Subject: Re: [bitcoin-dev] Block size following technological growth

From: Mike Hearn <[email-masked]>
Date: Fri, 31 Jul 2015 12:16:46 +0200

I agree with Gavin - whilst it's great that a Blockstream employee has
finally made a realistic proposal (i.e. not "let's all use Lightning") -
this BIP is virtually the same as keeping the 1mb cap.

> Well, centralization of mining is already terrible. I see no reason why we
> should encourage making it worse.
>
Centralization of mining has been a continual gripe since Slush first
invented pooled mining. There has never been a time after that when people
weren't talking about the centralisation of mining, and back then blocks
were ~10kb.

I see constant assertions that node count, mining centralisation,
developers not using Bitcoin Core in their own businesses etc is all to do
with block sizes. But nobody has shown that. Nobody has even laid the
groundwork for that. Verifying blocks takes milliseconds and downloading
them takes seconds everywhere except, apparently, China: this resource
usage is trivial.

Yet developers, miners and users even outside of China routinely delegate
validation to others. Often for quite understandable technical reasons that
have nothing to do with block sizes.

So I see no reason why arbitrarily capping the block size will move the
needle on these metrics. Trying to arrest the growth of Bitcoin for
everyone won't suddenly make Bitcoin-Qt a competitive wallet, or make
service devs migrate away from chain.com, or make merchants stop using
BitPay.

We need to accept that, and all previous proposals I've seen don't seem to
> do that.
I think that's a bit unfair: BIP 101 keeps a cap. Even with 8mb+growth
you're right, some use cases will be priced out. I initiated the
micropayment channels project (along with Matt, tip of the hat)
specifically to optimise a certain class of transactions. Even with 8mb+
blocks, there will still be a need for micropayment channels, centralised
exchange platforms and other forms of off chain transaction.

If Bitcoin needs to support a large scale, it already failed.
It hasn't even been tried.

The desperately sad thing about all of this is that there's going to be a
fork, and yet I think most of us agree on most things.  But we don't agree
on this.

Bitcoin can support a large scale and it must, for all sorts of reasons.
Amongst others:

   1. Currencies have network effects. A currency that has few users is
   simply not competitive with currencies that have many. There's no such
   thing as a settlement currency for high value transactions only, as
   evidenced by the ever-dropping importance of gold.

   2. A decentralised currency that the vast majority can't use doesn't
   change the amount of centralisation in the world. Most people will still
   end up using banks, with all the normal problems. You cannot solve a
   problem by creating a theoretically pure solution that's out of reach of
   ordinary people: just ask academic cryptographers!

   3. Growth is a part of the social contract. It always has been.

   The best quote Gregory can find to suggest Satoshi wanted small blocks
   is a one sentence hypothetical example about what *might* happen if
   Bitcoin users became "tyrannical" as a result of non-financial transactions
   being stuffed in the block chain. That position makes sense because his
   scaling arguments assuming payment-network-sized traffic and throwing DNS
   systems or whatever into the mix could invalidate those arguments, in the
   absence of merged mining. But Satoshi did invent merged mining, and so
   there's no need for Bitcoin users to get "tyrannical": his original
   arguments still hold.

   4. All the plans for some kind of ultra-throttled Bitcoin network used
   for infrequent transactions neglect to ask where the infrastructure for
   that will come from. The network of exchanges, payment processors and
   startups that are paying people to build infrastructure are all based on
   the assumption that the market will grow significantly. It's a gamble at
   best because Bitcoin's success is not guaranteed, but if the block chain
   cannot grow it's a gamble that is guaranteed to be lost.

   So why should anyone go through the massive hassle of setting up
   exchanges, without the lure of large future profits?

   5. Bitcoin needs users, lots of them, for its political survival. There
   are many people out there who would like to see digital cash disappear, or
   be regulated out of existence. They will argue for that in front of
   governments and courts .... some already are. And if they're going to lose
   those arguments, the political and economic damage of getting rid of
   Bitcoin must be large enough to make people think twice. That means it
   needs supporters, it needs innovative services, it needs companies, and it
   needs legal users making legal payments: as many of them as possible.

   If Bitcoin is a tiny, obscure currency used by drug dealers and a
   handful of crypto-at-any-cost geeks, the cost of simply banning it outright
   will seem trivial and the hammer will drop. There won't be a large scale
   payment network OR a high-value settlement network. And then the world is
   really screwed, because nobody will get a second chance for a very long
   time.