Skip to Content
Blockchain

How to fix one of Bitcoin’s biggest problems

MIT professor Silvio Micali says his new system allows blockchains to operate efficiently at a large scale.
April 23, 2018

Bitcoin and similar blockchain systems have a problem, and renowned MIT cryptographer Silvio Micali says he has a solution. 

To make blockchains scale, says Micali, the networks will need to adopt a new approach to establishing agreement that the information in the ledger is true. Agreements in current blockchains like Bitcoin and Ethereum require a resource-intensive process called proof of work, by which computers on the network, called “miners,” prove that they are not malicious actors trying to corrupt the ledger (see “What is a blockchain?”). Miners must spend lots of energy to win a chance to add new entries, or blocks, to the chain, earning cryptocurrency as a reward. Though an effective way for a network to come to agreement that the information in the ledger is valid, this consumes large amounts of energy and is relatively slow.

Micali—who won the Turing Award in 2012 for his pioneering work in cryptography, including a number of techniques that are used to secure blockchain systems—shared his vision for a new system, called Algorand, on stage at MIT Technology Review’s Business of Blockchain conference. The system uses a novel approach called proof of stake, in which responsibility for validating new transactions is allocated to users according to how much money they have in the system. 

Algorand doesn’t use miners, and the computation required to secure the ledger is “trivial,” which makes the system very fast, says Micali. It uses complicated math (sort of like “magic,” he says) to first select a random user to propose, digitally sign, and add new blocks to the chain. The algorithm then randomly selects 1,000 more users, who check that block and sign it. In each phase, the public keys—the strings of characters that represent these users on the blockchain—are revealed to the rest of the network. The probability that a user will be selected is proportional to the amount of money that user has in the system. 

Micali’s approach can also be used to propose and vote on protocol changes, he says, which means that this system will never “fork,” or split, the way the Bitcoin network did recently when the community could not agree on whether to change the protocol to increase its transaction volume. So-called “flexible self-governance” is very important, says Micali, because the community should be able to vote on things like changes to monetary policy. “This splitting of the community is not something that can scale,” he says.

Proof-of-stake systems are still nascent in their development and could create potential unintended consequences, such as centralization or inequality.

Deep Dive

Blockchain

Ethereum proof of stake concept
Ethereum proof of stake concept

Why Ethereum is switching to proof of stake and how it will work

One of the world’s biggest blockchains is testing a new way to approve transactions. The move has been many years in the making but doesn’t come without risks.

crypto city planner concept
crypto city planner concept

Crypto millionaires are pouring money into Central America to build their own cities

A new class of crypto investors have bold plans to rebuild society from scratch. But their pet projects risk repeating the region’s long history of corporate colonialism.

crypto pop up ads concept
crypto pop up ads concept

It’s okay to opt out of the crypto revolution

The crypto industry is investing heavily in getting more people to buy in. That doesn't mean you have to.

crypto winter concept
crypto winter concept

Crypto is weathering a bitter storm. Some still hold on for dear life.

When a cryptocurrency’s value is theoretical, what happens if people quit believing?

Stay connected

Illustration by Rose WongIllustration by Rose Wong

Get the latest updates from
MIT Technology Review

Discover special offers, top stories, upcoming events, and more.

Thank you for submitting your email!

Explore more newsletters

It looks like something went wrong.

We’re having trouble saving your preferences. Try refreshing this page and updating them one more time. If you continue to get this message, reach out to us at customer-service@technologyreview.com with a list of newsletters you’d like to receive.