Throughout the history of Bitcoin’s block size limit controversy, one part of the ecosystem that always seemed in favor of a larger block size limit was miners. Whether it was a proposal for an uncapped block size limit or SegWit2x, miners showed their support for a variety of hard-forking increases to the block size limit over the years.
Various mining-related companies such as Bitmain and ViaBTC are also huge supporters of the Bitcoin Cash altcoin, which was created out of the scaling wars.
Unfortunately for miners, they don’t control Bitcoin, so the protocol has yet to receive a block size increase via a hard fork, although a soft-forking increase was included as part of the Segregated Witness (SegWit) upgrade.
On a recent episode of Magical Crypto Friends, the idea that miners may have shot themselves in their collective feet due to the advocacy for bigger blocks was brought up during a discussion around whether blocks are too big today.
Miners Made More Money with Smaller Blocks
When talking about whether blocks are too big today, Blockstream CSO Samson Mow stated:
“If you’re actually a miner, you would not have wanted SegWit — not because of the FUD about SegWit — but just because you would have bigger blocks. And if you’re a smart miner, you also would not have wanted blocks to get bigger too because then you’re making less money off of the fees. So, I honestly can’t figure out why the miners and Bitmain and everyone were advocating for bigger blocks because now they’re making so much less money off of fees than they could have been making.”
“It makes no sense to me either. They were making so much money when the blocks were small and fees were high,” added Litecoin creator Charlie Lee.
To Mow and Lee’s point, miners were collecting more bitcoin-denominated transaction fees in 2016 and 2017 (when the 1 MB block size limit still existed) than they are today, according to Quandl. However, some of this data (especially the second half of 2017) is likely useless as the entire crypto asset market was in a gigantic bubble at the time.
To play devil’s advocate, it’s possible the bitcoin price could be higher if a hard-forking increase to the block size limit had been implemented, which would increase miner revenue through the block subsidy rather than transaction fees. However, as the failure of the hard fork related to the New York Agreement showed, there simply was not consensus for this kind of change.
Lately, Bitcoin Core contributor and Bitcoin Knots maintainer Luke Dashjr has been advocating for a decline in the block weight limit (today’s version of the block size limit). However, such a change seems unlikely to happen on the network at this time.