On Thu, Feb 14, 2013 at 1:07 AM, Peter Todd <p...@petertodd.org> wrote:
> On Wed, Feb 13, 2013 at 09:44:11PM -0500, Stephen Pair wrote:
> > One of the beauties of bitcoin is that the miners have a very strong
> > incentive to distribute as widely and as quickly as possible the blocks
> > they find...they also have a very strong incentive to hear about the
> blocks
> > that others find. There will not be an issue with blocks being
> "jealously
>
> The idea that miners have a strong incentive to distribute blocks as
> widely and as quickly as possible is a serious misconception. The
> optimal situation for a miner is if they can guarantee their blocks
> would reach just over 50% of the overall hashing power, but no more. The
> reason is orphans.
>
Perhaps, but a miner trying to target just over 50% of the network will run
the very real risk that they'll only reach 49%.
What about the case for centralization if the block size remains capped? I
see a far greater risk of centralization in that scenario than if the cap
were to be removed. The reason is very simple, bitcoin would ultimately
become useful only for very high value, settlement transactions. Only the
mega corporations and banks would be using it directly, everyone else would
be doing daily transacting in centrally issued currencies of one form or
another. As the banks and mega corps learned about the utility of bitcoin
and began to use it en masse, they would start to take the whole network
off the public internet and put it on a higher speed and more reliable
backbone. Those corporations would establish mining agreements among
themselves to ensure none of the participants could take over the system
and compromise it, while at the same time keeping the operational costs to
a minimum. Bitcoin is now a great alternative to the wire transfer system,
but has no value to the average person wanted to have cheap and private
transactions over the Internet. Maybe Litecoin starts to fill that niche.
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