Going back to your original post:
We note that block propagation times are the primary obstacle for scalability.
The obstacle to scalability is keeping Bitcoin decentralized while scaling up; we know that Bitcoin can scale if we sacrifice decentralization - Visa and Mastercard are doing just fine. Ultimately you're proposing something that solves one problem - the high granularity of confirmations and the long wait associated with them - at the expense of scalability
with decentralization. So don't claim you've done anything other than presented an interesting academic analysis of a specific trade-off possible in the system.
Peter,
I keep trying to agree with you.
One last try before I give up:
Surely you must agree that if there were no block propagation delays, there would be no centralization associated with scaling up. Blocks go instantly to everyone, and there are no problems with miners getting more than their share of the blocks.
I guess the difference in our perspectives is that I don't think these are optional tradeoffs. If at some point bitcoin becomes mainstream, there will be an increased pressure to allow more transactions through (or alternatively, fees will soar higher than the money transmitters Bitcoin is trying to replace). You then run into several problems. One is a security problem against attackers. The other is a pull towards centralization. All I'm saying is that we claim to solve the first problem. The second clearly remains.