MIT's Complete Incomprehension of Bitcoin

The MIT Technology Review has long been a reliable source to get a quick intro to many of the technology developments and trends coming out of MIT and the greater Boston Area in particular. However, they continue to show their complete lack of understanding of Bitcoin. In an article published the 2nd of January, 2017, writing that "the recent rise of Bitcoin may be attributed to the removal of high-value bank notes in India and Venezuela, but perhaps more significantly to the steady devaluation of the Chinese yuan." The article implies that this is problematic. But why think that? In essence, Chinese and Venezuelans (as well as Brazilians and others) see Bitcoin as more reliable and useful than their local currencies, particularly in times of crisis. Is this not precisely one of the major selling points for many Bitcoin adopters, the fact that it cannot be manipulated by a central bank or government?

Based on a New York Times report, the article highlights China as a particular potential problem because of the amount of hashing power located there. This has led to "a small band of Chinese companies [that] have effectively gained control of the currency." The problem here comes from the potential of a 51% attack which would enable the attacker to unleash double-spend fraud. The efficacy of this particular threat has long been debated (personally, I see the threat as overblown because it would require an enormous investment, a high amount of co-ordination among users in such a case where a pool or a group of pools collude, and would require not a malicious actor, but a nihilist actor which would destroy the value of that which they would be in control of) but this article takes "China" as a single user. In other words, it assumes all Chinese miners to be uniform and potentially united to act against their individual self-interest, a rather sweeping and unfounded assumption.

The author does point out the issue of the transaction limit, although there are currently two proposed solutions that are gaining traction, Bitcoin Classic and Segregated Witness. The former is based upon increasing the transaction size allowing faster processing through a hard-fork, while proponents of the latter propose a soft-fork solution that will enable greater scalability to the system, one which promises to rival even the biggest transaction networks in the world today. Bitcoin is still a very new technology and is still undergoing development, both in the core code and infrastructure needed to support a growing user base, and the transaction limit has been a long-known and widely acknowledged issue with more and better solutions out there than the author either realizes or acknowledges.