The solution to the block size debate

In a nutshell, the debate comes down to 2 things:

• Concerns about increasing the block size limit, because it would make it harder to run full nodes, and full nodes enforce Bitcoin’s rules and keep miners in check (among other things).
• Concerns about not increasing the block size limit, because it makes transactions get stuck, creates artificially high fees and forces people to run third party solutions such as the Lightning Network (which hasn’t been implemented yet and still needs to prove itself). It also risks moving all transactions outside of Bitcoin, which would potentially have a disastrous impact on miner fee income. Because miners secure the network, having no fee income risks removing miner’s long term incentive because the mining rewards are becoming less and less as we move closer to the 21 million supply limit.

The solution:

• Give SVP “lightweight” clients significantly more power by increasing their fraud proofs. This will get you nearly all the benefits of running a full node, without the disadvantages. But more importantly, this will make EVERY Bitcoin user, including those with a mobile phone wallet, protect Bitcoin’s rules. This solves the concerns of miners getting too much power, and limits them more to just validating transactions into the blockchain. Giving SPV nodes more power is in line with what Satoshi had intended, but we never got around to doing it.
• With SPV nodes enforcing the network rules, the necessity for everyone to run a full node is removed. There are still some concerns for the privacy paranoid, but these can be addressed by still running a full node, using Tor, VPN’s, or connecting to public full node services that guarantee your privacy (much like VPN providers). And with future privacy improvements to Bitcoin, privacy concerns can probably be removed altogether, and running full nodes or VPNs no longer becomes necessary.
• With the necessity for users to run full nodes removed, the block size no longer becomes an issue. Bitcoin miners, exchanges and online wallet providers will have no issue handling significantly larger block sizes between themselves. This is also in line with what Satoshi intended. He said: “Only people trying to create new coins would need to run network nodes. At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware.”
• With the block size no longer being an issue, we can finally safely implement a permanent block size solution once and for all, that will keep the block size limit above market demand. There are several options, such as Stephen Pair’s flexcap proposal.
• This will alleviate the miners biggest concern, which is also the biggest threat to the long term health of the network: Not being able to get sufficient transaction(s) (fees) on the Bitcoin blockchain. A combination of sufficient block space and the ability for miners to set the fees as they did uptil a year ago (instead of suffering from limited size and an artificial fee market), will be a winner for everyone. It would still allow free transactions to be included on the network, and it will allow Bitcoin to properly and fairly compete with any offchain or sidechain solutions that are being built on top of Bitcoin, such as the Lightning Network.
• With Bitcoin able to compete properly with offchain and sidechain solutions, I no longer see any issue with implementing anything that makes it easier for these solutions to be added. If we don’t, then a competing altcoin will do so and we risk losing market share.

Note: it is crucial that both the SPV fraud proofs AND a permanent block size solution (that keeps the limit above market demand), are both FULLY implemented without compromise. I would consider this solution to the block size debate invalid if there isn’t enough user protection built in or if the block size increase is lowered to anything that doesn’t keep it permanently above market demand.