During a panel discussion on Bitcoin scaling at the recent State of Digital Money event in Los Angeles, the idea that a larger block size limit would lead to further centralization of bitcoin mining was debated by the four participants on the panel: Airbitz CEO Paul Puey, derivatives trader Tone Vays, Yours CEO Ryan X. Charles, and Bitcoin Core contributor Eric Lombrozo.
The topic was first brought up by Vays in response to a statement from Puey regarding the need for the block size limit to be set by the free market. From Vays’s point of view, removing the block size limit completely and allowing it to be set by nodes on the network would lead to a situation where more powerful miners try to increase the block size limit for their own advantage.
“That scares me in [terms of] having a decentralized Bitcoin a lot,” said Vays.
As a counter to Vays’s claim, Charles pointed out that the more expensive aspect of mining is the actual mining process rather than the costs associated with operating a full node.
“Increasing the block size to 2MB has absolutely nothing to do with mining centralization,” Charles added.
Puey agreed with Charles’s point that the cost of an increased block size limit is nothing compared to the costs of mining equipment and electricity. “It’s nothing; it’s a rounding error,” he stated.
In Puey’s view, a better tool for the further decentralization of bitcoin mining would be financial incentives that push the industry to more countries around the world. Right now, a high percentage of Bitcoin’s network hashrate is assumed to be located in China due to the share of the overall network hashrate held by China-based mining pools.
When Lombrozo chimed in on this topic, he agreed that the costs associated with the system resources required to operate a full node are not the key issue with an increased block size limit that could lead to further mining centr...