Hijacking Bitcoin by Roger Ver

Author:Roger Ver [Ver, Roger]
Language: eng
Format: epub
Published: 2024-01-23T14:35:24+00:00

14

Centralizing Control

The centralization of control over Bitcoin’s software did not happen overnight. It took a few years, and during that time, dissenting views were common. Criticisms of Bitcoin Core and Blockstream were everywhere, especially after Gavin Andresen stepped down as the Lead Maintainer of Core. In hindsight, while it seems clear that Bitcoin’s development was compromised, the process was unclear as it was happening. Outright accusations of development capture were less common, because most of the important actors in the industry were desperately trying to keep the network together. Also, since Blockstream’s business model was not revealed until a few years after its creation, the glaring conflicts of interest could only be speculated about. Though, the curious absence of a clear business model was noticed immediately in a Wall Street Journal article about the company’s investors in 2014:

Blockstream has no clear roadmap on how it will turn an open-source software engineering project into a corporate money-maker. Instead, investors took a leap of faith, mostly based on the reputations of the company’s co-founders… [T]he indeterminate nature of Blockstream’s business model made it a complicated investment for many venture capitalists, who typically must justify returns to their investors.

The manager of one fund said he turned down the pitch because he couldn’t invest in such a vague plan. Mr. Hoffman said he invested via his personal not-for-profit foundation… because he felt strongly that Blockstream’s first funding round “had to be invested in the development of the bitcoin ecosystem and not have, as its primary focus, economic returns…”

[S]ome commentators have worried that a private company with such intellectual clout could have undue influence in a bitcoin network that’s supposed to be community-owned and decentralized. [Co-founder Austin Hill] said that’s why it was paramount that Blockstream was set up in a transparent way, as “a public utility, and not a way to hijack bitcoin.”1

Regardless of Austin Hill’s personal intent, Blockstream ultimately did turn into a way to hijack Bitcoin. Hindsight provides us with 20/20 vision, but when reconstructing Bitcoin’s history, it’s important to be aware of the lack of clarity at the time. It took years before the Liquid Network was openly promoted as an alternative to the Bitcoin blockchain—a smart strategy by Blockstream, since if they immediately advertised their proprietary network as a scaling solution, they would have been met with laughter and overwhelming resistance.

Instead, Bitcoin Core and Blockstream’s centralization of power was somewhat slow and methodical. They took advantage of small opportunities to give themselves more control over the network. They took advantage of Van der Laan’s weak leadership and desire to avoid controversy. Perhaps most importantly, they leveraged the idea of “developer consensus” to effectively give themselves veto power over the software—even if their veto radically changed the structure and economics of the entire system. Jeff Garzik warned about this in a public email about their refusal to increase the blocksize limit, saying:

This is an extreme moral hazard: A few Bitcoin Core committers can veto [an] increase and thereby reshape bitcoin economics, price some businesses out of the system.

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