How Does the Block Size Limit Create Scarcity for Block Space?

The block size limit, a cap on the amount of data (in bytes or weight) that can be included in a single block, is the mechanism that creates scarcity for block space. Since blocks are produced at a relatively fixed rate (e.g. every 10 minutes in Bitcoin), the limit ensures that the total transaction throughput of the network is capped.

When transaction demand exceeds this fixed supply of block space, users must compete by offering higher fees to get their transactions included. This competition transforms block space into a scarce economic resource.