One of the hallmarks of the Crypto Crime Cartel that has infiltrated Bitcoin is that profit isn’t the sole motivation: every one of these enterprises has a vested interest in seeing true Bitcoin—as specified in the Satoshi White Paper—fail, and it is that failure on which they seek to profit.
There is perhaps no better illustration of this than Blockstream, a company which perpetuates the problems faced by Bitcoin knockoffs and then offers its own solution to those problems, while attempting to destroy and censor the better solutions that already exist (and have existed since the release of the White Paper).
Blockstream a nexus point for the crypto crime cartel
Blockstream is a blockchain technology company founded by Adam Back. Its activities should be of great interest to the wider digital asset community: they have raised over $80,000,000 since going public in 2014. But for a company who promises to form the foundations for the financial infrastructure of the future, that money has returned very little other than the undermining of digital asset adoption and ensuring the personal enrichment of its founders.
If you understand what Blockstream actually is—and who is running it—then this isn’t a surprise. Straight from the Roger Ver playbook, Blockstream is a fundamentally ideological company masquerading as a non-partisan blockchain company.
The stated purpose of Blockstream, in Back’s words, is to “sell sidechains to enterprises, charging a fixed monthly fee, taking the transaction fees and even selling hardware.”
A sidechain is not a blockchain at all. The fees from sidechains do not go to miners—they go to the developer of the chain, in this case Blockstream. Sidechains are typically used to patch the holes in the capabilities of the underlying protocol. Therefore, the better Bitcoin becomes, the more obsolete companies like Blockstream become.
Blockstream’s Liquid sidechain is a perfect example. According to them, Liquid was created because Bitcoin’s supposed high-latency means that the volume of transactions which take place on-chain is going to be limited, so the solution is to move a large volume of transactions off the main chain and onto this sidechain.
This is laughable in itself because we know that the original Bitcoin does scale and was designed to do so—more on that in a moment.
But most important about Liquid is that it works by replacing the on-chain Proof-of-Work model with a system where Blockstream appoints a small group of market participants to validate the side-chain transactions themselves and then submit them to the main chain. This small group is called the Liquid Federation, and by and large consists entirely of digital asset exchanges.
If this is raising red flags already, it should. Not only is this not decentralized, as Blockstream audaciously claims, it is entirely centralized in a small hand-picked cabal (read: cartel) of exchanges with which they will trust the transactions they are trying to lure off-chain.
What kind of entity does Blockstream find suitable to give this kind of control to? Well, included in this ‘federation’ are such criminal enterprises as BitMEX and Bitfinex, both of whom have been shown to treat the digital asset economy and the money trusted to them as a private cash dispensary and in BitMEX’s case, at least, were complicit in the dubious Bitcoin SV delisting attacks.
What’s more is that Bitfinex is an early investor in Blockstream. This isn’t disclosed anywhere on Blockstream’s site, and yet Bitfinex is an approved member of Blockstream’s Liquid Federation.
Why are we not talking about Adam Back and Samson Mow, two of the most visible employees of Blockstream publicly siding with Bitfinex given that Bitfinex is an early investor in Blockstream? The conflicts of interest in this space are something else…
— Larry Cermak (@lawmaster) May 2, 2019
Here’s Bitfinex executive Zane Tackett admitting the company seed invested in Blockstream and also into Shapeshift:
Despite BitMEX’s founders being indicted and Bitfinex coming under investigation for covering up an $850 million loss and using user funds to do so, both are still members of the Blockstream federation.
The solution Blockstream says it wants
Blockstream has built itself on a business plan which requires bitcoin—as originally conceived in the White Paper—to fail. Blockstream needs bitcoin to be unscalable, with a hard block cap to ensure that mass adoption is impossible. Every failing of Bitcoin is a victory for Blockstream, because it allows them to provide a patchwork service on top of the original protocol to fill the need.
What does Blockstream make of Bitcoin SV, then? Bitcoin SV scales on-chain already, having demonstrated massive transaction volume and fractional cost. It does everything that Blockstream says Bitcoin can’t do.
In reality, the millions that have been funneled to Blockstream have funded the on-going misinformation campaign which passes the various Bitcoin imitators off as the real bitcoin and in which the proponents of the true bitcoin are subject to libel, slander and harassment.
In addition to being the person behind Blockstream’s business model, Adam Back has accused Bitcoin founder Craig Wright of lying about having invented Bitcoin, that he had forged the evidence which supports him, and that he had committed tax fraud. Back also inadvertently admitted that Blockstream employs a ‘large’ team whose job it is to ‘debunk and disprove.’ Given the scale of the misinformation peddled by Blockstream, it’s no surprise that they have a dedicated propaganda team, but Back’s admission of this is bold, to say the least.
facts do matter! that's the most frustrating thing about interacting with some folks – they create so much false narrative and FUD, and confusion that's it's a large teams full time job to debunk and disprove! if we had less confusion, we'd have less drama.
— Adam Back (@adam3us) December 21, 2017
Former Blockstream CTO Gregory Maxwell once provided a step-by-step guide to exploiting a possible vulnerability between BTC and Bitcoin SV which would allow users to steal unsplit coins. The vulnerability was not disclosed in accordance with Bitcoin SV’s bug bounty system, but was instead posted to social media site Reddit.
Speaking of Reddit, Maxwell was exposed for using multiple Reddit accounts to spread misinformation about bitcoin and denigrate Craig Wright. This is par for the course for Maxwell, who was banned by Wikipedia for bullying, harassment and using multiple accounts to reinforce edits he was making on Wikipedia.
Former Blockstream CEO and co-founder Austin Hill made his debut into the business world by scamming $100,000 out of unsuspecting Canadians. He placed advertisements in newspapers offering to pay people up to $600 a week to review television shows. Those that wrote in were asked to pay a deposit of $49 for a hastily cobbled-together training program, and Hill was relying on these people simply not completing the program. Hill has openly admitted to all of this. Rather than acting as a wholesome story about how Hill found the light and went on to work with Blockstream, the actual story reads more like a troubling origin story that is consistent with Blockstream, a company which is designed to profit from perpetuating the flaws of Bitcoin’s imitators.
Of the cofounders who don’t appear to be involved in theft, fraud and slander, most appear to be happy to leave Blockstream behind. Co-founder Matt Corallo said on Twitter that he’s embarrassed to have helped co-found the company. In response, Luke Dashjr, apparently another co-founder, speculated that Blockstream has let troll propaganda redefine the company.
I get a sense that @Blockstream may have essentially let the trolls' propaganda redefine the company.
(But I'm not sure @Excellion is necessarily part of the problem – I often find his tweets quite enjoyable; just needs to be taken in the correct light.)
— Luke Dashjr (@LukeDashjr) May 27, 2019
Bitcoin loses out
Consider how corrupt Blockstream is, and the damage it is doing to those who have bought the false vision of Bitcoin that the likes of Adam Back have sold. Blockstream, employer of many BTC Core developers, creates and sells sidechains which exist to address flaws in the underlying protocol. The flaws that Blockstream is trying to address—like scalability—were actually all created by Blockstream themselves. The original protocol worked and still works today as BSV. Blockstream only exists to try to confuse the world on the design brilliance of the original protocol of Bitcoin, trading today only as BSV.
Bitcoin SV is the answer to the problem that Blockstream is pretending to solve: only Bitcoin SV’s solution precludes the likes of Blockstream entirely. Our thesis holds true: a good test for criminality is whether a company and its executives are in favor of Bitcoin SV and Craig Wright, or if they spend their time trying to tear them down. Blockstream continues to make a tidy sum by doing the latter, and the rest of the cartel are reaping the benefits as well.
That is how criminal cartels work, after all.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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