What are the Ramifications of the One Megabyte Block Size for Counterparty?
Bitcoin transactions aren't the only transactions affected by the blockchain size debate, Counterparty also has a stake in the outcome. In this video, shot in ...
What's up party people? Chris DeRose here, Community Director of the Counter Party Foundation. In today's video we're going to talk about something that's really a big controversy in the community. It's something that you've seen just so many posts on. So many arguments. So many opinions. So let's get to the core of it.
The question is: What are the ramifications of the one megabyte block size for Counter Party? This question was asked by Sean. Sean is a very valued member of the Counter Party Team. He does a lot of the sysadmin work for us. He's not a programmer, but he's really involved in the day-to-day stuff of the project. Sean, I always love the work that you do. So let's start talking about his question.
So the one megabyte block size, if you guys haven't been accustomed to the debate yet, is the size of a block in the bitcoin block chain. It indirectly or directly governs how many transactions we can have in the block chain. The other component, of course, would be the size of the transaction. And it's been getting more and more filled over time. There's a lot of people think that it is going to be constraining the growth of the protocol, and want to increase that size from one megabyte to, typically, twenty megabytes. This is what's being discussed.
Gavin himself is the one who's really been spearheading a lot of this talk, and so everyone has been weighing in on the issue and what it means. And it is a complicated issue and I think I've covered it at some length in the channel already but I think we need to start kind of considering what it means for Counter Party. It's not very simple, unfortunately. There's a lot of varied disparate and odd inputs into this equation that really need to be considered and factored. And nobody has one good answer that works for everything. But, to summarize, if we make the block sizes larger, it would help Counter Party get more transactions in.
But conversely, if we make block size larger, it could lead to some money incentives that are slightly perverse, which would impact the Bitcoin block chain's immutability, which we also need at Counter Party. More specifically to that you also get into a lot of the function of tipping in the Counter Party system, or tipping in Bitcoin in general. Right now miners are making some money from tips. They're making a fraction of what they're making from the sale of Bitcoin itself. And whenever you get in to halving data this discussion starts to come up as well, because we know that over time we need to displace the value that's being earned from Bitcoin mining in the form of new bitcoins with tips. However, it seems like the tipping hasn't caught up to the degree that it should.
We're not really sure where it should be, but we certainly know that it's a very small percentage of the actual reward earned by the miners. I think it's like $300 a block or something like that right now. Something like $30 or $300, some in there. That is the average amount of tips that are earned, and that is conversely related to the $6000 that they earn from actually mining new Bitcoins, 25 bitcoins or so, depending on the price. If we keep the block sizes small, that tip amount goes up. I know a lot of you are going to say, "Wait a minute.
That means we can't do transactions on Bitcoin." Well, no, there are actually some pretty cool solutions on the table that will allow us to keep the block sizes small, and accommodate a lot of transactions. So, Lightning Network is probably the best example of that, and it's a really cool technology. You can look into it. I may cover it in depth in another video. But Lightning technology will let you do things like establish payment channels amongst larger networks, create tons of transactions, like major amounts of transactions on a single block, all without having to have too many settlement points which incur time on the block chain.
Now, for Counter Party we won't have the Lightning Network any time soon, if ever. With Counter Party we actually need to use the block chain for these other purposes. It's a really tough equation. I can't say. I know they were not going to do terrible either way. It's not going to be the end of the world if we don't upgrade it.
It's not going to be the end of the world if we do upgrade. It's just a matter of how efficient and where things are going to be. So if I had to guess, I think we would probably want to keep the one megabyte block size limit right now. I think I'd like to see the tips go up a little bit. And I'd like to see some development of things like Lightning Network and such that would really help the community out. I thnk we will have to upgrade the block size eventually.
I don't think it's a major rush. If that means in the time being the Counter Party transactions are getting more expensive, I'm fine with that. I think that's okay. This kind of gets into the community over what Counter Party is supposed to do. There's a lot of people who want to see Counter Party used in the same way that Bitcoin is used, doing value transfers and all these things, which it's able to do just fine. Personally, I like Counter Party as a settlement mechanism, particularly for inter-bank exchanges.
The idea of course would be that your Bank of Spells of Genesis, perhaps, holds your cards, and at the time that bank needs to settle with Bitcoin, an exchange or something like that, then we go ahead and create an actual transaction on the block chain. And yeah, that will cost a little bit more money, but it doesn't really mean that we're operating inefficiently. It probably means that the Bitcoin network will be more immutable, which is really the thing that we need more than anything else in Bitcoin, is to maintain immutability, and perhaps make it more immutability. I mean, that's what this whole movement is really based on. But I don't know. Maybe you disagree.
If you do, why don't you leave your comments and questions in the comments section below, and explore my channel. If you like this video, watch some others and subscribe to it. I'd love to have you around. Later, party people.