I'm going to have to sit down and read the paper more carefully to have a solid opinion on it, but my meta-opinion is that I think it's great to see people taking scalability and blocksize seriously on an academic level. We've got some incredibly naive ideas floating around the Bitcoin space right now - like the idea that just removing the blocksize limit entirely will work out fine - and we need research into scalability solutions that considers incentives and the resulting security carefully. That kind of reasoning tends to involve a lot of math, rather than platitudes about "market forces"


Speaking of, while the paper presents a solution preserving security guarantees, a quick skim of it doesn't seem to indicate they take into account the incentives around block propagation. If you wind up with a situation well large, centralized, mining pools earn more money as a part of this high-speed propagation game, even though in theory all the work being done contributes towards 51% security, the overall result may be a serious negative due to the incentives towards centralization. Lately I've done some work (pdf) on that topic; it's a very important crypto-currency design consideration that I'd like to see other people analyzing as well.