Why the blocksize limit keeps Bitcoin free and decentralized

The blocksize limit is what ensures everyone can participate in the Bitcoin network, and it ensures everyone can participate anonymously should they choose too. Some people want to remove this protection to make Bitcoin scale, but we can have the best of both worlds: high transaction volume and true decentralization with off-chain transactions.


You all know bitcoin. It's a secure, inflation-proof, decentralized currency. You make a transaction and it gets published to the global bitcoin network.

Bitcoin nodes all around the world forward that information to each other until seconds later the whole world knows about your transaction.

Every node, even yours, validates the transaction and ensures it follows all the rules. Bitcoin has a built-in limit of one megabyte of data per block or seven transactions per second. The transaction then goes on to one block chain.

As you know, bitcoin has become very popular. Unfortunately, supply and demand will cause fees to increase over time which means small value transactions just won't be practical. Easy thing to do is just have everyone change their software to accept bigger blocks all at once. Fees would go down, but you will need an expensive data center to run a node. And you won't be able to do it anonymously. Mining pools will be forced to close due to rising costs and regulations. What's left are large powerful and regulated pools controlling what transactions happen at all. Doesn't that look like banking today? This is not the bitcoin we know and love.

We have an alternative to increasing the block size - off-chain transactions. The block size stays the same and mining stays decentralized. You'll still use the block chain for large transactions. Small exchanges will be handled by payment processors which means small purchases like your morning coffee don't clog the whole system up. We can use the very same cryptography that makes bitcoin secure to audit off-chain payment systems, as well as effectively make it impossible to get away with fraud or theft.

Imagine a plexiglass bank where you can easily observe the inner workings. Unlike the completely public block chain where you can't pick who mines your transactions or who you trust to do validation, off-chain transactions can be both instant, truly private, and you have complete control over who to trust.

What can you do to keep bitcoin decentralized?

If you're a miner, only mine at pools that support the block size limit and ask your pool to publicly say so. If you are a user, ignore anyone trying to change the bitcoin software you use to increase the one mega byte block size and tell people you transact with that you support keeping bitcoin decentralized and out of the hands of the existing corporate system.

Remember, bitcoin is democratic. And the only way the block size can change is if we agree to let that happen.

Written by WeUseCoins on May 16, 2013.