One of the most common canards against the use of larger blocks is that there is an infinite desire for storage or transactions on the block chain and therefore we need a fee market to discourage excessive use. The idea being that if transactions are cheap then everything from cat pictures to corporate documents will be dumped ad infinitum until chain blot becomes unsustainable and the whole chain grind to a halt. This article is going to pull apart the assumptions that this conclusion relies upon.

Cheap transactions don’t mean cheap storage. If we are filling up 32MB blocks then we have already won. This would be 118 transactions per second or 10 million transactions per day. The transaction cost for 10 million transactions would only be $25,000, which is extremely cheap. However, this is a payment system usage and should be encouraged, as these transactions represent the network effect and adoption of tens of millions of individuals using Bitcoin worldwide. These transactions usage of storage space is different from an individual storing a single 32MB file on a block.

Being able to send unlimited amounts of money at 1/4 of a penny doesn’t mean that storage in the OP_Return per transaction can be used to store data meaningfully in a cheap manner.

Doing some quick and dirty math, assuming no overhead costs or conservation techniques to link the data together, and we can store a terabyte in 200 bytes of data chunks using OP Return. To store a terabyte would require 5 billion transactions, which at a 1/4 of a penny per transaction would cost 12.5 million dollars. This is clearly unfeasible, even if the storage is forever.

Now if you consider 12.5 million to be cheap in storing data for 1,000 years then consider how cheap the alternatives are. If you want web storage, you use dropbox and store a terabyte of storage for $9.99 a month or Microsoft one drive for $2.50 a terabyte per user per month. If you wanted to keep it private, then you can get a terabyte Western digital hard drive for $50 and this will only get cheaper with time.

Paying $12.5 million to store a terabyte of data when you could store a terabyte of data on a terabyte hard drive on five continents for $250 a year. Ignoring the time value of money, this would still take 50,000 years to break even with blockchain storage.

Blockchains are not efficient for raw data storage. Even with a system specifically designed to partition hard drives and store data in a distributed way is much more expensive than the existing solutions. For example, Storj costs $0.015 per GB per month for storage ($15 per month for the terabyte example above) and then $0.05 per GB bandwidth ($50 to download that same data once). This is almost 6.5x more expensive than dropbox, which is stored across many locations to prevent accidental data loss.

Furthermore, the idea that the only cost associated with using Bitcoin cash transactions as storage is the transaction is also mistaken. To be a significant threat to the block size, there needs to be a system developed for creating the chained transactions for encoding and decoding these images in 200 byte chunks. It would take a significant amount of development time that would act as a barrier to the system creation. Time is a scarce commodity and time spent building an image storage system on Bitcoin cash is time not spent on a more viable project.