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More miners will not make the fees go down. The limited resource is space in each block, currently 1 MB. Having more miners does not increase the block size.

by nas 9y ago

More miners will not make the fees go down. The limited resource is space in each block, currently 1 MB. Having more miners does not increase the block size. It would be nice to have a proper economic feedback mechanism on this, e.g. miners decide how big to make the block based on how high the fees are getting. However, the costs for big blocks are externalized and so I think miners would make blocks as big as possible to capture as many fees as possible. The cost of storing those blocks in perpetuity costs the whole Bitcoin ecosystem. I consider this a major crisis for Bitcoin as with current fees, the system is not very useful. The original thinking was that block sizes could be increased a lot and provide transaction rates that match what credit card companies can do. Current Bitcoin core developers and miners can't seem to increase the block size, each blames the other for inaction. Some suggest the core team is mostly controlled by Blockstream and their business model depends on expensive transactions forcing people to use their Lightning network instead. Miners are fine with high fees as long as the Bitcoin price doesn't collapse. I don't know how this will play out. Perhaps some clever idea will come forth to solve the scaling problems. If so, Bitcoin should continue to be adopted and rise in price. If things say deadlocked, I could see Bitcoin wither away as other crypto-coins do the same job but for lower transaction fees.

grandalf 9y ago
Great points. It could be argued that adjusting a parameter like block size should be easy and that this not being possible is a design limitation of Bitcoin. However if you consider that miners (or more abstractly, mining rigs themselves) are easily repurposed to mine a BTC fork which could potentially include a larger block size from the start. So the conflict is between the beneficial network effects of BTC and the transaction cost imposed by arguably "bad" governance (corrupt governance, if the rumor you mention is true). There are lots of interesting incentives that apply to BTC at scale that are hard to predict when reading the paper. I think we'll see a very messy world of many competing cryptocurrencies and difficult-to-understand layers of overly centralized governance resulting in layers upon layers of perverted incentives. But the silver lining is that the blockchain is a nice way to offer the kind of transparency that could make a system like that actually far better than the kind of messes we end up in with fiat currencies :)
- CydeWeys 9y ago
  Why should adjusting the block size be "easy"? Who gets to adjust it, and what is the mechanism? How do you prevent bad actors from picking adjustments that benefit them but that hurt the ecosystem over all (i.e. a tragedy of the commons situation)? I don't think you've thought this through enough. I will tell you that, right now, I can just about barely fit the entire blockchain onto my laptop. With a bigger block size, that would no longer be possible. Similarly, the network requirements of transmitting much bigger blocks would hemorrhage users as well. What we need is something like Lightning Network, which is a multiple-level system that doesn't require that all participants download all data from the levels beyond level one. Just naively scaling up level one removes lots of participants from the system and still hits a cap at well below what we'd want Bitcoin to finally be capable of handling.

by nas 9y ago

grandalf 9y ago

Great points. It could be argued that adjusting a parameter like block size should be easy and that this not being possible is a design limitation of Bitcoin. However if you consider that miners (or more abstractly, mining rigs themselves) are easily repurposed to mine a BTC fork which could potentially include a larger block size from the start. So the conflict is between the beneficial network effects of BTC and the transaction cost imposed by arguably "bad" governance (corrupt governance, if the rumor you mention is true). There are lots of interesting incentives that apply to BTC at scale that are hard to predict when reading the paper. I think we'll see a very messy world of many competing cryptocurrencies and difficult-to-understand layers of overly centralized governance resulting in layers upon layers of perverted incentives. But the silver lining is that the blockchain is a nice way to offer the kind of transparency that could make a system like that actually far better than the kind of messes we end up in with fiat currencies :)

CydeWeys 9y ago
Why should adjusting the block size be "easy"? Who gets to adjust it, and what is the mechanism? How do you prevent bad actors from picking adjustments that benefit them but that hurt the ecosystem over all (i.e. a tragedy of the commons situation)? I don't think you've thought this through enough. I will tell you that, right now, I can just about barely fit the entire blockchain onto my laptop. With a bigger block size, that would no longer be possible. Similarly, the network requirements of transmitting much bigger blocks would hemorrhage users as well. What we need is something like Lightning Network, which is a multiple-level system that doesn't require that all participants download all data from the levels beyond level one. Just naively scaling up level one removes lots of participants from the system and still hits a cap at well below what we'd want Bitcoin to finally be capable of handling.