Do miners like block congestion?
In the early days of Bitcoin, when transaction volume was extremely scarce and bitcoin’s highest block reward period, the early miners were equivalent to 50 bitcoins per block + a few fees, so it can be said that the early miners did not live on transaction fees. As Bitcoin has matured, it has gone from a few transactions per block in its early days to today, where each block is chock-full of transactions and congestion is the norm, which naturally generates more fees as transactions increase. When the average block capacity reaches 95% of the upper limit, the memory pool starts to swell, and users start raising fees in hopes of getting miners to write their transactions to the next block as quickly as possible without experiencing delays, eventually the fees start to skyfire.
Before 2016, miners were earning around 50 to 60 bitcoins a day. Since then, miners’ daily transaction fees have skyrocketed to 250 bitcoins, and bitcoin transaction fees are rising at a considerable rate.
For short-term miners, it is natural to want the block cap to be as small as possible, limiting the trading space, preferably to an average block size of more than 95% at all times, so that fee competition becomes increasingly fierce. In the short term, the optimal block capacity is “low volume with congestion”; Long-term miners, on the other hand, want to maximize their trading capacity so that they can increase their trading volume and earn fees within reasonable limits.
BCH route – Volume is miner’s life
On August 1, 2017, another version of Bitcoin was officially launched, named Bitcoin Cash (BCH), driven by another group of big block backers and developers. BCH believes that Bitcoin should have a larger block cap to handle more transactions and increase transaction throughput, while maintaining a low average fee to meet users’ transaction needs to the maximum extent. So the original BCH was set to an 8MB block cap and the isolated witness was abandoned. BCH has been operating smoothly for a year and a half, and has undergone two hard fork upgrades to gradually adjust block cap and transaction performance. BCH has proven the effectiveness of increasing block cap to address transaction congestion.
Bitcoin Cash’s (BCH) path is actually the development path planned by the initial white paper, which gradually increases the block limit based on hardware and demand, so as to avoid congestion in the main chain as much as possible and maximize user experience.
Large blocks can solve the problem of transaction congestion, although reducing the fee per transaction, if the transaction volume increases, the overall benefit of the increased transaction volume is not comparable to that of a few high fees, even if it does not reach the inflated fee at 95% of the average block capacity. For example, now that BCH has reached 32MB and BTC is still 1MB, BTC can theoretically process 7 transactions per second, while BCH can theoretically process up to 224 transactions. Assuming that BTC is fully loaded with blocks and BCH only has 50% block capacity, can only 7 high processing fees be compared with 112 low processing fees?
However, miners’ current concerns about large blocks are concerns about hardware level. Raising the upper limit of blocks naturally puts forward higher requirements for mining equipment when miners deal with large blocks, which is also the biggest reason why short-sighted miners oppose large blocks. At the same time, large blocks also increase the rate of isolated blocks, waste miners’ time and resources, and put forward higher requirements for full node storage space. According to the upgrading direction of BCH over the past year, the developers are trying to stabilize the block cap when the current trading volume has not exploded. The current block cap of 32MB has been stable for more than a year, and it seems that the development team has no plan to further increase the block cap in the short term. According to Moore’s Law, When the block limit is raised again in the future, it will certainly be able to keep up with the hardware level. In view of the problem of lone block rate, BCH community also proposed to use weak blocks to create subchains to connect and match complete difficult blocks (strong blocks), effectively reducing the risk of lone blocks.
As the block reward continues to be halved, it will be reduced to 6.25BTC per block in 2020. In the future, the main income of miners will still be transaction fees. In the future, BCH will face hundreds of millions of market, and miners will grow rapidly.
BTC route – Miners are just my main chain attendants
BTC took a completely different route, opting to maintain the 1MB block cap while they decided that a layer 2 network was the solution to the transaction needs. Just recently, the lightning network that they placed high hopes on recently broke through 700BTC trading mark, preliminary promotion has made certain progress, so is the lightning network friendly to miners?
Lightning network is a transaction mode outside the main chain. Both sides of the transaction lock the coins in their own lightning nodes. After opening the lightning channel, both sides can trade in the channel for an unlimited number of times and only settle once in the main chain when closing the channel. As a result, the trading volume of the side chain is very large, while the main chain becomes the settlement layer with very low trading volume. No matter how many transactions are made, only miners have an opportunity to appear in the settlement, and the fee income is greatly reduced. The lightning network has broken the pattern of bitcoin ecology, and miners are gradually marginalized in the BTC world. With the gradual reduction of block reward, miners are more and more reluctant to mine in BTC, and the probability of BTC’s miners and computing power will go down in the future.
One might think of the central nodes of the lightning network as the miners of the new age. Indeed, these central nodes act as transaction-relays and thus collect fees. But lightning network economic model has been exist larger controversy, intermediary nodes must be monopoly, only able to win a super node, which is a new era of the so-called miners is an individual or company, could not become a business, because the lightning network is a winner-take-all commercial behavior, the strength of the strong, the weak die, Such a situation is the most economically efficient.
Finally, BTC also faces a crisis of computing power. BTC’s unfriendliness to miners may drive out a large number of miners, which will eventually lead to the reduction of computing power of the main chain. Under the POW mechanism, this is a problem that BTC needs to solve urgently. The expelled miners may end up on the BCH after all.