THE WEEK AHEAD
Bitcoin Core May Temporarily Decrease the Block Size Limit
The Bitcoin scalability debate used to be about whether to increase the block size limit or wait for second-layer technologies to be developed and resulted in two chains: Bitcoin and Bitcoin Cash. Bitcoin is pursuing scalability via the Lightning Network, while Bitcoin Cash increased the block size limit and is pursuing on-chain scaling. Now there is a new debate, initiated by Bitcoin Core developer Luke Dashjr, about decreasing the block size limit.
The reasoning is very similar to the argument about bigger blocks being problematic. The cost of running a full validating node increases with the blockchain size. The bigger the blockchain, the longer the initial full node sync duration and the costs associated with maintaining it. Blockchain networks increase robustness and decentralization with more full nodes, so the interest is in having as many participants in the network running their own full node as possible.
On the other hand, smaller blocks decrease the number of transactions the network can process and as a result increase the transaction fees, which makes certain use cases not viable. Users might start using custodial services for payments instead of running their own full nodes as a result. Advocates of a block size limit decrease believe that Lightning Network will mitigate the downsides of lower on-chain transaction throughput, as higher fees would incentivize users to start using Lightning Network.
In any case, even if this change slowed the growth rate of the blockchain, it would not impact the already existing size, so the whole argument that this change would incentivize a larger number of full nodes is questionable. The change would without a doubt be contentious, which could result in an even larger split in the community.