They also work on the lightning network, which creates middlemen.
In general, all Blockstream's products are solutions to the problems of (1) bitcoin being hard to change/fork, and (2) the block size being small. Blockstream's products are thus more relevant and useful if bitcoin is difficult to improve, and has limited capacity.
This is because all Blockstream's products are built on Sidechains: https://blockstream.com/sidechains.pdf Rather than change bitcoin itself, a sidechain lets you create an alternative set of rules for bitcoin, that re-uses the actual bitcoins from the main chain, so that users can put their bitcoins on either set of rules. Sidechains let users move coins between chains with different rulesets. Thus, Sidechains are useful only if it is difficult to add desired features to Bitcoin itself. All Blockstream products (like Liquid above) are implemented as Sidechains.
Thus, Blockstream's products will have no purpose unless Bitcoin is limited, and difficult to change, creating a need for a Sidechain.
Blockstream employees unanimously oppose every proposed hard fork to bitcoin.
At last October's Bitcoin Dev Workshop in San Francisco (ironically run by the Bitcoin Foundation), Blockstream CTO and Bitcoin Core Dev Greg Maxwell, who invented most of the Sidechains tech, said on stage (video recording is online somewhere) he was bummed that so few people use Sidechains, and that his biggest surprise was how much work it takes to get applications in the ecosystem (like wallets, blockchain.info, etc.) to support a Sidechain. He needs people to have a good reason to switch to a Sidechain. If Bitcoin keeps improving, there will be no good reason.
Blockstream employees unanimously oppose every proposed hard fork to bitcoin. They are making it hard to improve bitcoin.
That said, Sidechains is VERY COOL technology, and the Blockstream developers make VERY COOL new features that could be added to Bitcoin. Unfortunately, by building a company on Sidechains and looking for profitable applications of it, they have become attached to a single technology that's only useful if Bitcoin itself slows its pace of improvement.
He asked about Bitcoin transaction middlemanship, not alternative ledger consensus systems. It should not be surprising that alternative ledgers exist that provide some features that Bitcoin doesn't.
> They also work on the lightning network, which creates middlemen.
LN transactions are just zero-conf Bitcoin transactions with some extra opcodes and defined behavior around the semantics of when certain transactions can be verified. see http://lightning.network/
> In general, all Blockstream's products are solutions to the problems of (1) bitcoin being hard to change/fork, and (2) the block size being small. Blockstream's products are thus more relevant and useful if bitcoin is difficult to improve, and has limited capacity.
Bitcoin is more useful if it's difficult to be "improved", period. Auto-update mechanisms take away voluntary participation and this is too dangerous for a financial system that is attempting to be decentralized (who's gonna "authorize" the updates, eh?). So yes maybe Blockstream has an incentive to assist with maintaining the current Bitcoin decentralization mechanisms... so what?
> Blockstream employees unanimously oppose every proposed hard fork to bitcoin.
jtimon? sipa? dude you know these people, wtf.
> He needs people to have a good reason to switch to a Sidechain. If Bitcoin keeps improving, there will be no good reason.
No, he doesn't need a good reason for people to switch. He needs a reason for people to use sidechains, thankfully he and everyone has many. This isn't about switching -_-.
> If Bitcoin keeps improving, there will be no good reason.
That's like saying "if positive changes are made to bitcoin.git, there's no reason to use sidechains"... That's not a reasonable argument.
> Blockstream employees unanimously oppose every proposed hard fork to bitcoin. They are making it hard to improve bitcoin.
They are opposed to hard-forks for many reasons, but perhaps most important here is because they aren't in control of Bitcoin network hard-forks. And they are unwilling to campaign to add those particular hard-forks into Bitcoin Core. It's wrong to claim that Blockstream is making it hard to improve Bitcoin when it's naturally hard to do so by design in the first place.
First, you're confusing me for my brother. It's a common mistake. He is Jonathan Toomim, and I'm Michael. Together, we are... the Toomim Bros!!! https://toom.im
Now, you've written seven different statements here, but they aren't connected to a main point. Could you put your thoughts together? Are you trying to address whether Blockstream are middlemen?
> First, you're confusing me for my brother. It's a common mistake.
I feel sort of cheated because you two use very similar HN usernames. You are not as bad as the Rayhawk brothers, though, which I am convinced are all the same person.
Bitcoin processes transactions via the mining process. Miners gather up all the transactions that Bitcoin users broadcast and package them into blocks which they do their mining work on. Every ~10 minutes a block of transactions is mined.
There is currently a 1 MB limit on the size of a block. A typical individual Bitcoin transaction is around 500 bytes in size. So if a block is produced every 10 minutes and the size of a block is limited to 1 MB that limits the transaction throughput of the Bitcoin network. When the rate of transactions being broadcast by users outstrips the available space in the blocks being mined then there is a backlog and not all the transactions will be mined in a timely fashion.
Which transactions get in a block are determined by the miners so the net effect of there not being enough room is that miners pick the transactions with the highest fees to include first. Over time as the Bitcoin network gets very large this will artificially drive up transaction fees to very high levels. The fact that the block size limit is 1MB was a quick hack in the early days to prevent spam and was always meant to be lifted once Bitcoin gained popularity.
Back to Blockstream. Blockstream is developing a technology generally referred to as "sidechains". It would allow users to perform transactions on private blockchains that are pegged to the Bitcoin blockchain. A sidechain can be thought of as a alt-coin backed by Bitcoin (similar to how paper money might be backed by gold, or the full faith and credit of a powerful government). Transactions on a sidechain wouldn't need to be processed by Bitcoin proper so the sidechain wouldn't be limited by any block size limit in Bitcoin.
There is nothing inherently wrong with sidechains and the idea is even kind of cool. The problem is that Blockstream and those acting on it's behalf oppose any increase in blocksize. This will have the net effect of driving up Bitcoin transaction costs to artificially high levels making it unattractive to use for every day transactions and would relegate Bitcoin to a settlement layer where high value transactions between major financial players take place and nothing else. Blockstream is hoping this would drive people who still wanted to use Bitcoin to sidechains where there wouldn't be a back log. These sidechains could in turn be controlled by a company or bank for their specific purpose. ie: you can transact on the Visa sidechain powered by Blockstream.
Raising the block size doesn't preclude Blockstream from implementing sidechains but keeping the block size small as Bitcoin grows very large will make Blockstream's sidechain scheme absolutely necessary. If the block size were allowed to grow it isn't clear if the value proposition of sidechains would be as strong.
> The problem is that Blockstream and those acting on it's behalf oppose any increase in blocksize.
.... because Bitcoin Core developers find that most block size increase proposals seem to be incompatible with Bitcoin resource requirement minimization. Absent the existence of Blockstream I suspect the currently-non-Blockstream developers would still prefer to focus on their own understanding of Bitcoin, rather than popular sentiment on Bitcoin block size limits. Anyway, Bitcoin Core developers have done just that and have organized a FAQ regarding some fascinating proposals and implementations they are working on for how to increase capacity: https://bitcoin.org/en/bitcoin-core/capacity-increases-faq
> and would relegate Bitcoin to a settlement layer
Ehhh settlement layer is sorta unfair. Existing "settlement layers" are things like Target2 RTGS, which turns out to be a typical centralized payment processor under the hood. oops.
> where high value transactions between major financial players take place and nothing else.
Transaction fees offer prioritization for inclusion, true. I don't think it's reasonable to blame Blockstream for an absence of a solution to this problem :-).
> Raising the block size doesn't preclude Blockstream from implementing sidechains but keeping the block size small as Bitcoin grows very large will make Blockstream's sidechain scheme absolutely necessary.
Nah any form of sidechain would work, not just Blockstream's implementations. Also, from an experimentation standpoint, sidechains are necessary regardless the value of the block size limit.
> If the block size were allowed to grow it isn't clear if the value proposition of sidechains would be as strong.
It would be just as strong, read the sidechains whitepaper: https://blockstream.com/sidechains.pdf (basically they are valuable as an experimentation tool, even if they are not being used by businesses; indeed, Blockstream could experiment using sidechains prior to gathering consensus for deployment of features on the Bitcoin blockchain, which is itself quite valuable to Blockstream).
"most block size increase proposals seem to be incompatible with Bitcoin resource requirement minimization."
What are you talking about, there are no such requirements and current requirements are nowhere close to being beyond the reach of a typical user.
"Transaction fees offer prioritization for inclusion, true. I don't think it's reasonable to blame Blockstream for an absence of a solution to this problem"
The alternative to a hard limit on block size is to have no limit and let miners set their own soft limits for fees and block size so they compete on efficiency. Artificially restricting the supply of transaction space is not something that was in the original vision for Bitcoin. Satoshi himself said a number of times that the 1MB block limit was a _temporary_ measure that should be lifted in the future.
> What are you talking about, there are no such requirements
"Bitcoin resource requirement minimization" does not mean "this is an existing requirement in the protocol". Resource minimization, indeed even resource maximization, is not expressible in the Bitcoin consensus protocol as a rule. Instead I was talking about the idea that Bitcoin resource requirements can be minimized. By minimizing the resource requirements, you make Bitcoin more cheap and easily accessible, and you can accrue benefits of tech development to process and handle the existing Bitcoin system on ever-cheapening computer hardware.
> and current requirements are nowhere close to being beyond the reach of a typical user
I guess that depends on what you consider a typical user. A lot of those "typical users" are complaining about the mere possibility of $20 Bitcoin transaction fees in the future, so it sounds like a $20/year node cost might not be compatible with the "typical Bitcoin user". In general to encourage adoption we should not cut off users from their nodes participating in the Bitcoin network.
> The alternative to a hard limit on block size is to have no limit
You mean the "transaction fee market without a block size as long as selfish mining doesn't exist" paper? That particular paper's assumptions have been dispute for a while now, a bunch of his points were refuted... indeed he even agreed to update his paper, although he hasn't done this yet, and instead backtracked, and meanwhile hasn't provided new arguments against the refutations. See http://pastebin.com/jFgkk8M3
> Satoshi himself said a number of times that the 1MB block limit was a _temporary_ measure that should be lifted in the future.
Argument from authority. Also, I think the Bitcoin developers have learned more about Bitcoin since Satoshi's disappearance, which can be used to inform ourselves and evaluate whether we think Satoshi was wrong about the effects of lifting the block size limit upwards.
At the current 1MB block size, Bitcoin can only process seven transactions per second. If everyone were directly connected to the the BlockChain ledger, it could not become a global real-time payment processing system. However, if there were middlemen involved to take the transaction processing load off of the Blockchain...
As points of reference, Visa processes 2,000 transactions per second and PayPal does over 100. Those are averages, not max capacity numbers.
