Bitcoin is dominated, like it or not by some well-funded companies, most of them are what I call pre-revenue. (That is not a bad thing), Bitcoin is just starting to take off and no one really knows what the future brings if we can sort the current mess out. I run a company so I feel that I am able to comment with some sort of experience on the company situation. The companies that are funded with VC money will have to show what’s called shareholder value. Even after revenue starts to come in you still have to keep up the shareholder value.
Shareholder value is more or less about producing a plan and getting the shareholders to agree that the plan is good. Then you have to deliver on it. if you do, the shareholder value goes up and everyone is happy. It can be an incredible amount of pressure but let’s remember we are talking serious money as well.
This brings me to something important.
We have one company in the bitcoin space who have taken a very different approach to core development than we took. We at KnC thought early about getting core developers on our team, after all we wanted to show support but do it in a way that we would not destroy the open source development community. We ended up supporting it through the bitcoin foundation like many others did at the time. We really thought long and hard about having developers on staff we really did. Blockstream have taken the other approach. Bring core developers into the company. This sounds at first like an ok idea, after all many core developers have full time jobs at companies. The difference here is that not only have the company taken in more than one developer they have given them positions in the company that are very high up in the management team.
The conflict of interest here is larger than I ever expected to see. Let me elaborate. Blockstream as far as I know don’t have any products in the market yet, and that’s ok they have just started. But what they have said a large amount about are layer2 solutions. (ones that sit on top of the bitcoin blockchain or sometimes called off chain/side chain) Now a layer2 solution will use bitcoin as a settlement layer and while I agree it’s a FANTASTIC settlement layer. layer 2 is not needed if layer1 is good enough. Only when bitcoin blocks become full (layer 1 not good enough) will we need the layer2 solutions, and that’s the problem. You have a company which needs to produce shareholder value and is under a lot of pressure to do it, they have a potential for large revenue in solutions that use bitcoin as a settlement layer and has some of the main core developers on staff.
The blockstream core developers have the power to fix the issues we have today by coordinating and cooperating with the rest of the network on a simple piece of code that will alleviate the current issues. However, they can’t do this, they simply must object to it because it reduces the value of the layer 2 solutions and thus removes shareholder value. Now I’m not saying this is going on, but the conflict of interest is pretty plain to see.
My next blog will be on SegWit Vs HF called plain overview