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Thanks for offering an alternate perspective on this. Could you clarify how they make themselves a middleman in Bitcoin transactions?

by chejazi 11y ago

toomim 11y ago
Blockstream Liquid makes them a middleman: https://blockstream.com/2015/10/12/introducing-liquid/ https://blockstream.com/2015/10/12/introducing-liquid/ 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 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.
- toomim 11y ago
  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.
- kanzure 11y ago
  > Blockstream Liquid makes them a middleman 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/ 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.
  - toomim 11y ago
    > jtimon? sipa? dude you know these people, wtf. 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 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?
jgalt212 11y ago
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. https://en.bitcoin.it/wiki/Scalability https://en.bitcoin.it/wiki/Scalability
pmorici 11y ago
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.

Thanks for offering an alternate perspective on this. Could you clarify how they make themselves a middleman in Bitcoin transactions?

by chejazi 11y ago

Thanks for offering an alternate perspective on this. Could you clarify how they make themselves a middleman in Bitcoin transactions?

toomim 11y ago

Blockstream Liquid makes them a middleman: https://blockstream.com/2015/10/12/introducing-liquid/ https://blockstream.com/2015/10/12/introducing-liquid/ 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 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.

toomim 11y ago
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.
kanzure 11y ago
> Blockstream Liquid makes them a middleman 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/ 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.
- toomim 11y ago
  > jtimon? sipa? dude you know these people, wtf. 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 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?

jgalt212 11y ago

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. https://en.bitcoin.it/wiki/Scalability https://en.bitcoin.it/wiki/Scalability

pmorici 11y ago

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.