Luke-Jr is again posting about something that he has not even basic understanding: financial networks. This by itself isn't new.

But I think it is worthwhile to show that the classic credit card are using two messages per transaction: authorization and capture.

http://www.authorize.net/support/merchant/Submitting_Transactions/Credit_Card_Transaction_Types.htm

Typical self-serve fuel pump would use two transactions: the authorization to unlock the dispenser and capture one the dispenser is put back in the locked position. Physical store checkout stand transactions typically roll those two phases into a single compressed form.

Directly the above information has no bearing to Bitcoin. But the "payment protocol" is an area of the active development in Bitcoin. It would be great that more people understood how the typical payments work and think on how to translate them to the Bitcoin global broadcast network.

One thing is to prevent double-spends. But there is additional value to be gained from discovering who even attempted to authorize more spending that they really had available funds.

Exactly this.

For everyone sending transactions, start putting fees in them HIGHER than whatever SatoshiDice is paying.  This would relegate SD transactions to be the least-prioritized transactions on the network, and they would only fill up the remainder of blocks after all of the more "legitimate" transactions have been processed

That said, we will eventually need to be increasing block sizes, so why not start now?  I completely agree that the network needs to be able to handle more transactions to go "mainstream", and I think we should begin planning based on what current hardware can handle, not on an arbitrary limit that we think will be enough.

Currently, the network at 1 MB per block can create about 52 GB of blockchain data in a year.  I'm not sure about the rest of you, but that amount is certainly feasible for me to store indefinitely.  A 2 TB drive can be had for $99.  That'll store 19 years of data, so less than $6/year to store the blockchain.  Is that really so unreasonable?

So say we increase the maximum block size to 5 MB per block.  That would create up to 260GB of blockchain data in a year.  Again, a 2 TB drive would store 7 years of data for $99.  So that's what, $12 or $13 a year?

Now certainly, there is no monetary compensation or incentive for people to choose to store the whole blockchain, and I don't expect many people to do so regardless of what block size is ultimately chosen.  But those who are interested in maintaining Bitcoin's integrity as a decentralized currency certainly will, and will definitely be willing to spend a token amount ($12-$13 a year) to maintain their Bitcoins' value.

So you are saying that Gold tx's are > 7 per second (just trying to work out what the *real* problem is)?

My cognitive dissonance alarm is ringing.

On the one hand you're against people including 'informational messages' in the blockchain, even if actual value is transferred...
On the other hand your mining pool has embedded prayers and scripture into the blockchain.

Perhaps you've recently changed your opinion on blockchain bloat?

Regardless, I think S.Dice performs a few services to Bitcoin as a whole and is a good thing:

• It stress tests the Bitcoin network. Without it we wouldn't truly know how the network would handle transaction volumes that we see today as it accounts for a large proportion of global volume.
• It provides an incentive to use Bitcoin. While many are of the opinion that gambling is wrong, far more people around the globe enjoy it. S.Dice provides a simple way to gamble and has introduced Bitcoin to new users as a result; people can't gamble online as easily with cash.
• It lets us anticipate future requirements for Bitcoin sooner, as Mike has pointed out with respect to the soft block limit. This is like a small alarm: we're 1/4 of the way to a breaking point so let's start thinking about the best way to solve this problem now.

Yes, S.Dice produces a large volume of transactions, but S.Dice is NOT an attack of the network. Every transaction into S.Dice is a transfer of legitimate value, and every response is another transfer of value. An attack would transfer NO value, or such negligible value that it is worthless.
Refusing to process these transfers in value is similar to a net-neutrality issue: it's a "currency-neutrality" issue.

Bitcoin was developed to prevent any party from declaring who can and cannot participate in a financial network. Blacklisting a set of addresses from having their transactions included in the blockchain seems like a step backwards and is the antithesis of Bitcoin's raison d'etre.

Well thanks for being the "spokesperson" for everyone here but I think you'll find that quite a few people disagree and if Satoshi really had planned for Bitcoin to be a tx system to compete with the likes of Paypal/Visa then you don't think he might have made a mistake or two (if not then why does this very thread exist)?

Thanks Luke-Jr for taking the time to explain it to people. Bitcoin can scale up, but it's quite expensive! Expensive as in not just hardware and bandwidth, but also network decentralization and availability to enthusiasts.

Let's say you're a bitcoin enthusiast and you want to run a full node. Will you spend $1,000 just to service Satoshi Dice? No way! Will you spend $10,000 to be part of a world changing global money system? HELL YEAH!

Bitcoin will scale up, but it would be best if it kept small until there is actual user demand who want to transfer value. Sathosi Dice are mostly bots and they mostly transfer information, not value.

You may have heard me say "Bitcoin is an experiment" before...  well, we're finding out right now what happens as the experiment scales up.

First:  I sent a message to the big mining pools, reminding them of the run-time options they can set to control the size of the blocks they create. I did not tell them what they should or shouldn't do, I think we need to move beyond centralized decision-making.

I did send them a pointer to this very rough back-of-the-envelope estimate on the current marginal cost of transactions:
  https://gist.github.com/gavinandresen/5044482

(if anybody wants to do a better analysis, I'd love to read it).

Second: block size is half of the equation. The other half is transaction fees and competition for getting included into blocks. All of the bitcoin clients need to do a better job of figuring out the 'right' transaction fee, and services that generate transactions will have to adjust the fees they pay (and are, already).

Finally: in my opinion, there is rough consensus that the 1MB block size limit WILL be raised. It is just a question of when and how much / how quickly.

Firstly, for all those people crying out the end of Bitcoin if the block size is not lifted to 1GB, do yourselves a favor and go read the blocksize thread. There are many many issues you have no clue of which have been raised in the thread by people who have been thinking about this issue far longer than you know of Bitcoin.

Regarding Luke's view on SD, while i personally do not agree with his view that SD MUST not exist in it's current form, it is entirely upto him what txns his pool includes or excludes. If you don't agree with him, start your own pool or join one which has policies which you agree with. This is called freedom.
I agree that SD is extremely wasteful in it's current form, but the ideal way to fix that must come from the market, when people are willing to pay more than SD in fees to ensure their "useful" txns are processed efficiently. Or a SD competitor to offer better odds by using a deposit system to cut down on fees. The market will eventually force SD to change or go out of business.

Mike -  Ive been reading up on Assurance Contracts, have some questions.

1) My question is why will nodes contribute on behalf of everyone(including wasteful nodes)? Or is there a scheme where the payee can filter which txns are subsidised?
2) If it is indeed meant for everyone's benefit,
a) How do you prevent waste by spammers or attackers?
b) Whats to prevent the cultivation of even more wasteful txns(sending msgs over blockchain, storing ascii art in scripts, etc..)
c) How is it sustainable?
I can understand for certain Kickstarter projects, its a 1 time cost. But incentivising miners will be a permanent requirement.
Even if there are big Bitcoin businesses which benefit from sustaining the network, how do we know their contribution will be enough?
Why not let my competitor foot the bill instead while i use the money saved to expand my business?
It just does not make economic sense to me.

I could see NAC subsidising and reducing network fees, but im quite certain the network will fall apart if NACs are going to be the sole source of funding for miners.
This is akin to the Fed bailing out banks for the "stability" of the global financial system. What happens instead is that you encourage banks to lever up even more since they know they are backstopped. Without personal cost/risk, there is no reason for anyone to optimise or reduce waste. If the world could function on the charity of a few, nobody would work.

Having said that, maybe im wrong. If you feel strongly that this will work, please implement it and prove me wrong so that we can all have free Bitcoin txns.

Ian, Satoshi did plan for Bitcoin to compete with PayPal/Visa in traffic volumes. The block size limit was a quick safety hack that was always meant to be removed.

In fact, in the very first email he sent me back in April 2009, he said this:


Satoshi said back in 2010 that he intended larger block sizes to be phased in with some simple if (height > flag_day) type logic, theymos has linked to the thread before.

I think he would be really amazed at how much debate this thing has become. He never attributed much weight to it, it just didn't seem important to him. And yes, obviously, given the massive forum dramas that have resulted it'd have been nice if he had made the size limit floating from the start like he did with difficulty. However, he didn't and now we have to manage the transition.


The "why" is the whole point of assurance contracts. They're a way to fund the creation of what economists call public goods, that is, goods which cost money to create but once created benefit everyone for free with no way to exclude people. The canonical example is a lighthouse.

Why will nodes contribute on the behalf of everyone? Firstly, it's not actually nodes, it's "receivers of funds", and it doesn't need to be all of them, just some. They will fund these contracts because they need network security and thus mining to take place. Yes, by doing so, they implicitly subsidize freeloaders who don't pay, however that's the reason for the design of an assurance contract - it means others have to chip in, otherwise nobody pays anything.


The system naturally converges upon an equilibrium in which the only businesses that use Bitcoin are the ones who can tolerate the delay/double-spend-frequency tradeoff. If other businesses want more hashing in less time, they can join the contracts and result in more fees. So "enough" is a relative term. It will always be "enough" for the current set of users, and for other sets the equilibrium hash rate may be more or less than what they need.

Bear in mind that if everyone thinks "I won't pay for hashing because my competitors will" then the contract does not complete and nobody pays anything, therefore nobody gets any security. That's the purpose of an assurance contract - I pay only if my competitors also pay.

W.R.T "waste" - you have to distinguish between the cost of mining and the cost of validation. The two are not connected except that the cost of mining is always more than the cost of validation, because mining requires validation. I believe validation will be, even at high transaction rates, cheap enough that people can just swallow them as a cost of business or even just for hobbyist reasons. Alternatively, people can once again band together and form assurance contracts to fund the running of full nodes.


Unfortunately I can't do that today. The present situation is that hash speeds are so great thanks to inflation that nobody is successfully double spending via forced re-orgs (the attack that lots of mining prevents). So there's no incentive for anyone to fund mining via fees, the only reason anyone is attaching fees at all right now is to try and win the block space auction or avoid DoS checks. Currently inflation is "good enough" and this has, in fact, always been the case.

One of the curious things about this whole argument is nobody knows the future well enough to implement solutions today. For all we know it can be the year 2050 and a single Bitcoin is worth so much that inflation is still driving hash speeds sky high. There may never even need to be incentivization via fees within our lifetimes. Or maybe there will. If there is, then if I'm still around I'll sit down and write the code.

And you can thank Luke-Jr for turning the issue into a personal vendetta against SatoshiDice.

And for the record, Luke-Jr has every right to not include SD transactions, if he wishes. That's his choice, as a free individual using this technology. I don't fault people for using Bitcoin in whatever way they choose.