If Not a Conspiracy, Why Is Blockstream Crippling Bitcoin?

"Truth is stranger than fiction," a conspirophile told me. The "truth," in this case, was that the CIA, or the Bildeberg Group, or both, are behind a conspiracy to destroy Bitcoin, using Blockstream as a front for their evil plans.

Then shouldn't the truth be something different than the same boring story told over and over in countless conspiracy theories, as well as movies and books and other fiction? I've heard of conspiracy theories involving the CIA and the Bildeberg Group since long before Bitcoin even existed. So it seems to me that the CIA or Bildeberg option is the most mundane, uninventive possibility, far from the strangest. The least you could do is come up with new antagonists for your story.

The reality is that the truth is not obligated to be interesting or fantastical or anything. It just is what it is, and we discover it or we don't.

Anyway, having spent some time describing what the Blockstream Conspiracy isn't, I thought I would balance that with what I guess the Blockstream "conspiracy" to be.

First of all, I simply don't believe the rationality behind the idea that organizations like the CIA, the Bildeberg Group, or anyone else, put lots of energy into simply maintaining an economic homeostasis for the world as it is. I believe these groups, and others, are motivated by things like capitalism and nationalism, and many other ideologies, all of which have generally one thing in common. They want to win. They want to find new ways to be better than everyone else. To be and have more.

Which means that I am absolutely sure that in bland meeting rooms with fluorescent lighting in some CIA office somewhere, there have been discussions about what to do with Bitcoin. And the questions weren't just, "Is this a threat?" but also, "how do we use this to increase US hegemony and further our interests." The questions weren't, "how do we do everything we can to stop this from happening so that nothing changes." In the end, I bet the CIA routinely uses Bitcoin to help facilitate whatever modern day Iran/Contra style operations they get up to.

Similarly, I don't think AXA Ventures, the supposed tool of the Bildeberg group, invested in Blockstream so that after spending tens or hundreds of millions of dollars they would have nothing more than they have now. I think AXA Ventures invested for the same reason anyone invests in anything. To reap some kind of reward that would launch them and their shareholders into the stratosphere.

In other words, there is nothing about the motivations of anyone closely watching Bitcoin, or hoping to invest in it, that inspires a need for any particular examination. Everyone is acting in self interest, capitalizing on new opportunities, or not, like they do with every new paradigm that comes along in the world. Blockstream is as free to develop and progress as any other IT company. Their motivations are to succeed and reap rewards, like every company, and it's that context in which I look at them.

At the heart of the whole concept of how Blockstream and the "Core" developers crippled Bitcoin is by setting a 1 megabyte cap on blocks. This is known as the block size debate, and the initial rumblings of it started as far back as 2011. I'm not sure when exactly second layer solutions as a possible solution entered the conversation, but somewhere along the way someone came up with the idea. It probably wasn't lost on them when they did that side chains could be immensely profitable, taking a cut of the earnings that are otherwise exclusive to miners. But, nonetheless, in the earliest days the discussion might have been more technical than economic.

A critical point is that the question of, "should there be some kind of block size limit?" is a perfectly reasonable question. Partly because almost all questions are reasonable. There's little harm in asking things, and in considering options and looking at possibilities.

I personally believe that the available technology in 2021 makes it obvious that block sizes of 8 megabytes, 32, or larger, are easily manageable. But even still, I don't know exactly the lines are. There could be unforeseen issues, maybe Moore's Law won't hold how I generally assume it will. As much as I am on the side of Bitcoin Cash in the block size debate, it would be pure hubris to assume there is no way I could ever be wrong about it. It would be equally myopic to look back to 2011 and say everyone should have known everything that is known now.

I believe the process of human thinking in this matter was somewhat organic. It starts out with, "maybe the block size could be a problem." Which then gets answered with, "if it is a problem, it might be solved with a second layer solution."

Then along the way, someone realizes, "this second layer, if it took off, could be very profitable." Then, as investors hear about this, and it seems like there's money to be had, people start dropping conditionals like, "if" and "could," and start saying, "the second layer is needed."

At this step, the people saying, "the second layer is needed," may only half believe it. But it's better to say it and get the investment than to present investors with uncertainty and get no investment. I've actually played the investment game before. I ran a small start up around the year 2000 during a dot com boom in Tokyo, and raised around a million US dollars worth of investment for my company. Small potatoes compared to the roughly 300 million US dollars that Blockstream has received over the years. Still, I have some idea of what it's like to have investors.

Relevant to this discussion is that what I experienced is that investors don't just pour money on your head and say, "do your thing and let us know how it goes." They check up on you, a lot. And usually investments come with fail safes, incentives, and other precautions to make sure you don't just take the money and fly away to somewhere with nice beaches no extradition treaties. You don't just get a million bucks in your personal bank account one day. Usually you get shares that don't vest until certain milestones are met, but there can be other things too, like maybe your position as CEO of the company is contingent on results, or your voting rights on the board, or salary, or whatever.

What I'm getting at is that there is high pressure to succeed. You're expected to "10X" the money given you. In other words, give back ten times what the investor gave to you. Depending on what's going on in your life, you might feel like your home, your family's security, your sense of validity is at stake. On top of this, you start hiring people, and they have lives and families that you start to feel responsible for.

The whole concept of, "second layers are needed," goes from the marketable description of a possible business opportunity in order to win over investment, and becomes a creed on which reputations, jobs, and lives are at stake. What felt like something you could maybe adjust and pivot as needed now feels like something you've said out loud so much that you can't turn back on it without everyone coming after you with pitchforks and torches. Even if one day you realized that the second layer solution thing isn't going to go as you expected, what are you going to do? Fire the whole company and tell the investors they just wasted their money on you? "Sorry everyone, my bad, let's just all walk away, okay?"

And also, there's the dreams, the hopes. What if it is really true that second layers are the solution to making Bitcoin work better? I personally don't believe it, but if I was working at Blockstream, I would at least consider the possibility. If nothing else, maybe it's not the only way for Bitcoin to go forward, but it is one possible way. And, if by some crazy set of circumstances, it did turn out that second layers worked out, then the potential for being the company at the center of a global currency... it's almost too much upside for a human to conceive of. Previous global tech companies and all their riches, like Facebook or Google, would pale in comparison.

So there's dizzying hopes and dreams on one side, and pressure and damnation on the other. And this brings me to a quote I've mentioned before, because I think it really speaks to the heart of the matter. Some guy named Upton Sinclair once said, "It is difficult to get a man to understand something when his salary depends upon his not understanding it." I believe this to be very true and have experienced it directly in my life. It can be adjusted slightly to say, "people will believe what they need to believe to justify their income."

I have no doubt that Core developers, Blockstream, and whoever else is invested in Bitcoin having small blocks and second layers, believes 100% that what they're doing is right and true.

Sometimes I cynically describe the situation as being that Blockstream has no reason to exist if not for trying to profit off their second layer services. This can make it sound like there was a deliberate attempt to suppress block size in order to justify the creation of their business. But, that puts the cart before the horse. I think the end result of Blockstream needing to manufacture a need for second layers to support their goals is true. But the more nuanced history is that everyone involved came to sincerely believe what they're doing makes sense because their position evolved naturally over years. The seed was a genuine question, "maybe we need second layers," and was forged by the pressures of investment and business obligations into the declaration, "we need second layers!"

And if you try and tell them that they only believe that because their income depends on it, that somewhere along the way, the cart got put before the horse, they will turn that logic back on you. Maybe it's you who believes in big blocks or no second layers because that's where you've bet your money. Which, if we're being objectively fair, could be equally true.

The part that conspirophiles can't accept is that everyone on both sides of the whole block size debate believes in what they're saying. Sometimes it might seem to one side like the other side is engaging in underhanded tactics to manipulate the truth, to discredit the other side, to troll, and to spread FUD. Some tactics are inherently deceptive in nature, and if someone is doing something deceptive, that seems like evidence that your opponent is fundamentally a deceptive and underhanded person.

However, every war is fought by people believing they're on the good side, but willing to do whatever it takes to win. The degree to which any side uses underhanded tactics is not a function of how noble the perpetrator thinks they are, it's a function of how evil they think their opponent is. The more you think your opponent is an existential threat, the more you think you're justified in showing them less mercy.

Small blockers are as genuinely convinced of their position as big blockers, and both sides feel that the existence of the other is mutually exclusive to their own existence. Precisely because everyone is so convinced that what they think is objectively true, they can't conceive that the other side is equally sincere in their beliefs, meaning everyone is prone to seeing the other as being criminal in their intent.

Both sides might be willing to use all sorts of tactics, from smear campaigns up to more honest campaigns of out competing the other with services and utility. In the end, though, I think the only way anyone on any side of this debate is going to be forced out of their position is when somebody's path crashes into a wall of reality. Somebody's blockchain spirals into chaos because of some technical failure, or some malicious attack, or the market for one simply dwindles away to into entropy.

Still, even if Liquid, or Lightning, or Bitcoin, or Bitcoin Cash, or anyone else crashes and burns, it's unlikely that anyone on the "losing" side will say, "oh wow, I was so wrong all along!" That generally only happens in movies written by writers without much life experience. If Bitcoin and Lightning and whatever crash and burn, they'll say it was because all its detractors sabotaged the system so that it didn't get a fair chance. Bitcoin Cash supporters, and any supporters of any failed crypto, will do the same.

And that is what I think the real Blockstream "conspiracy" is. It's humans arriving at positions because of circumstances, buffeted by promises of success and fear of failure.

The funny thing about writing something like this is that out there, somewhere, are people who actually know what happened. They were there forming Blockstream, and at pitch meetings with AXA Ventures, and whatever else. Should they happen to read this, they might have a laugh at how wrong everything I've said here is.

But then again, if I'm right that they were essentially seduced by the potential profitability of their own proposals, would they even know it? Am I blinded by my own lenses on the world? Who knows. No human sees the world as objectively as we think we do.

The only thing I know is that the truth, whatever it is, is more nuanced and human than the kind of conspiracy theory that would be indistinguishable from a forgettable episode of the X-Files.