Bitcoin and the blockchain are interesting ideas that escaped the laboratory without proper engineering—and it shows.
So what went wrong? What happened to a system designed as an alternative to, e.g.., credit cards where the “cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions”? Instead, today the Bitcoin network is overloaded, leading to high transaction costs. The answer is a lack of engineering.
For any computer-based financial system, one crucial parameter is the transaction rate. For a system like Bitcoin, another goal had to be avoiding concentrations of power. And of course, there’s transaction privacy.
In all of these, Bitcoin has failed. The failures weren’t inevitable; there are solutions to these problems in the acdemic literature. But Bitcoin was deployed by enthusiasts who in essence let experimental code escape from a lab to the world, without thinking about the engineering issues—and now they’re stuck with it.
Eulogy made by Steven M. Bellovin