Re: [Bitcoin-development] Proposed alternatives to the 20MB step function

[Matt Whitlock <bip@mattwhitlock.name>]

On Friday, 8 May 2015, at 8:48 am, Matt Whitlock wrote:
> On Friday, 8 May 2015, at 3:32 pm, Joel Joonatan Kaartinen wrote:
> > It seems you missed my suggestion about basing the maximum block size on
> > the bitcoin days destroyed in transactions that are included in the block.
> > I think it has potential for both scaling as well as keeping up a constant
> > fee pressure. If tuned properly, it should both stop spamming and increase
> > block size maximum when there are a lot of real transactions waiting for
> > inclusion.
> 
> My problem with it is that "bitcoin days destroyed" is not a measure of demand for space in the block chain. In the distant future, when Bitcoin is the predominant global currency, bitcoins will have such high velocity that the number of bitcoin days destroyed in each block will be much lower than at present. Does this mean that the block size limit should be lower in the future than it is now? Clearly this would be incorrect.

I feel a need to point out something that may be obvious to some but not to others: the cumulative total number of "bitcoin days destroyed" since the genesis block is bounded by the cumulative total number of "bitcoin days created" since the genesis block. (You can't destroy something that hasn't yet been created.) After all coins have been mined, bitcoin days will be created at a rate of 21M bitcoin days per day. In the long run, bitcoin days will be destroyed at a rate not exceeding 21M bitcoin days per day. This is so because bitcoin days cannot be destroyed at a rate faster than they are created for an indefinitely long time. This upper limit on the rate of bitcoin days destruction is irrespective of bitcoin adoption and the growth in demand for space in the block chain.

Even ignoring the fact that "bitcoin days destroyed" is bounded whereas demand for block-chain space is not, we'd still have to answer the question of whether the rate of bitcoin days destroyed is a good estimator of demand for block-chain space. Why would it be? Suppose some day Satoshi moves his 1M coins to a new address. Would this huge destruction of bitcoin days imply anything about future demand for space in the block chain? No.