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Date: Sun, 31 May 2015 16:46:58 +0200
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From: =?UTF-8?B?Sm9yZ2UgVGltw7Nu?= <jtimon@jtimon.cc>
To: Gavin Andresen <gavinandresen@gmail.com>
Content-Type: multipart/alternative; boundary=047d7b3a86040ccb49051761c83c
Cc: Bitcoin Development <bitcoin-development@lists.sourceforge.net>
Subject: Re: [Bitcoin-development] Block Size Increase Requirements
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On May 30, 2015 10:38 PM, "Gavin Andresen" <gavinandresen@gmail.com> wrote:
>
> Mining is a competitive business, the marginal miner will ALWAYS be going
out of business.
>
> That is completely independent of the block size, block subsidy, or
transaction fees.

No, the later determines who can be profitable.
Here's a thought experiment:

Subsidy is gone, all the block reward comes from fees.
Miner A has great connectivity and mines 20 MB blocks, with an average of
20 btc per block.
Miner B has a connectivity such that 2 MB blocks puts it on a reasonable
orphan rate, so it gets an average of 2 btc per block mined.
But the difficulty is the same for all and it can rise up to miner A
breaking even after energy costs.
Will miner B be profitable with this setup? The answer is no and miner B
will just go out of business. In that sense too, bigger blocks mean more
mining centralization.

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<p dir="ltr"><br>
On May 30, 2015 10:38 PM, &quot;Gavin Andresen&quot; &lt;<a href="mailto:gavinandresen@gmail.com">gavinandresen@gmail.com</a>&gt; wrote:<br>
&gt;<br>
&gt; Mining is a competitive business, the marginal miner will ALWAYS be going out of business.<br>
&gt;<br>
&gt; That is completely independent of the block size, block subsidy, or transaction fees.</p>
<p dir="ltr">No, the later determines who can be profitable.<br>
Here&#39;s a thought experiment:</p>
<p dir="ltr">Subsidy is gone, all the block reward comes from fees.<br>
Miner A has great connectivity and mines 20 MB blocks, with an average of 20 btc per block.<br>
Miner B has a connectivity such that 2 MB blocks puts it on a reasonable orphan rate, so it gets an average of 2 btc per block mined.<br>
But the difficulty is the same for all and it can rise up to miner A breaking even after energy costs.<br>
Will miner B be profitable with this setup? The answer is no and miner B will just go out of business. In that sense too, bigger blocks mean more mining centralization.</p>

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