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Re:Bitcoin hits 3-year peak, nears record high on U.S. ETF a... by schmichael on Thursday February 23, 2017 @06:36PM (#13719007)
But the relationship between block size and per-tx fee is based upon the amount of competition between txs, not absolute tx volume. So if the block size is raised high enough to accommodate the current rate of txs with no competition, the fees don't just fall proportionally: they fall to near-0.

The higher the tx backpressure, the higher the fees. The larger the block size, the lower the pressure regardless of overall tx volume.

Re:Bitcoin hits 3-year peak, nears record high on U.S. ETF a... by kalleboo on Thursday February 23, 2017 @08:35PM (#13720019)
Miners could also simply decide to not include any transactions with a fee smaller than X. Transactions can't "shop around" for a miner, the first miner to mine a block wins.
Re:Bitcoin hits 3-year peak, nears record high on U.S. ETF a... by TD-Linux on Thursday February 23, 2017 @07:05PM (#13719274)
Yup, it's not an exact tradeoff, and near-0 it breaks down entirely. At zero it's worse than that, because of the diminishing block subsidy schedule, having zero fee pressure will reduce the incentive for mining, and therefore security.

However, miners can't simply apply the limit to themselves without a consensus rule. There is code in Bitcoin Core to apply a soft limit, but as long as there is any fee pressure, ignoring transactions leads to a disadvantage compared to other miners, so in practice all miners tend to always use the maximum permitted block size. Most proposed schemes for increased or variable block size still enforce the same size across all miners for this reason.