the size, one could couple the block size increase to halvings,
> etc. Without judging any of these proposals on the table, one can see that
> there are countless alternative functions one could imagine creating.
> 
> I'd like to ask a question that is one notch higher: Can we enunciate what
> grand goals a truly perfect function would achieve? That is, if we could
> look into the future and know all the improvements to come in network
> access technologies, see the expansion of the Bitcoin network across the
> globe, and precisely know the placement and provisioning of all future
> nodes, what metrics would we care about as we craft a function to fit what
> is to come?
> 
> To be clear, I'd like to avoid discussing any specific block size increase
> function. That's very much the tangible (non-meta) block size debate, and
> everyone has their opinion and best good-faith attempt at what that
> function should look like. I've purposefully stayed out of that issue,
> because there are too many options and no metrics for evaluating proposals.
> 
> Instead, I'm asking to see if there is some agreement on how to evaluate a
> good proposal. So, the meta-question: if we were looking at the best
> possible function, how would we know? If we have N BIPs to choose from,
> what criteria do we look for?
> 
> To illustrate, a possible meta goal might be: "increase the block size,
> while ensuring that large miners never have an advantage over small miners
> that [they did not have in the preceding 6 months, in 2012, pick your time
> frame, or else specify the advantage in an absolute fashion]." Or "increase
> block size as much as possible, subject to the constraint that 90% of the
> nodes on the network are no more than 1 minute behind one of the tails of
> the blockchain 99% of the time." Or "do not increase the blocksize until at
> least date X." Or "the increase function should be monotonic." And it's
> quite OK (and probably likely) to have a combination of these kinds of
> metrics and constraints.
> 
> For disclosure, I personally do not have a horse in the block size debate,
> besides wanting to see Bitcoin evolve and get more widely adopted. I ask
> because as an academic, I'd like to understand if we can use various
> simulation and analytic techniques to examine the proposals.  A second
> reason is that it is very easy to have a proliferation of block size
> increase proposals, and good engineering would ask that we define the
> meta-criteria first and then pick. To do that, we need some criteria for
> judging proposals other than gut feeling.
> 
> Of course, even with meta-criteria in hand, there will be room for lots of
> disagreement because we do not actually know the future and reasonable
> people can disagree on how things will evolve. I think this is good because
> it makes it easier to agree on meta-criteria than on an actual, specific
> function for increasing the block size.
> 
> It looks like some specific meta-level criteria would help more at this
> point than new proposals all exploring a different variants of block size
> increase schedules.
> 
> Best,
> 
> - egs

Hi,

Good point. I found it also to be important. Enumerating first exactly
WHAT and WHY is being solved and then formulating HOW the proposed
solutions can be evaluated, resonates with me, probably because I'm an
academic. We need to be able to predict if a given proposal addresses
the actual problem at hand and we need to know how to evaluate the
proposals.

But first, we need to re-evaluate the problem.  I think the original
problem of the increasing demands on the transaction throughput of the
bitcoin blockchain have been derailed into a rather constrained
discussion on the block size increase. This is fundamentally broken. The
debate should be reverted back to the actual problem: how to deal with
the increasing demands of the transaction throughput on the bitcoin
blockchain, what exactly is the problem, and what possible ways exist in
dealing with those problems? In other words, how to deal with the
scalability of the bitcoin blockchain.

Somewhat surprisingly, all the solutions proposals so far focused on a
"centralized" model in which Bitcoin blockchain plays the central role
in any future economy. Bitcoin has been compared to VISA and questions
have been asked how to handle 1000s of transactions per second - via the
Bitcoin blockchain. Should any form of electronic value transfer such as
assets, currencies, etc be handled by THE SINGLE CHAIN? A single chain
that does it ALL? Is that the objective for the Bitcoin blockchain?
There are some contradictions: from one hand the Bitcoin blockchain
offers transparent, distributed ledger that can be used for verification
of transactions, which is a good thing. At the same time, it uses p2p
technology, consensus, and limited transaction throughput (regardless of
where the actual block size limit sits), which are bad when considering
processing and validating large volumes of financial transactions such
as currently processed by VISA.

Planning the Bitcoin blockchain to handle everything will simply never
scale, it might turn out impossible, and also it will hinder innovation,
and can ultimately work against the Bitcoin blockchain (e.g. by
inadvertent and irreversible centralization of verification nodes, or
simply reducing the full verification nodes count).

(Devil's advocate): limit stays on 1MB and there are more transactions
generated every 10min that can potentially fit into the block. Then,
this follows:

1. There will be a strong incentive for fees to grow.
Is it a bad thing? Are growing fees unavoidable anyway? Miners need to
recover the costs of mining when the crossing-point of rewards/fees
happens, and that means growing fees, right?  Can this be modeled? Can
we predict how much the fees will actually grow to weed out all the
"noise" transactions that currently get through because it is cheap to
do so?

2. Some transactions will simply never made it to the chain.
Is it a bad thing? Perhaps it is just a self-adaptation to weed out
"invaluable" transactions from the system? Do we need to process and
cater for ALL the transactions? Including all the NOISE that doesn't
really contribute to anything? Can we model this?

Personally, I think transaction fees for electronic transfers should be
close to ZERO, but, at the same time, I think transaction costs of
Bitcoin blockchain should be high enough to keep this chain special,
noise free, and compact, with large number of validating nodes working
in p2p fashion.

So are points 1 and 2 really fundamentally BAD, or are they just a
self-regulating anti-noise mechanism? I can pack-up thousands of
transactions in auxiliary systems, and validate them via a SINGLE
bitcoin blockchain transaction, and this would scale.

3. Companies generating large number of transactions will have to look
into ways of saving costs and combining multiple individual transactions
into larger ones to save on FEE costs.
Is it a bad thing? No - it is a very good thing, and the sooner it
happens the better ;)

4. Companies, governments and institutions would have to look into ways
of improving their own performance and scalability OUTSIDE of the
Bitcoin blockchain. For example through client-server, extremely
efficient centralised blockchains, Open Chain-like models, and only
using Bitcoin blockchain for validation/verification in a transparent
and verifiable manner. How about running thousands of financial
transactions per second on open chain and only recording merkel root
hashes for batches of transactions every 10min in a Bitcoin blockchain
for transparency and verification?

So, coming back to the original question about CRITERIA:

*1* The ability to setup and run low-cost fully validating node should
remain the same or should improve; upon deployment of a given proposal
there should be an increase in a number of fully validating nodes, or at
worst, there should be no decrease.

*2* The ability to include additional data into Bitcoin blockchain (e.g.
via OP_RETURN) should improve or, at worst, remain the same as it is now.

*3* Upon deployment of a given proposal, the noise in the ledger should
be reduced, or at worst, remain the same.

*4* A proposal should address long-term scalability, and offer the
possibility of combining Bitcoin blockchain with well-defined auxiliary
protocols to offer high-transaction throughputs.

cheers
Mariusz