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From: James Hilliard <james.hilliard1@gmail.com>
Date: Sat, 10 Dec 2016 18:40:25 -0600
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To: "t. khan" <teekhan42@gmail.com>, 
	Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>
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Subject: Re: [bitcoin-dev] Managing block size the same way we do difficulty
 (aka Block75)
Precedence: list

Miners in general are naturally incentivized to always mine max size
blocks to maximize transaction fees simply because there is very
little marginal cost to including extra transactions(there will always
be a transaction backlog of some sort available to mine since demand
for block space is effectively unbounded as fees approach 0 and they
can even mine their own transactions without any fees). This proposal
would almost certainly cause runaway block size growth and encourage
much more miner centralization.

On Sat, Dec 10, 2016 at 6:26 PM, t. khan via bitcoin-dev
<bitcoin-dev@lists.linuxfoundation.org> wrote:
> Miners 'gaming' the Block75 system -
> There is no financial incentive for miners to attempt to game the Block75
> system. Even if it were attempted and assuming the goal was to create big=
ger
> blocks, the maximum possible increase would be 25% over the previous bloc=
k
> size. And, that size would only last for two weeks before readjusting dow=
n.
> It would cost them more in transaction fees to stuff the network than the=
y
> could ever make up. To game the system, they'd have to game it forever wi=
th
> no possibility of profit.
>
> Blocks would get too big -
> Eventually, blocks would get too big, but only if bandwidth stopped
> increasing and the cost of disk space stopped decreasing. Otherwise, the
> incremental adjustments made by Block75 (especially in combination with
> SegWit) wouldn't break anyone's connection or result in significantly mor=
e
> orphaned blocks.
>
> The frequent and small adjustments made by Block75 have the added benefit=
 of
> being more easily adapted to, both psychologically and technologically, w=
ith
> regards to miners/node operators.
>
> -t.k
>
> On Sat, Dec 10, 2016 at 5:44 AM, s7r via bitcoin-dev
> <bitcoin-dev@lists.linuxfoundation.org> wrote:
>>
>> t. khan via bitcoin-dev wrote:
>> > BIP Proposal - Managing Bitcoin=E2=80=99s block size the same way we d=
o
>> > difficulty (aka Block75)
>> >
>> > The every two-week adjustment of difficulty has proven to be a
>> > reasonably effective and predictable way of managing how quickly block=
s
>> > are mined. Bitcoin needs a reasonably effective and predictable way of
>> > managing the maximum block size.
>> >
>> > It=E2=80=99s clear at this point that human beings should not be invol=
ved in the
>> > determination of max block size, just as they=E2=80=99re not involved =
in
>> > deciding the difficulty.
>> >
>> > Instead of setting an arbitrary max block size (1MB, 2MB, 8MB, etc.) o=
r
>> > passing the decision to miners/pool operators, the max block size shou=
ld
>> > be adjusted every two weeks (2016 blocks) using a system similar to ho=
w
>> > difficulty is calculated.
>> >
>> > Put another way: let=E2=80=99s stop thinking about what the max block =
size
>> > should be and start thinking about how full we want the average block =
to
>> > be regardless of size. Over the last year, we=E2=80=99ve had averages =
of 75% or
>> > higher, so aiming for 75% full seems reasonable, hence naming this
>> > concept =E2=80=98Block75=E2=80=99.
>> >
>> > The target capacity over 2016 blocks would be 75%. If the last 2016
>> > blocks are more than 75% full, add the difference to the max block siz=
e.
>> > Like this:
>> >
>> > MAX_BLOCK_BASE_SIZE =3D 1000000
>> > TARGET_CAPACITY =3D 750000
>> > AVERAGE_OVER_CAP =3D average block size of last 2016 blocks minus
>> > TARGET_CAPACITY
>> >
>> > To check if a block is valid, =E2=89=A4 (MAX_BLOCK_BASE_SIZE + AVERAGE=
_OVER_CAP)
>> >
>> > For example, if the last 2016 blocks are 85% full (average block is 85=
0
>> > KB), add 10% to the max block size. The new max block size would be
>> > 1,100 KB until the next 2016 blocks are mined, then reset and
>> > recalculate. The 1,000,000 byte limit that exists currently would
>> > remain, but would effectively be the minimum max block size.
>> >
>> > Another two weeks goes by, the last 2016 blocks are again 85% full, bu=
t
>> > now that means they average 935 KB out of the 1,100 KB max block size.
>> > This is 93.5% of the 1,000,000 byte limit, so 18.5% would be added to
>> > that to make the new max block size of 1,185 KB.
>> >
>> > Another two weeks passes. This time, the average block is 1,050 KB. Th=
e
>> > new max block size is calculated to 1,300 KB (as blocks were 105% full=
,
>> > minus the 75% capacity target, so 30% added to max block size).
>> >
>> > Repeat every 2016 blocks, forever.
>> >
>> > If Block75 had been applied at the difficulty adjustment on November
>> > 18th, the max block size would have been 1,080KB, as the average block
>> > during that period was 83% full, so 8% is added to the 1,000KB limit.
>> > The current size, after the December 2nd adjustment would be 1,150K.
>> >
>> > Block75 would allow the max block size to grow (or shrink) in response
>> > to transaction volume, and does so predictably, reasonably quickly, an=
d
>> > in a method that prevents wild swings in block size or transaction fee=
s.
>> > It attempts to keep blocks at 75% total capacity over each two week
>> > period, the same way difficulty tries to keep blocks mined every ten
>> > minutes. It also keeps blocks as small as possible.
>> >
>> > Thoughts?
>> >
>> > -t.k.
>> >
>>
>> I like the idea. It is good wrt growing the max. block size
>> automatically without human action, but the main problem (or question)
>> is not how to grow this number, it is what number can the network
>> handle, considering both miners and users. While disk space requirements
>> might not be a big problem, block propagation time is. The time required
>> for a block to propagate in the network (or at least to all the miners)
>> is directly dependent of its size.  If blocks take too much time to
>> propagate in the network, the orphan rate will increase in unpredictable
>> ways. For example if the internet speed in China is worse than in
>> Europe, and miners in China have more than 50% of the hashing power,
>> blocks mined by European miners might get orphaned.
>>
>> The system as described can also be gamed, by filling the network with
>> transactions. Miners have the monetary interest to include as many
>> transactions as possible in a block in order to collect the fees.
>> Regardless how you think about it, there has to be a maximum block size
>> that the network will allow as a consensus rule. Increasing it
>> dynamically based on transaction volume will reach a point where the
>> number got big enough that it broke things. Bitcoin, because its
>> fundamental design, can scale by using offchain solutions.
>>
>>
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>
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