Do I hear 8 MB blocks? Sold!

Wednesday 24 June 2015

As we recently discussed, there is (was) a war hotting up over the blocksize debate. It seems that war has now been averted by a series of, er, 'negotiations' initiated by a cartel of miners.

Here’s the roadmap that appears on Gavin Andresen’s Github code repository

Implement hard fork to allow bigger blocks
Unit test and code for a bigger-block hard fork.
Parameters are:
8MB cap
... doubling every two years (so 16MB in 2018)
... for twenty years
... earliest possible chain fork: 11 Jan 2016
... after miner supermajority (code in the next patch)
... and grace period once miner supermajority achieved (code in next patch)

Read also: 20MB blocks - an unfortunate compromise

If Andresen’s code for 8MB blocks and biennial doubling is taken up by miners, the results for bitcoin's trajectory and sustainability might be something like this (thanks Peter R):

Chart

Good for bitcoin, sort of. Very, very good for hard drive manufacturers.

How did this happen? Well, like so much else in Bitcoinland, it leads back to the Chinese.

As a quick recap of the situation, the problem surrounds the scalability of the bitcoin protocol, which is rapidly becoming overstretched. At peak times, when many transactions are made at the same time, some blocks are completely filled, meaning transactions are delayed. Not good for business.

The two options previously on the table were:

  1. Let the market decide (some miners’ first choice). If people want to make sure a transaction gets included fast, well, pay more.
  2. Gavin Andresen’s proposal to hard fork to a 20 MB blocksize, which should be plenty of room to keep everyone happy for a while (except the miners, who will get paid less in tx fees).

The good news, or bad news if you're on the other side of the fence, is that a group of five Chinese mining pools waded into the debate and came up with what’s actually a pretty reasonable compromise. Courtesy of the FT and reddit, here’s the broad idea:

‘The bitcoin miners of China agree that the blocksize must be increased, but we believe that increasing to 8MB first is the most reasonable course of action. We believe that 20MB blocks will cause a high orphan rate for miners, leading to hard forks down the road. If the bitcoin community can come to a consensus to upgrade to 8MB blocks first, we believe that this lays a strong foundation for future discussions around the block size. At present, China’s five largest mining pools account for more than 60% of the network hashrate.’

The basic reason is that Chinese internet infrastructure isn’t as developed in many bitcoin-using countries, and couldn’t handle the traffic. And since they represent 60% of network hashrate, what China wants, China gets.

The last word on this has to go to the FT’s Izabella Kaminska: ‘it’s all so similar to what happens with oil and Opec, and speaks volumes for the actual “democracy” in the system. (Namely, there isn’t any. China - the Saudi Arabia of bitcoin - dominates.)’

 


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