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Comment by intabli | Hacker News Reader

What renders this whole calculation wrong is that it doesn’t account for transaction fees AND transaction fees growth which was also supposed to be growing exponentially, had Bitcoin not been artificially limited to ~ 2 MB blocks every ten minutes.

On an actually uncapped Bitcoin instance, Blocks (Block size) and transaction fees will grow exponentially, rendering all such “Bitcoin is environmentally terrible” and “Miners aren’t profitable” calculations absurdly wrong.

Other instances exist that are chugging along flawlessly and are set to help miners grow their revenue with on-chain transaction fees growth: DYOR.

Of course, BTC Maxis lead by companies set to profit from such an artificial limit on Bitcoin (hint: they often peddle L2 solutions) would hate for you or anyone to understand and study those facts.

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It's not possible to have an uncapped block size. As blocks get larger they take longer to propagate through the network. Longer propagation means more forks, which means more work is wasted on forks which do not become canonical, which lowers the effective hash rate of the network and therefore the threshold for a 51% attack.

2MB is far too small, but it would be a gross mistake to overcorrect by removing the cap entirely.

See, for example: https://www.gsd.inesc-id.pt/~ler/docencia/rcs1314/papers/P2P...

> On an actually uncapped Bitcoin instance, Blocks (Block size) and transaction fees will grow exponentially

Transaction fees would drop to zero. The fee is a bid in an auction for scarce block space. If block space is not scarce then the winning bid is always zero.

Uncapped is a pseudo name for “capped just in time”. It’s never really uncapped.

If you’re interested in some work being done on such larger blocks, you’ll enjoy this presentation:

https://m.youtube.com/watch?v=5SJm2ep3X_M&feature=youtu.be

> On an actually uncapped Bitcoin instance, Blocks (Block size) and transaction fees will grow exponentially, rendering all such “Bitcoin is environmentally terrible” and “Miners aren’t profitable” calculations absurdly wrong.

This doesn't make any sense.

If anything were to make mining more profitable, we would see even more miners come online.

There is no scenario in which Bitcoin mining becomes less environmentally terrible by paying more money to miners. Those payments incentivize more miners to come online and, if significant enough, would encourage miners to bring older, less efficient equipment online relative to today's rates.

If transactions scale enough for you to be able to shut down most bank branches, end commutes for all banking and central banking employees, shut down all credit card companies and their offices and terminals, turn off ATMs, end printing physical paper money and minting money, just to mention a few, I think the environment will be way, way better off.

That’s the argument behind unlimited on-chain transactions.

> end commutes for all banking and central banking employees

Because central banks and banks didn’t exist when we were on metal standards…

There's no evidence that any of that would be technically feasible. And hypothetically even if it was technically feasible, the nation states which have taxing authority and hold an effective monopoly on violence would never permit it.

Most world governments and taxing authorities work for their populace, they could be easily voted out if people saw what other nations are benefiting from such innovation.

As for what’s feasible and evidence on it, I assure you, Edison had no clue that the internet will one day be born out of his electricity inventions and that it will be mostly used for porn, so sit back, relax and enjoy the next 100 years of untold human history.

    As for what’s feasible and evidence on it, I assure you, Edison had no clue 
    that the internet will one day be born out of his electricity inventions and 
    that it will be mostly used for porn, so sit back, relax and enjoy the next 
    100 years of untold human history.

This is a statement of faith. As such expecting it to win an argument involving logic is doomed to fail. You may be believe it but I and many others have no reason to.

> Most world governments and taxing authorities work for their populace, they could be easily voted out if people saw what other nations are benefiting from such innovation.

you've got a lot of faith in "most world governments and taxing authorities". here in the US, i look at other countries who include in their tax statements a breakdown of where all your tax bill is going. that looks like a thing those other citizens benefit from, so please tell me: how can i vote this into effect here?

As a voter, why would I do something so stupid as to put my country's economy under the control of a Ponzi scheme invented by incompetent programmers? That's just delusional, makes no sense at all.

>What renders this whole calculation wrong is that it doesn’t account for transaction fees AND transaction fees growth which was also supposed to be growing exponentially, had Bitcoin not been artificially limited to ~ 2 MB blocks every ten minutes

I agree that bitcoin should use an adjustable block size, but I'm not exactly sure that this logic follows. Can you explain this to me? If the network could handle more transactions per block, wouldn't the fees per transaction just decrease?

Correct, the fees would decrease, but when when you can only process 200k transactions every ten minutes, there’s an upper limit of how much people are willing to pay before it becomes absurdly expensive. This reached almost $100 in the 2017 rush. It’s unsustainable and renders the network unusable for most of the planet.

When you on the other hand can process millions of transactions every block (and scalable as needed), you’ll charge far less per transaction while still allowing miners to generate a huge (and ever growing) revenue, while also enabling most of the planet to transact next to free.

From an environmental perspective, if you divide the hash rate environmental impact on a mere 200k transactions every ten minute, the carbon foot print per transaction would seem absurdly high. Do the same calculating for millions of transactions every ten minutes, and you’ll arrive at a far better environmentally friendly figure.

So currently every transaction costs around $101, of which $1 visible in transaction fees, and $100 invisible in mining reward (aka seignorage, leading to money supply growth of 1.7% p.a.).

To maintain current mining hash power, as the mining reward halves away to zero, every transaction would have to incur around $100 in fees.

> still allowing miners to generate a huge (and ever growing) revenue, while also enabling most of the planet to transact next to free

If blocks would grow 10x, the blockchain would grow about 50GB per month, every human being could do around 10 transactions in their lifetime, and those would cost around $10 each. I don't see how huge and growing revenue for miners is compatible with "next to free" transactions.

I think you will enjoy this great presentation by Peter Rizun and Andrew Stone:

https://youtu.be/5SJm2ep3X_M

That was an interesting talk, thanks. Looks like with some optimisations they could support blocks of around 100 MB, yielding around 500 transactions per second. Would mean though that the blockchain grows by a few hundred GB every month.

Just to clarify your number, an average Bitcoin block (currently) has about 2000 transactions, each of which, be it a transaction for half a cent, or a billion dollars, cost around $3 each. What you described is what happened when Bitcoin was actually being adopted by people, the mempool, that is, transactions not added to the latest block, started to fill up, and the market took hold and people who offered more to transact were included in the block. You don't have to offer more for the transaction and your transaction will sit in the mempool forever. Offering more is simply a way to expedite your transaction.

Then why isnt bcash or bsv more valuable than bitcoin?

In my experience, BTC has more "brand recognition" amongst uninformed investors who are more concerned with "number go up" technology than digital cash technology

If you measure value by the thing Bitcoin came to replace (fiat), your vision will be distorted.

If you measure value as a consequence of utility, they’re certainly far more valuable than BTC (BSV however is a corp coin and has weird copyrights so I wouldn’t touch it with a stick).

> This reached almost $100 in the 2017 rush.

Ethereum, with a bigger blocksize had transaction fees going up to $3,500 a couple of weeks ago. A larger blocksize is not the answer.

https://web3isgoinggreat.com/?id=popular-nft-mint-spikes-eth...

Ethereum is account based, not UTXO based, has a completely different overhead and you can’t possibly compare it to Bitcoin.

Why wouldn't fees go all the way to zero? Zero times a zillion transactions is still zero.

Miners still have to choose to include your tx. The risk of losing during two blocks being mined goes up as blocksize does (longer to transmit across the network), so you still have to incentivize the miner to include your tx.

Ofc there will be miners who make much larger blocks no matter what, but it comes down to how urgent is your tx?

...because miners choose whether to include a transaction or not. Obviously they have no incentive to include a zero fee transaction

There would be an equilibrium where the fee is worth the marginal cost of mining it

Unless miners start colluding their strategy will become "include every possible transaction with fee greater than $0." which means fees will settle at the smallest possible value greater than 0.

Yeah sure, everything I buy costs the smallest possible value greater than zero.

shawabawa3 already explained it "There would be an equilibrium where the fee is worth the marginal cost of mining it"

The miner has cost X and wants profit Y. He adds those together and now the price is X+Y. Someone wants his transaction on the blockchain, he is going to pay X+Y unless there is a miner that offers an even lower rate.

You're making the assumption that the block reward is high enough to make transaction fees irrelevant, which is a trivial observation and not what we are interested in talking about here.

There is no cost to adding a transaction to your block if its size is uncapped. Once a miner completes a block why wouldn't they maximize the profit they can make on it?

If we assume no blockreward then the fees will be whatever motivates miners to include your transaction. If the fee was zero, then no miner would even bother.

> Blocks (Block size) and transaction fees will grow exponentially

Currently, the blockchain is 405 GB and grows by about 5 GB per month. In your proposal, that will go up exponentially?

My proposal? I won’t take credit for Satoshi’s work, it was his proposal:

https://satoshi.nakamotoinstitute.org/posts/bitcointalk/485/

You either misunderstood the parent or are being deliberately disingenuous.

He/she asked, in effect: How do you plan to deal with the blockchain growing exponentially instead of linearly? And how much acceleration do you think is reasonable?

I needed to clarify that it wasn’t my proposal, as to how to gradually approach this, test nets are already deployed on many of the uncapped networks, I believe you’ll enjoy this great presentation by Peter Rizun and Andrew Stone, they’re far smarter than I’ll ever be: https://youtu.be/5SJm2ep3X_M

Strictly speaking it wasn't his, it was the originator of that thread, jgarzik, and satoshi replied "We can phase in a change later if we get closer to needing it.", which doesn't strike me as a ringing endorsement.

At any rate, the suggestion was for one increase, not an infinite sequence of increases, which your suggested exponential growth amounts to.

One increase every time its theoretical limit is approached, which becomes exponential as transaction growth becomes exponential.

If it doesn't, then Bitcoin is dead. It has no future.

So in a fantasy universe that doesn't exist this analysis doesn't make sense. Ok?

These uncapped forks do exist, they’re the reason the whole community split in 2017; so when those “analysis” articles ignore them and ignore the fact that the white paper and Bitcoin’s creator explicitly called for on-chain growth and scaling, they’re being either dishonest or ignorant.

It’s like someone saying “Look at how wasteful this car limited to 20MPH is! All cars are wasteful!”. No, not all cars, especially that the original design explicitly said to scale the engine as more speed is needed.

> they’re the reason the whole community split in 2017

This makes it seem like it was some sort of 50/50 split, but in reality it was more like 99/1. A tiny group split off to do their own thing while "normal" bitcoin is just chugging along with unchanged block size. It's all fine and well that Satoshi may have wanted something different for block sizes, but he hasn't been involved in bitcoin development for over a decade now so his wishes are pretty irrelevant. Right now, the vast majority of "bitcoin" value is in the original one and speculating about how things could be different is just the crypto version of "world peace is easy if we all could just get along".

>This makes it seem like it was some sort of 50/50 split, but in reality it was more like 99/1

In reality most bitcoin owners/users were the silent majority, and the "default" option was to do nothing, so they did nothing.

>speculating about how things could be different is just the crypto version of "world peace is easy if we all could just get along".

bitcoin's current blocksize/transaction fees are basicially an artificial problem that could be fixed with a minor storage/bandwidth tradeoff. It's more like "world hunger could be solved if we produce more food and stop limiting ourselves with insane protectionist trade policies".

But you make it seem as if it’s a done tale, as if there were no bad actors, no companies set to profit from selling their own “Layer 2” solutions, no censorship, etc. Reality is, even if the whole planet (not only the 99% of the community you claim) were set on a broken vehicle which they can barely drive but just speculate on, it won’t be long before most realize that this is just that, a broken vehicle meant for speculation and has nothing to do with peer to peer electronic cash, you know, Bitcoin.

So when you discuss miners, on a network DESIGNED to emit less Bitcoin and change to transaction fees down the line, it’s ultra important to note that this actually working vehicle exists and the same miners protecting the speculative vehicle are also protecting the working one. And when calculating for the working one, miners are set to be some of the richest businesses on the planet, even when ALL Bitcoin has been already mined, a 100 years from now.

Perhaps, if and only if bitcoin manages to win out against the traditional banking system AND the governments of the world do not regulate miners into oblivion. Even if some form of cryptocurrency does win out against the combined might of traditional banking and governments, let's hope for the sake of these mining companies that the winning currency is one that both depends on Proof of Work (I can stake PoS chains just fine from a raspberry pi, after all) and also requires hashing of the type supported by the current equipment of the miners.

All in all, the chance that a crypto mining company becomes one of the richest businesses on the planet is slim and the chance that that company will be one of the mining companies already existing is slimmer still. Buyer beware when investing in the current crop.

As someone who is more familiar with BCH rhetoric, I can tell you that what the parent comment is referring to is not mining companies but rather LN relay node operators and other "services"

https://www.youtube.com/watch?v=UYHFrf5ci_g

I don't see how any of this undermines the post. What “uncapped fork” could these big miners switch to that would give them anywhere near the revenue they have today?

I won’t point you to any, but you should dig deeper into the 2017 block size wars and understand why the community forked then and how, avoid the commercially appealing answers and the laser eyes.

I assume you're alluding to bitcoin cash. I don't see what it has to do with any of this, given that the aggregate transaction fees are not enough for big fish like the ones my article to migrate to at scale.

When you discuss miners, on a network DESIGNED to emit less Bitcoin and change to transaction fees down the line, it’s ultra important to note that this actually working vehicle exists and the same miners protecting the speculative vehicle are also protecting the actually working one. And when calculating for the working one, miners are set to be some of the richest businesses on the planet, even when ALL Bitcoin has been already mined, a 100 years from now, because of transaction fees.

Crypto is still very, very, early. I assure you of that.

This article is about bitcoin miners. What I'm struggling to understand is, what does any of that have to do with bitcoin miners? Are you just wishing I'd pump BCH or something?

You mentioned it before that I did. And no I don’t want you to pump it, but answer the following yes/no questions please:

-) Did your article discuss miner profit from finding Bitcoin?

-) Did you mention that Bitcoin’s emission halves and will eventually end?

-) Did you mention that miners profit from including transactions?

-) Did you mention that transactions become the SOLE source of income once all Bitcoin is mined in around a century from now?

-) Did you mention that BTC is a version of Bitcoin which allows only for a maximum of 200k transactions every ten minutes?

-) Did you mention that the original design should allow for millions (and billions 30 years from now) of transactions every ten minutes?

-) Would such a huge number of transactions processed render miners more profitable than your calculation?

-) Would revenue from fees be much higher than the 1-2% you mentioned miners currently do?

-) Does omitting the above facts render your article possibly half-factual?

No, not all cars, sure, but like, the vast, vast majority of 'em.

You're still ignoring the practical for the theoretical.

I've seen this pattern play out online and offline countless times. A perennial favorite is dialog patterned like so

    "Ethereum is ok because proof of stake will solve problem X."
    "Is proof of stake currently in use?"
    "Well, no, but it will be soon/someday/eventually."

I call it crypto-wishful thinking, but only for lack of a better name.

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