How relevant is the Chinese Great Firewall in the blocksize debate? Mike Hearn said the following:


  The reason the true limit seems to be 700 kilobytes instead of the theoretical 1000 is that sometimes miners produce blocks smaller than allowed and even empty blocks, despite that there are lots of transactions waiting to confirm — this seems to be most frequently caused by interference from the Chinese “Great Firewall” censorship system.


Also, he mentioned on another occasion that the bandwidth through the GFW, is only about 50 KB/s, sometimes less. In the best scenario you can get 3 MB/s, according to Scaling Bitcoin Conference.

Mike put lots of accusations towards the Chinese regarding blockchain development, but how much of that is true and if there's some solution, what will be the solution?
Yes, data has shown, that GFW has effects on packet propagation, but not much. The major cause of delay is distance. As you can see here, the median propagation time is comparable for various locations.Complete details can be seen here.

Interestingly, this issue highlights that more than the effect of GFW, it is the effect of large blocks propagation delay &amp; rather serves as a case for even smaller blocks, which Mike was against.

Possible solutions:


O(1) block propagation : "If memory pools were perfectly synchronized and all miners had exactly the same policy for choosing which transactions to include in their blocks and in what order to include them, then miners could just announce new blocks as the fixed 80-byte block header and the coinbase transaction; there would be no need to include any transaction data at all, it could be reconstructed from their peers' memory pools."
Blocktorrent : "a leech(node) will begin to upload chunks of data as soon as it gets them and confirms both PoW and hash/data integrity instead of waiting for a fully copy with full verification."
A miner backbone network : "a hub-and-spoke network, which consists of servers set up in eight well-connected Internet traffic hubs: New York, Seattle, Amsterdam, Beijing, Tokyo, Singapore, Hong Kong and Novosibirsk (located in central Russia). Additionally, the relay network uses a fairly basic compression algorithm. Any Bitcoin node can connect to the nearest hub on Corallo's relay network, and send and receive transactions and blocks to and from other connected nodes."
Cache transaction validation : memoization of transaction validation
Surprisingly enough, blocks smaller than 1 mb! 


A duplex payment channel abstraction 
Lightning Network 



on top of bitcoin would enable off-chain transactions &amp; be like the visa protocol over the fiat layer.


Stratum Mining : The miner in china delegates the block header creation to a server outside china. Probably, the best short-term solution.