Blockstream, the AOL of Bitcoin?


Blockstream has announced a pivot of sorts from software to hardware with the launch of leased bitcoin satellites that allow you to connect to the network in a read-only mode without requiring an internet connection.

The idea is old, in bitcoin terms, and surfaced to some popularity around 2013 when someone showed how you can connect to a local radio point and keep your bitcoin node running even without internet.

And, in our view, the idea is cool. Not quite something you’d be using perhaps, but the option of connecting through radio frequencies does add a robustness of sorts for the network.

That’s if you have a “a portable generator, satelite dish, wifi hotspot, full node laptop & some means to send 250 Bytes,” according to Adam Back, Blockstream’s CEO. Then, “you can use Bitcoin anywhere with zero infrastructure,” except for the ones we just mentioned.

The equipment you need to connects to a bitcoin leased satellite.

Once all of that is set-up, you still need a way of sending a transaction, with SMS text messages often mentioned as an option. Which is all pretty geeky, but Blockstream is a for-profit corporation, not a garage kid playing around tweaking things. So the only way any of this makes sense is if they:

“Put popular wallets plus blockhistory on microsd plus USB SDR bundle, and airdrop them. Bulk cost is low.”

By airdrop he probably means sell them. So then an ordinary user in countries with bad internet connection connects to the network through mainly Blockstream provided and controlled products after purchasing their hardware to then pay Blockstream fees per transaction.

We’re thinking here probably individuals in mountainous remote regions where cars are a rare sight and TVs are limited to one per village, but they would have somehow heard of bitcoin and want one.

Which we estimate to be a very small number, since internet capable smartphones are now ubiquitous. So that’s most probably not their target market, but the satellite connection is most probably a fundamental product for Blockstream.

“The system is currently designed to guarantee 64kbit/sec. This provides adequate bandwidth to reliably maintain synchronization with the network with modest delay,” Blockstream says.

That’s dial-up, something you may have enjoyed in the 90s when streaming a video was not a thing and when a page took what, at times, seemed like forever.

It, therefore, can barely handle the current 1MB blocks every ten minutes. Which may provide a fairly good reason for Blockstream to strongly resist any increase of the base blocksize. Leading to the two years long scalability debate, high transaction fees, delays of 24 hours or more for a confirmation, the rise of ethereum, the chain-split hardfork to Bitcoin Cash, and so on.

All of that so that there can be a satellite connection at this point in time. But why is that so important at this very stage? How is that trade-off beneficial to 99.99% of bitcoin users and why is it so important to Blockstream specifically that there is this satellite connection?

One reason might be that if you control the hardware, you control the software. You can then choose what runs on your hardware and lock out competition. A mindset they’re already employing with Paul Sztorc, who was and maybe still is a very strong small block supporter, stating:

“I could not even collaborate with Dr. Back on a [drivechains] roadmap update, without [Gregory Maxwell] claiming I was “not being transparent”!”

Drivechains is not a Blockstream product and might even be a competitor to their sidechains, so of course they wouldn’t like such collaboration.

And when this mindset is applied to even “small things,” forget any collaboration regarding bigger things, such as mutliple, competing, bitcoin clients. Why would any for-profit company want or help any such competition? Especially when they can use their influence over the Bitcoin Core client to lock them out.

A competition that might apply to Lightning Network hubs too. Why would any for-profit company not limit their hardware to their own LN hub?

It’s a mindset of competition that transcends most aspects, including open source code itself. Blockstream employees are often heard complaining about Bitcoin Core’s code being copied or about others benefiting from their work on open source code, even though the vast majority of bitcoin was coded by others.

That suggests they think Bitcoin Core itself is a product with Luke-Jr, a Blockstream “contractor,” telling miners at the Hong Kong “consensus” meeting in 2016 that they would be benefiting from around $300,000 worth of work for the hardfork code to be produced, which he never did.

It is something you would expect a for-profit company and their employees to do, but selfish use of the commons usually leads to no commons, which is why bitcoin has an inbuilt Nakamoto miners consensus.

But that’s the technical aspect. As Gregory Maxwell, Blockstream’s CTO, often takes the effort to point out, Nakamoto was wrong to say the longest blockchain. It has to be the “valid” longest blockchain, according to Maxwell.

Who decides valid? As far as Blockstream’s hardware is concerned, they do. As far as r/bitcoin moderators are concerned, they do. Same for the IRC moderators, which includes Gregory Maxwell.

But let us assume they do manage to centralize the Bitcoin Core chain under Blockstream’s control, what then?

AOL tried to centralize the internet in the 90s by packaging it into CDs and “airdroping” them, but users usually don’t like being limited in choices or paying for things if they don’t have to, so they moved to the open internet, sending the AOL brand to history books.

That history might not repeat itself, but it will probably rhyme. A packaged USB bitcoin is such a low hanging fruit, we only wonder why it took so long. But a dial-up network can hardly compete with an open network that can employ Google Fibre.

AOL provided a useful mean of access by using what at the time was state of the art technology. It worked for a time because the alternatives were non existent or not better. Dial-up, in the 90s, was state of the art.

In this century, a network or product that works on last century’s capabilities – well, who knows, it might work. Perhaps individuals now suddenly prefer inconvenience and paying for things more than they have to. Or, perhaps, they’ll do what they always do, and route around to get the cheapest and the best.



Notify of