Bitcoin Blocksize: Is Smaller Better?

Not unlike religion or politics at the dinner table, never mention block size to a bunch of bitcoiners.

Nowadays, calling for smaller blocks is sure to spark controversy. Bitcoin struggles to scale, how could shrinking the block size fix anything?

Counter-intuitive to say the least.

Yet, there’s some sense to smaller blocks. With far less data within each block, checking for transactions on the blockchain would become easier, and it is smaller and thus easier there would be more parties checking and verifying blocks as a whole. The bitcoin blockchain could even be in theory even more trustworthy.

From a philosophical perspective, moreover, smaller blocks are aligned with Bitcoin’s decentralization ethos: the more active participants such as exchange businesses and users verifying transactions, the higher the network’s resilience.

A smaller block also makes transaction propagation simpler in a sense because only transactions within that small block will matter and because the block is small it will make validation simpler, your crappy phone could in theory participate in the validation, and the spread of that transaction across the peer-to-peer network — propagation — improves the overall integrity of the blockchain.

Who doesn’t want that? A more decentralized and resilient Bitcoin blockchain? Read on for the specifics of smaller-sized blocks on the Bitcoin blockchain!

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How small?

The champion for small blocks Luke Dashjr gave bitcoiners back in 2019 between August 1st and December 31st to vote on small blocks. If the majority of the nodes at that time agreed, a soft fork in favor of smaller blocks will occur.

“This patch would enforce a very simple soft fork, reducing Bitcoin block sizes to ~300kB”, the Bitcoin Core developer explained on Twitter. At less than one third of the 1MB limit, these small — or lighter — blocks would facilitate block validation, while curbing the overall weight of the BTC blockchain.

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Was it the right time to go small?

Interestingly, it wasn’t the first time the concept was flaunted by the Bitcoin Core developer. Back in January 2017, Luke Dashjr had proposed a BIP (“Bitcoin Improvement Proposal”) requesting the block size to be decreased down to 300kB. At the time, though, his motion had been shrugged off. However, there were two sets of circumstances that helped smaller blockers to gain traction one last time back in 2019.

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Node-dive

The number of active nodes on the Bitcoin network has been decreasing.

Short reminder: two types of nodes allow users to connect to the blockchain.

–Fully validating nodes (aka full nodes), verify each transaction in new blocks. Unfortunately, these nodes are costly and difficult to run.

–SPV nodes (for “Simple Payment Verification” aka lightweight nodes) are easier to operate. But, the latter has two limits: they latch onto full ones to access the blockchain and they accept the blocks’ transactions without verifying them.

From 2019 to 2020, none other than Luke Dashjr warned the number of full nodes dropped from 100k to 37k. The node has never recovered back above 100k, remaining at 46k today. This kind of dip is concerning since the fewer full nodes there are, the higher is the risk of network corruption. In fact, if the number of full nodes keeps on dipping, lightweight nodes might one day have to resort to centralized services to connect to the Bitcoin blockchain. Even today there are a lot of node services because managing a node, particularly non-bitcoin nodes for other chains, is impossibly expensive, money and time-wise.

As explained by Blockstream’s strategy chief Samson Mow in a Hard Fork article, the stake in block size is that of network decentralization: with prohibitively heavy full nodes, the network would eventually crystallize into poles around data centers.

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Lightning on the horizon

The biggest concern around smaller blocks is arguably the fees. If blocks are small, then the competition to get your transaction on the blockchain will be fierce and the only way to discern who gets in and who has to wait is to give the right of way to those that pay more fees. Miners handle this and will almost always select transactions with larger fees. Smaller blocks also will mean longer wait times for those that don’t pay enough fees.

The rebuttal to this high fee and slower transaction times entailed by small blocks is obvious: let’s move more transactions onto another layer, onto the Lightning Network.

Far from denying the losses entailed by smaller blocks, Bitcoin developers agree that the adoption of the second-layer solution will offset them.

Quick to support Dashjr’s proposal, Bitrefill’s John Carvalho inspired others to do the same. The adoption of the Lightning Network was one of the reasons Carvalho cited as a curb to soaring blockchain fees.

The timing of the proposal may have played a role in convincing some. Internet entrepreneur dubbed “Bitcoin Oracle”, Vinny Lingham, who used to be rather neutral in the block size debate, switched sides to Dashjr small-blocks side.

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Luke-warm Supporters

Aside from those, like Roger Ver, who wholeheartedly rejects small blocks, crypto experts agree that Luke Dashjr is technically correct. But, they don’t think switching to smaller blocks is as cut and dry.

The dip in the number of full nodes, for one, might be addressed without resorting to smaller blocks. The fraud proofs patch, for instance, means to bridge the gap between lightweight and full nodes. If a full node

detects an anomaly in a block to be validated, it would emit a ‘fraud proof’ as a warning for the rest of the network to orphan the block.

It is worth noting that, while addressing the overall security risk, fraud proofs do not shore up lightweight nodes’ security to that of full nodes.

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Blocked by consensus

Ignoring all the technicalities, the issue with adjusting Bitcoin’s block size is actually human. Being a public chain, being a public good, and being open to all means Bitcoin requires a lot of heavy duty consensus. A majority of its participants have to agree to the changes.

Unfortunately, many Bitcoiners are reluctant to change due to the turbulent crypto business history. Just like the question marks clouding the Y2K in the late 90s, the unknown unknowns of a structural change deter any major changes — Nobody wants another Bitcoin cash variant.

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Conclusion

In a 300kb nutshell, limiting the size of the blocks will simplify the verification process. The more people can contribute to validating blocks, the more reliable, resilient, and decentralized the network could become. But small blocks might make it difficult for conducting businesses (especially in the case of exchanges) to manage long and unknown confirmation times.

Regardless of block size, network resilience hinges on the authenticity of every single transaction. On-chain congestion would be a short-term trade-off for small blocks to ensure the sustainability of the network and store of value.

As the debate fizzled out in favor of keeping the blocksize at 1 MB, we can see that the biggest roadblock was simply human consensus and free of change. The tech was there, and the theory made sense, the application, however, remained elusive.

Swaying mindsets is much harder than patching code, and maybe that’s okay. In hindsight, it seems immutability is Bitcoin’s greatest feature. Because in an unpredictable ever changing world, something unchanging strangely becomes the most dependable and reliable thing in the world.

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