From the time it was introduced in 2010, the 1MB block size was a non-functioning cap. It would stop massive increases in the size of the blockchain, but day to day transactions were much lower and did not approach the limit.
Transactions slowly increased on the Bitcoin blockchain, until late 2016 when the 1mb block size limit became a functioning limit.
To understand the difference, imagine the difference between a $5/hr minimum wage and a $30/hr minimum wage. In a rich country, almost everyone will be able to create more value than $5/hr. So even though there is technically a legal minimum wage, the market’s “minimum wage” would be higher.
A $30/hr minimum wage law on the other hand, would be much higher than the market’s minimum. It would mean that people who are able to create $25/hr value are no longer able to find work.
For the first 8 years, Bitcoin was operating with a block size limit that was much higher than the market’s block size “limit”, so it did not have a day to day effect. Then in 2016 that changes, as the limit is consistently reached and begins to force out many transactions with high fees, like the $30/hr minimum wage would force out many workers.
Bitcoin Cash raised the block size limit to 8MB, returning it to the same state the Bitcoin had existed in since 2009, where the market “limit” was much lower than the technical limit. This is not a new or dangerous strategy, but a continuation of Bitcoin.
The main argument for maintaining the 1MB block size limit, is to prevent centralization that would be caused by the costs of maintaining a large block size.
But even if you accept that (which I don’t and will go into in future blog posts), it still ignores the rapid improvement in technology. A 1MB limit in 2018, when you can buy 4TB of storage for $99, is drastically different than a 1MB limit in 2010.
As technology advances and storage and bandwidth become ever cheaper, the fixed block size limit actually acts more like a shrinking limit. We are more capable of using the technology, but the technology is less capable of being used.
During the debate over Segwit 2X, there was extreme vitriol and fear about how a 2MB block size would change Bitcoin, but in 2017, in terms of cost, a 2MB block size is actually much more manageable than a 1MB block size was only 4 years before.
Even if you don’t think Bitcoin can scale on-chain forever, you simply need to look at the technology you are using today to realize how ridiculous it is to enforce a block size limit as tiny as 1MB.
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