Bitcoin think tank rejects science behind ‘limited adoption problem’ paper

A team of researchers from the Bitcoin Policy Institute, a nonprofit think tank, have roundly rejected the conclusions reached in a 2022 paper claiming that Bitcoin has an intrinsic scaling problem that will lead to limited adoption in the future.

According to the Bitcoin Policy Institute’s researchers, the original paper, dubbed “Bitcoin’s Limited Adoption Problem,” is predicated on three faulty assumptions.

First, the authors of the original paper claim that payments on the Bitcoin (BTC) network require full network consensus for settlement. Second, they assert that the addition of miners to the network prolongs time to settlement by “delaying network consensus.” Third, they claim there’s an upper limit on Bitcoin payments due to the architecture of Bitcoin’s blockchain.

The Bitcoin Policy Institute researchers reject each premise in a recently published paper cheekily titled “Bitcoin works in practice, but does it work in theory?”

The institute researchers, who hail from six different prestigious universities in the United States, claim that the so-called “limited adoption problem” is theoretical and counterintuitive to the reality of how Bitcoin operates:

“Hinzen, John, and Salah argue that the design of the Bitcoin protocol results in a negative network effect. […] This is an interesting theoretical result, but rests on faulty assumptions about how bitcoin actually works.”

In rebuking the first paper’s assertions, the institute researchers argue that its authors “fundamentally misunderstand how Bitcoin achieves consensus and how the entry and exit of miners affects the timing of new transaction blocks” and that their research ignores “existing, widely-implemented scaling solutions.”

While the institute’s research paper does conclude that the work being criticized comes to a sound conclusion — namely, that “Bitcoin’s blockchain does not scale well for on-chain payments” — it also points out that these scaling issues have been known since Bitcoin’s inception and have thus been properly mitigated in the time since.

Ultimately, the institute team observes that the original paper’s authors are “tilting at windmills” because Bitcoin “scales through off-chain payments, not by increasing throughput at the base layer. Off-chain protocols afford more scalability precisely because they do not require consensus of the entire network.”

Related: Bitcoin think tank: Reject CBDCs and look to BTC and stablecoins instead

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