October 13, 2016
Securities and Exchange Commission:
As a retired systems analyst and programmer with a degree in Philosophy concentrating in logic and computer science, I would suggest that the Commission delay its approval of the rule related to File Number
1. Bitcoin is not a commodity. Bitcoin is a system. As a result you cannot "hold" bitcoins. You might have a digital copy of what you believe is a bitcoin but if the public ledger (blockchain) disappears, the bitcoins you hold become worthless. No one has yet determined if the blockchain is secure. Also there is nothing in place to guarantee the blockchain continues to exists. While there are currently incentives to maintain the existence of the blockchain, the incentives might diminish or disappear.
2. A quantum attack while not currently possible, is, almost by definition, guaranteed success. A quantum computer can try all key combinations at the same time.
3. Bitcoin is not well regulated or understood. Several critical facets are not common knowledge. The base computer code used in bitcoin processing is currently controlled by a small group of people who are not regulated in any fashion comparable to normal fiduciary responsibility. These are technicians with little understanding of economics or law. The entire system currently relies on their goodwill.
4. A further problem with the consensus facet of bitcoin is a vulnerability to attacks by botnets. Botnets are collections of computers under the control of malware (virus, etc.). Not long ago a botnet was discovered by law enforcement connecting over two million computers. A botnet could be designed to infiltrate the bitcoin miners and become its "consensus". This would leave the bitcoin system at the mercy of the botnet controller.
5. A further unknown is what happens when the last bitcoin is mined sometime next century. At that point the incentive system changes entirely. While this might seem like far into the future, that doesn't relieve the Commission of responsibility for considering it. After "mining" is complete, the bitcoin system relies solely on processing fees for incentive. It is likely that the financial incentives for buying bitcoin may disappear by then. Fee structures for financial transactions may have already switched to private blockchain technology controlled by banks who may be more efficient than miner collectives.
6. Bitcoin founders like Mike Hearn have written extensively about fatal flaws in current bitcoin technology.
7. It should be a warning that the original designer of bitcoin has not submitted any defense of the rule change. Surely he has a stake in this proceeding.
While these reasons may simply be viewed as "risk", I challenge the Commission to find one person who understands bitcoin completely.
Thank you.Dana K. Barish