Bitcoin Jesus Roger Ver: It’s time to lift the block size blockade

Recently, I have seen many people in the Bitcoin ecosystem commenting that Bitcoin blocks should always be full. They compare Bitcoin block space to Starbucks coffee, which should always be completely sold out.

They argue that block space is like coffee, in that it is also a consumable good. When consumers buy coffee, they express their expectations of that consumption. When Bitcoin users pay fees for transactions to be included in blocks, they similarly express their expectations of block space.

However, in the coffee market, there are many coffee suppliers. We have Starbucks, Tully's, Costa, and many other suppliers. In addition to coffee, we have many other choices, such as Coca-Cola, Pepsi, water, etc. Consumers will compare the prices of coffee from different suppliers, as well as coffee substitutes. Then, they will decide the quantity to buy based on their personal preferences.

Some people are willing to pay anything for coffee, but others may not. If the price of coffee offered in the market is high enough, more suppliers will be attracted to enter the coffee market and fill the demand. If the price of coffee becomes lower, the least efficient coffee producers will be forced out of the market.

Many options

The same applies to the Bitcoin blockchain space. As consumers, we also have many choices, including Bitcoin, Litecoin, Ripple, Ethereum, Dogecoin, etc. We also have non-blockchain options, including banks, credit cards, PayPal, cash...

Potential Bitcoin users will look at the costs associated with using such a system. These costs include network fees, ease of use of wallet software, number of merchants accepting, payment confirmation speed, security, difficulty in opening an account, legal risks, and many other aspects. Consumers will choose the payment method that best matches their needs, and if Bitcoin does not best meet their needs, the likelihood of Bitcoin being chosen is very low.

It would be a mistake for Starbucks to not provide enough coffee to its customers, and it would be a mistake for Bitcoin miners to not provide enough block space to meet user demand.

Any time a Bitcoin user is willing to pay a fee greater than the marginal cost of including a transaction in a block, it makes economic sense for miners to include the transaction in a block because it is profitable. Whether it is the sale of coffee or block space, only those who lack an understanding of economics or the business world would want to deny customers what they want.

Pros and Cons

This brings us to the topic of pros and cons.

Perhaps people who take caffeine are more excited when driving, and get into more accidents. Or perhaps they are more alert and therefore more effective at work. These are the pros and cons that need to be considered when it comes to coffee sales and the debate over bitcoin block size.

I think the negative effects of more transactions are as follows:

1. Additional bandwidth is required to relay transactions within the network.

2. Additional CPU time is required to verify these transactions.

3. Additional storage space is required to store these transactions.

4. Due to the above three issues, there may be fewer nodes in the network.

Let us revisit these questions:

1. Additional Bandwidth

It’s hard to know exactly how big of a problem this is, but as time goes on, as the network gets faster, nodes around the world will be able to relay more and more transactions. If a block takes too long to be relayed, the chances of it becoming an orphan increase.

The right block size today will certainly be different than the right block size next year. The best option I see is to let individual miners and nodes decide how much bandwidth they are willing to allocate to individual transactions, and Bitcoin blocks. The least efficient miners and nodes will be thrown out of the network, just like the least efficient producers in any industry.

2. Additional CPU Time

For every transaction included in a block, it takes some additional time for full nodes to verify the transactions, or for miners to create a block to include these transactions. Every full node on the network needs to verify the payment.

The time it takes to add additional transactions to a block increases the likelihood that the block will become an orphan. Even if the maximum block size is not written into the protocol, there is still a practical maximum block size limit due to reasons 1 and 2.

3. Extra Storage Space

This seems like the most troubling factor to me. All of these additional transactions need to be stored on the blockchain, and every full node needs to download them. If the blockchain gets too large, fewer people will be willing to run full nodes. If there are too few full nodes on the network, its censorship resistance will decrease.

The good news is that bandwidth and storage, for example, are getting cheaper every year. Even today, computers have the storage to keep up with 100MB blocks, or about 5TB of transaction data per year. In the near future, 1GB or even 1TB blocks won’t be a problem from a storage perspective.

4. Fewer nodes

If the above three problems become serious enough, fewer and fewer people will be willing to run full nodes, and Bitcoin will lose some of its censorship resistance. I think this is one of the biggest risks facing Bitcoin, but as the great Frederic Bastiat reminded us, a good economist will always take into account things we haven't anticipated.

Today, Bitcoin has 5,000 full nodes around the world, and its user base is only a few million people. If Bitcoin's user base expands to hundreds of millions, or even billions, then even if the proportion of people running full nodes will be smaller, the total number of full nodes will increase. The absolute number of full nodes is the important factor in Bitcoin's anti-censorship, not the percentage.

Equally important, Bitcoin has many positive effects once it becomes widely used.

1. The government will no longer be able to inflate the money supply;

2. Capital controls will come to an end;

3. Wars will no longer be financed by inflation;

4. It will be more difficult for the government to hide financial waste or corruption;

5. People around the world could trade with each other far more freely than they do today;

6. The value of Bitcoin will go up, which means the value of the block reward will go up, more resources will go into mining, Bitcoin will be more secure, and therefore, more people will use Bitcoin. It’s an ever-reinforcing feedback loop.

The list goes on and on, but the important point is that most of these positive effects can only become a reality if the majority of the world starts using Bitcoin. If Bitcoin doesn’t meet people’s needs, none of this will ever happen.

Increase block size

Many Bitcoin Core members told me directly that the reason why the Bitcoin block size has not been increased so far is not a technical problem. They do not allow it, but only for "economic" and social reasons.

The great economist Murray Rothbard once made a point about this kind of situation:

It’s not a crime to not know a lot about distributed crypto consensus networks, after all, it’s a specialized discipline, but it’s completely irresponsible to voice loud and vociferous opinions about such projects in a state of ignorance.

I have never thought of telling the current Bitcoin Core team what the right way to build a cryptographic consensus network is, but the small blockers who are making noisy comments about this economic project are equally ignorant.

Artificially limiting the block size will not bring any benefits. It will only cause potential Bitcoin users to use something else. Now is the time for cryptographers to do cryptography and economists to think about economics.

As someone like me, I spent most of my time studying economics, which I’m sure is why I became one of the first people in the world to invest in Bitcoin companies, including the most prominent companies in the current ecosystem.

For example, for people like me, most of my assets are in Bitcoin, I will do my best to ensure that Bitcoin is a global success. Artificially limiting the block space is like Starbucks deliberately limiting the amount of coffee produced, which is a crazy act.

It’s time to end the block size lock.