Scalability Principle

The nature of Bitcoin stability implies an inherent economic pressure precluding linear scalability. The block size limit consensus rule establishes the arbitrary trade-off between utility threshold and system security. Yet at any block size the system remains non-scalable due to the necessity of confirmation finality. In other words, a finite set of transactions must be selected, which implies that others may be excluded, necessitating a competitive fee market for inclusion.

This raises the question of whether sufficient demand can exist to secure Bitcoin, given the requirement for risk sharing. Aggregate demand can be increased through the use of off-chain confirmation for below-threshold scenarios, settled on chain. This represents an individual security compromise (for lower-value transactions), avoiding a system security compromise (for all transactions). This cost-security compromise produces its own limit. In other words Bitcoin stability is a consequence of inherent non-scalability. This stability implies price is not unbounded but can rise with scalability improvements.