Blocks on the Bitcoin blockchain are 1 megabyte in size, meaning that every time 1 megabyte of information is processed on the system, the block must be verified by miners. This has become prohibitively slow as the system has grown.
Enter Bitcoin Cash, with its 8 megabyte block size. Less frequent verification means that processing time is quicker, making the coin more workable as a functioning currency.
But what if we were to push the concept of block size to its limit? A blog posted on Sunday posits mammoth digital monoliths of a staggering terabyte in size! The reasoning: “…hashing power provides the same security no matter if 1MB blocks or 1TB blocks are used, yet in the later case, each transaction is secured with a million times less energy per transaction.”
1/10 cent transaction fees
Less money too, according to the calculations of Joannes Vermorel, founder of Lokad, a consultancy company that offers “demand forecasting and inventory optimization” to businesses.
The blog is entitled “Terabyte blocks for Bitcoin Cash” and discusses exactly this subject, and specifically whether or not the idea is feasible (yes, apparently). Vermorel’s text is thorough and very technical, covering the subjects of mining rig construction, financing, and how to scale all the technical aspects of blockchain transactions such as cryptographic validation and block propagation.
For his hypothesis he assumes 10 billion human beings all using the blockchain, though he points out that the exact number is immaterial since the cost is reliant on the number of transactions which is reliant on the number of people using it.
After a detailed breakdown of the cost of the necessary equipment, electricity and internet connection, he comes to the conclusion that 26 million USD would be necessary to set up the system, or 1.3 million per year. While this seems a lot, 10 billion people contributing 1/10 of a cent a day through transaction fees equals 3.65 billion USD. He points out: “In 2016, Google is extracting about 7 USD per user per year, while Facebook is extracting about 16 USD per user per year. If Bitcoin [Cash] reaches 1TB per block, a large portion of the world economy will be running on top of this blockchain offering numerous monetization opportunities.”
57 transactions per person per day
The mining rig which he describes is made up of today’s technology, more than capable of handling the load. The issue of storage was covered in the original whitepaper for Bitcoin – Satoshi Nakamoto wrote that storage “should not be a problem”, citing Moore’s Law – the rule that human technology develops such that integrated circuits double in complexity roughly every two years.
Vermorel says that even the price estimates given by himself are likely massively overstated, because the costs of processing power are only ever going to fall as systems become more complex. He guesses that the 1.3 million USD to run a mining operation could actually be closer to 400,000 USD, a sum doable for modestly-sized businesses.
The benefit of the bigger blocks, as I mentioned earlier, is transaction speed. Bitcoin blocks are capped at 1 megabyte, and can process only 3-4 transactions a second (compared for example to Visa, with 24,000).
A terabyte block would be able to handle 7 million transactions a second. Each one would hold about 4 billion transactions, and such a blockchain would be able to process 57 transactions per person per day, assuming 10 billion people. Let’s hear it straight from the horse’s mouth:
“I assume a 2ms CPU cost per transaction on a regular 2Ghz x86 CPU. At 250 bytes per transaction, a 1TB block every 10 mins represents 6.7 millions transactions per second…The mining rig is largely sufficient to keep up with the transaction validation. The rig has even spare capacity to catch-up with a delayed validation which could, for example, occur in case of a local network outage.”
As I said, the blog is very technical. However he ends the piece on a slightly more rousing note: “The only option to decentralize further Bitcoin is not to wish for a downsize of miners, but to organize a massive expansion of the mining pie which will comparatively shrink every miner.”