[Cryptography] Bitcoin is a disaster.

Matt Corallo metzdowd at bluematt.me
Sat Jan 2 00:16:36 EST 2021


A few corrective notes - the recent history of Bitcoin's block size is not as simple as you posit here.

Matt

> On Dec 31, 2020, at 23:22, Ray Dillinger <bear at sonic.net> wrote:
> -snip-
>> 
>> You said on BitcoinTalk several years ago that the plan was always to
>> raise the blocksize. Is it still your opinion that it should have
>> been done? Or do you think that even Satoshi's original plans were
>> flawed too?
> 
> Yes, the plan was to raise the size of the blocks.  And yes, I think it
> should have been done.  The 1MB limit was considered temporary. We got
> the current limit just to prevent people from filling space with dumb
> stuff but thought, of course they'll make it bigger when people
> actually need the space for legit transactions.  But now they can't
> make it bigger, because that was a classic case of nerds making a
> design mistake by failing to note that we were leaving a decision in
> the hands of people with perverse incentives. 
> 
> The reason that issue became the screaming sewer knife fight it became
> is because of toll trolls. Miners have a financial stake in the blocks
> continuing to be small, because bidding goes higher for a smaller
> amount of block space.  So they hired a bunch of trolls to sabotage all
> discussion about raising the limit.
> 
> All they have to do to kill a raised limit is refuse to mine on larger-
> size blocks.  But that would mean abandoning all pretense of not being
> a cartel.  The trolls and screaming you've seen are just symptoms of
> their need to keep the user base conflicted and uncertain.  That way
> they don't have to alienate the community by being tremendously obvious
> in a highly visible 51% attack when they participate with each other in
> refusing a protocol with bigger blocks.
> 
> The current 1MB limit was added to the code at the last minute, because
> Hal was concerned about the size of the block chain (and time/cost of
> downloading it to set up a new node) growing faster than the Internet
> communications bandwidth.  Satoshi was confident that it wouldn't grow
> beyond the power of a $mumble-priced hard drive to contain as hard
> drives got bigger/cheaper, but that's a different thing. Hal saw a
> scalability problem w/r/t internet bandwidth because while drive space
> was on an exponential curve, internet bandwidth wasn't.  And isn't.
> 
> My input to the bandwidth discussion didn't go much beyond "well, of
> course the bandwidth would be a crippling issue at scale, but you don't
> need to worry about this for a small experiment .... wait, are you
> serious?" 
> 

Ironically the story is quite the opposite of what you suggest - the toll collectors were precisely the ones suggesting an (immediate) increase in the blocksize, with technologists (or as you put it, nerds) taking an opposite view. One particularly famous toll collector bet a large volume of his company's funds on Bitcoin Cash, ultimately to his own distruction. While the blocksize was, eventually, roughly doubled, the concern over long-term stability of the system to ensure the miners are paid appropriately overrode temporary pain of getting there.

Study upon study of long-term stability of Bitcoin after the block reward diminishes over the coming 10 or so years indicates there is significant reason to worry about the incentives for miners to create new blocks. Sadly, the limited supply of Bitcoin is precisely the thing which ended up giving it a lot of its value, and the ship on removing that cap sailed long, long ago. Indeed, 10x here or there on the blocksize may not be a material issue for any of the concerns, but it also doesn't go very far towards providing the kind of scale you seem to seek.

Instead, the debate that ended up taking hold was one of the long-term understanding of Bitcoin, not one of the practical next-year blocksize. The understanding that won out was that, in the long-term, fees were a necessary part of the system - miners need to be paid, and for blocks to be created in any semblance of stability, that necessarily implies there is a regular backlog of fee-paying transactions available to mine. Increasing the blocksize every time the fees went above zero was dismissed as unworkable, and those who held that view moved on to other things.

Matt
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