On Thu, Feb 14, 2013 at 1:07 AM, Peter Todd <pete@petertodd.org> wrote:
On Wed, Feb 13, 2013 at 09:44:11PM -0500, Stephen Pair wrote:
> One of the beauties of bitcoin is that the miners have a very strong
> incentive to distribute as widely and as quickly as possible the blocks
> they find...they also have a very strong incentive to hear about the blocks
> that others find.  There will not be an issue with blocks being "jealously

The idea that miners have a strong incentive to distribute blocks as
widely and as quickly as possible is a serious misconception. The
optimal situation for a miner is if they can guarantee their blocks
would reach just over 50% of the overall hashing power, but no more. The
reason is orphans.

Perhaps, but a miner trying to target just over 50% of the network will run the very real risk that they'll only reach 49%.

What about the case for centralization if the block size remains capped?  I see a far greater risk of centralization in that scenario than if the cap were to be removed.  The reason is very simple, bitcoin would ultimately become useful only for very high value, settlement transactions.  Only the mega corporations and banks would be using it directly, everyone else would be doing daily transacting in centrally issued currencies of one form or another.  As the banks and mega corps learned about the utility of bitcoin and began to use it en masse, they would start to take the whole network off the public internet and put it on a higher speed and more reliable backbone.  Those corporations would establish mining agreements among themselves to ensure none of the participants could take over the system and compromise it, while at the same time keeping the operational costs to a minimum.  Bitcoin is now a great alternative to the wire transfer system, but has no value to the average person wanted to have cheap and private transactions over the Internet.  Maybe Litecoin starts to fill that niche.