The Bitcoin Foundation — a sort of non-profit industry lobby group for the online crypto-currency — has welcomed an academic paper published by researchers at Cornell University which claims Bitcoin could collapse if "selfish" owners begin colluding with each other. But the foundation did not specifically deny its claims.
In a blog post, foundation board member Gavin Andresen says:
Let me start with how fantastic it is that we’re seeing more academic interest and research in Bitcoin-the-system. In the coming months, I expect we’ll be seeing a lot more research claiming to have found ways of making various pieces of Bitcoin better. Some of it will even turn out to be both practical and correct.
He doesn't specifically knock down the Cornell paper's central claim, which is that Bitcoin "miners," who create new Bitcoins by crunching code which churns out the currency according to a set formula that prevents inflation, could collapse the system by colluding until one group of collaborators owns a majority of all Bitcoins. Andresen does express doubts about the study:
... I’m not going to write about the specific claims in the paper; lots of smart people are, or soon will be, thinking really hard about the issues raised and whether or not the researcher’s model matches reality. However, it is good to note that in my initial review, I believe the paper’s assertion of a fundamental flaw is based on some over-simplified assumptions about how the bitcoin mining market works.
What's interesting about the foundation's forthcoming response — or lack thereof — is how it will advance the debate over whether Bitcoin is a reliable non-sovereign internet currency, or merely the ultimate example of a fiat currency (that only exists because people believe in it) caught in a speculative bubble. Because if the Cornell researchers are right, and the people minting new Bitcoins can control the market for them, then Bitcoin is essentially worthless, because who would want to make transactions in a currency whose value was decided by a single entity?
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