Block size limit controversy
Blocks are limited to 1MB in size. Miners can mine blocks upto the 1MB fixed limit. Any block larger than 1MB is invalid.
Blocksize limits were put in place for the dual purposes of discouraging economically frivolous transactions from flooding the blockchain and encouraging transactions fees to incentivize miners.
Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.—Satoshi Nakamoto 
The fixed blocksize limit cannot be modified without a hard fork.
Hard forks require adoption by virtually all of the bitcoin participants.
Gavin Andresen has recently called for all bitcoin users to adopt a hard fork which increases the blocksize to 20MB.
Arguments in favor of increasing the blocksize
- Bigger blocks (more transactions per second)
- Sidechains and Lightning do not exist.
Arguments in opposition to increasing the blocksize
- A hard fork requires waiting for sufficient consensus.
- Risk of catastrophic consensus failure[clarification needed]
- Orphan rate amplification, more reorgs and double-spends due to slower propagation speeds.
- European/American pools at more of a disadvantage compared to the Chinese pools[why?]
- No amount of max block size would support all the world's future transactions on the main blockchain (various types of off-chain transactions are the only long-term solution)
Damage to decentalization
- Bitcoin is only useful if it is decentralized because centralization requires trust. Bitcoins value proposition is trustlessness.
- The larger the hash-rate a single miner controls, the more centralized Bitcoin becomes and the more trust using Bitcoin requires.
- Running your own full node while mining rather than giving another entity the right to your hash-power decreases the hash-rate of large miners. Those who control hash-power are able to control their own hash power if and only if they run a full node.
- Less individuals who control hash-power will run full nodes if running one becomes more expensive.
- Larger blocks leads to more expensive full nodes.
- Therefore, larger blocks lead to less hashers running full nodes, which leads to centralized entities having more power, which makes Bitcoin require more trust, which weakens Bitcoins value proposition.
|Entity||Supports Larger Blocks||Supports Hard Fork|