There were zero views to the Satoshiwall full version, and it's Christmas, so here's a continuation of Part I, II, of the 'beta' version of the book (ty tippers!):

(Some of the original formatting is gone, but even for free I doubt a single soul will read it...)

Before getting into the heart of the matter we’ll have to define a few of the concepts in our discussion.

When Bitcoin was first released it claimed to solve what was considered by some computer scientists to be an unsolvable problem: a distributed ledger working without any centrally planning authority in control, and it does so using an incentives system rewarding participants in the network which follow the consensus rules. It’s very nature is to be censorship resistant. The program was supposed to be so resilient to attacks once it is released in the wild there’ll be no way to stop it.

The blockchain is nothing but a public ledger which relies on miners as to not require any central authority - that sets it apart from any technology that existed until now and gives it unseen properties. For achieving decentralization it requires miners who constantly provide work with their computation resources to earn money in exchange for voting on the correct state of the ledger. You could also think of mining as “voting power”, or as commonly known as “hash rate”. This mechanism of incentives was put in place so that economic forces have an interest to work for the health of the network aligned with profiting from the rules.

Mining as a concept is really no different from a wedding ring which is given as a gesture showing commitment. By itself it’s not supposed to do nothing but… to cost money. Similarly the miners invest money to prove they are committed to the protocol giving value to the coins.

Is it fail proof? Is there a way to completely stop Bitcoin? An attacker could try to acquire 51% of the miners’ voting power, and since it costs money to mine blocks for the chain, the users and miners will generally choose the most voting power to make the safest bet by staying on the “real” chain if the new rules make sense, otherwise they’d be dismissed as invalid. Having the majority of the voting power really says one thing: “the majority of the money is voting in one way, if you want to be sure you won’t be left with worthless coins, you better follow us, the majority.” Of course in the lack of a central owner, this openness in how the rules and what constitutes the coin are open to interpretation, and leaves out many open questions and there are many edge cases which we can’t cover them all, and we already see governance or the lack of it is perhaps the weakest link in the chain. Instead of covering all the edge cases we’ll talk about the ones that will be most important for us down the line:

Nothing stops any miner from voting for any new incompatible rules or cheating on the system, but the incentives system will make sure the bad actors risk not being rewarded with new mined coins or with fees from transaction in the network. A hard-fork is really a simple protocol change agreeing on following new rules, and there’s no way around it since any software needs updates. When the miners don’t agree on the protocol rules which constitute Bitcoin and vote for two different sets of rules, blockchains diverge from the old one, and a split, also called a fork, occurs in the ledger, generally two coins are created with incompatible rules, and the economic forces either follow one or both coins and assigns different values to each. A fork could happen either when: 1. a coin has two legitimate or illegitimate contending factions each with its own group of miners supporting and voting for it with their mining power, or 2. when a the developers of a coin decide to update the software and the protocol and the miners decide to move to vote on the new rules as an upgrade to the coins, in which case only one blockchain remains out of lack of interest in the old rules, or 3. as an outright attack trying to seed FUD (there is a surprising number of such cases, including Ethereum Classic).

The blockchain itself is really just a chain containing all the transactions that took place arranged in blocks. Once a block is created it shouldn’t be reversible - it is immutable. The attack which tries to reverse their order is called a “reorg” attack a reorganization of the last blocks by providing more proof of work. The transactions in the blockchain are nothing more but a never ending entries in the ledger each indicating a coin transfer between the addresses which typically are owned by different users.

The economical incentive means that in a blockchain the price of the coin follows the “voting power” is a self-feeding loop to an extent which causes one coin to be valuable because it’s already valuable.

So we can see Bitcoin is based on game theory, and was first conceived as order in anarchy, achieved by employing self-interest, since everyone assigns similar importance to money as the abstraction of value, and the participants in the network are rewarded for playing by the rules, and the rules everyone follows are assumed to naturally converge into what’s best for all the players, since they all benefit from the coins having value.

By now we’re knowledgeable enough to understand that either Bitcoin is permissionless or it’s pointless. By permissionielss we mean anyone can make a transaction without any privilege required. To be valuable and useful before it can even be law-compliant it has to retain that quality. That’s a requirement for preserving it as a special asset class unlike any other, without it it’s no different than using any means of payment which existed before it, like SWIFT or PayPal. Without that property there’s no importance for the level of the network’s security, which measures how hard it is to attack the network and making it unreliable.

Decentralization isn’t an ends in itself, but it’s needed since it helps to achieve permissionless. Decentralization is, 1. the degree to which any participant can take part and join the network and provide proof of work to mine new blocks, 2. the number of participants in securing it, since securing the blockchain requires a long number of participants as a protection from collusion with each other. Without that property mining and proof of work have little significance since the whole network could become a one man’s show and be at the mercy of the single miner making the rules he wants.

On the difference between permissionless and decentralization: 1. when we talk about permissionlessnes we typically also mean decentralization. Since the former is the desired result of the latter, the two terms should go together in the context of our general discussion the ability and freedom for a random user to use the network and make a transaction. 2. decentralization is not easy to measure and to evaluate its effect for various reasons, for example two mining pools could be really the same operating under different names.

Even if what we desire is a permissioned system, it could only work as long as it is permissionless and made permissioned on top. Permissionlessness isn’t about tax evasion, it’s about not being censored, or more generally, about the rules not being overriden by anyone. If a permissioned currency is a desired quality for some of the users, and it’s implemented as such on the base level, it wouldn’t be able to work as a decentralized system anymore, but would be nothing but a database operated by a single authority, and the special properties of the coin which give it value won’t be preserved, since it’s not a physical asset like gold, and it would be completely pointless to make it decentralized. The only use case for a blockchain which isn’t decentralized or isn’t permissionless would be really just saving money for the centralized authority operating it, as long as there’s trust between its users.

This can’t be stressed enough: There’s just no point at all in Bitcoin that isn’t implemented in a way which doesn’t make it permissionless!

Those who don't learn from history are doomed to repeat it.

The pivotal point in Bitcoin’s history was this a single line of code in the software which SN (Satoshi Nakamoto) put in place as an anti-spam measure.

This little insignificant-at-the-time constant was essential for stopping Bitcoin.

This book isn’t about the “block size debate”, and the infamous civil war which followed, which is already settled with two forks, one under the ticker BTC, the other under the ticker BCH, and the question of “what’s the optimal block size” is no longer disputed.

Fighting something directly can be counter productive, since that would only serve it by validating its strength, and with it helping it and making it stronger. Fighting an idea can be difficult, but fighting a technology which the very thing it was designed to do was being resistant to being shut down can be even harder.

In that case the most effective way to stop it would be not fighting it overtly at all but making it appear like it won when in reality it’s vice versa.

Since Bitcoin is synonymous with Blockstream, the history of Bitcoin since 2015 is the history of Blockstream.

BTC has a $188B market cap. The first important question we should ask is who makes the important calls about BTC and steers the giant ship that it is today? The developers? The businesses built around it? Is it the “community”? If so, is it a democratically elected committee of representatives? A consortium of miners?

It’s clear before going into the details how vastly influential the developers are to a coin since some of the decisions they make for it cements its very purpose in the future. The question of who the developers are, why they were chosen, by who, and what their motives are is clearly important. The two leading original devs were replaced by Blockstream, their solutions were vehemently rejected, and after they were removed from the project, all of the remaining Bitcoin Core (Bitcoin’s reference client) devs were working for Blockstream or funded by the same sources. Unlike in its early years, Bitcoin has moved to no competing alternative implementations, mainly because of the complexity of it’s all-or-nothing scaling solution, the Lightning Network.

To understand the current situation we’re at now, we’ll have to start with a very brief overview of how Blockstream came to power:

First take control over the channels of communication:

A hugely underreported part of the story of Bitcoin is the story of the online propaganda that shaped it and brought it to where it is currently. We can’t go into all the details here, but it’s enough to say it had such a huge role it has wider implications and questions how the Internet is really close to the democratic egalitarian principles it was hailed to promote in its early years. Nothing can be completely removed and censored from the World Wide Web, but as it proves it’s still possible to control what information almost every user receives by controlling the few popular platforms which disseminate most of the information, and by buying out a few key figures. When an online forum becomes too popular, the administrators could always be bought or harassed or tricked into selling their accounts or quitting. The tools available at the hands of a determined attacker with authority aren’t much different in the digital age from what they were before, and the list of tricks they could use is never ending. Kings can be dethroned, and new kings be crowned in their place by creating a community consensus around an idea.

If you repeat a lie enough times it’ll become the truth worked in online forums despite the borderless nature of the internet. r/bitcoin, the main sub-reddit for the Bitcoin community is held and managed by a person who goes by the pseudonym u/theymos. Theymos not only controls r/bitcoin, but also bitcoin.org and bitcointalk.com. Reddit is the most popular one with thousands of daily users participating, and even many of the developers are active on it, important as the central forum in crypto and the was heavily targeted by bots and astroturfers (paid users faking grassroots public views) at critical times in Bitcoin’s history.

Around mid 2015 a new player came out of the dark and appeared on the scene, a for-profit private company called Blockstream. Blockstream was made up of/hired many bitcoin developers. Some people pointed out right away there are some serious potential conflicts of interest that could arise when one single company controls most of the main developers for the biggest decentralized and distributed cryptocurrency in the world.

The details of the fight to cement Blockstream’s position in power can fill whole books and we can’t cover them all here. It’s enough to say the attacks were highly organized to censor down any dissenting views.

Since Bitcoin at that time didn’t allow for higher capacity than 3 transactions per second, Gavin Andersen and Mike Hearn, the next in line after Satoshi Nakamoto, released a client without that limit where the original model based on a blockchain and miners could be continued. As a result anyone trying to distribute or run it was DDOS’d to obliteration.

Later followed a large scale sweeping censorship started against even any mentioning of that client’s existence. Theymos censored anything that didn’t agree with Blockstream, and r/bitcoin, which was the main discussion sub-Reddit, started changing the forum code to conceal as much as possible the censorship from the users by changing the way posts are displayed, while Reddit sat idle, despite Theymos admitting to what he was doing. In April 2016 Reddit removed its warrant canary.

Twitter was flooded by bots with pro-Blockstream messages. The actual competing implementations were DDOS’d to oblivion. Bitcoin Classic and Bitcoin XT, the two most famous attempts to break out of Blockstream went to oblivion (the DDOS attacks were so severe in some cases whole towns were disconnected from telephone and Internet). Later in 2015 Greg Maxwell and his friends from Blockstream expelled Gavin from his own project, which he invited them to contribute to. This has meant that all control of bitcoin development is in the hands of the developers working at Blockstream.

Propaganda wasn’t limited only to social media. Blockstream paid for conferences in which they controlled the messages allowed to be expressed. They were meant to create a false impression of “we’re seriously working on it” and to create a voice opposing the community which was in favor of Gavin’s, while employees of Blockstream were recommending attacks against Gavin’s software. Blockstream employees were also publicly talking about suing Gavin and Mike from various different angles simply for releasing this open source software that no one was forced to run, which is reminiscent of the bullying and harassment through lawsuits “Satoshi’s Vision” did in 2018.

Back to Blockstream: Whole conferences were funded for the sole purpose of publicly sounding the message “blockchains don’t scale” (even though that’s a clear paradox blockchains are the very mechanism which makes Bitcoin useful in the first place, without it they could dismiss Bitcoin completely). Every effort was made to make sure the original model won’t be followed through. Reddit has been culprit and turned a blind eye to the army of shills (users paid to promote a message in social media), trolls, and astroturfers who made sure only one voice will be heard and that voice will have an appearance of “the people have spoken”. In reality there was no public square discussion taking place in the virtual world, but one big puppet show to make it appear like there was “community consensus”.

Some developers like Jeff Garzik were harassed and their families received threats, even users in r/Bitcoin received death threats for supporting the XT client which didn’t bend the knee to Blockstream.

Eventually Hearn declared “Bitcoin failed” and he and Gavin quit working on Bitcoin for good.

And now to the 1MB limit debate and how it led to where we are now…

The block-size constant was an anti-spam measure added to the code by Satoshi with a clear intention it will be removed in the future. As more transactions are taking place in the network, the blocks, which were limited in size, only have enough capacity for around 7 transactions per second, which is far too low for any real use case, and as the capacity reaches its limit, the miners include only the transactions with the highest paying fees, at times of peak usage leaving out any tx (abbreviation for transaction) below $5 and up to $20. Former Bitcoin Core developer, Jeff Garzik, posted on the bitcointalk forum about raising the blocksize as Satoshi agreed with and the first objection to that was by... Theymos, the same person censoring r/Bitcoin to this day.

It’s important to note: as time passed, Blockstream refused even the most conservative solution to the problem suggested by Gavin, a solution which was much more conservative than even the employees of Blockstream had proposed themselves months earlier. As this software started to gain support in the community nonetheless, Blockstream organized more meetings, especially with the biggest Bitcoin miners and made a pact with them. They promised that they would release code that would offer a scaling solution within about 4 months, but if the miners wanted this they would have to commit to running their software and only their software. The miners agreed and the ended up not running the most conservative proposal possible, which would have had all the necessary capacity to accommodate for today’s transactions of BCH and BSV, two BTC forks, and Ethereum, a cryptocommodity which was originally proposed to be built over BTC, combined.

Did Blockstream win by having merit?

Understanding who maintains the software is essential because he’s the gatekeeper and gets the last word. Blockstream received around $100M in funding from private sources, mostly from the investment bank AXA. All the new software they released was offchain that is, off the blockchain: Liquid, which is a centralized solution analogues to converting BTC coins to fiat, wiring the fiat money in a bank account using the banking SWIFT, and converting the fiat back to BTC.

The Bitcoin client is now maintained by 10 developers, working under two companies. Blockstream and Chaincode. As people who followed Bitcoin remember, around 2015 when people started crying foul about Blockstream having been created to fund Bitcoin devs, people defending Core were pointing at van der Laan as being funded by MIT therefore "independent."

One of the two founders of Chaincode also participated in funding MIT's Media Labs Digital Currency initiative, which funds Wladimir J. van der Laan (who has final responsibility for deciding what gets merged into Bitcoin Core) and Corey Fields. Matt Corallo (Blockstream) is a team member of Chaincode.

It appears the two companies provide some "plausible deniability" for a corporate entity which is the same.

That goes completely against what Blockstream claims that “the head maintainer has nothing to do with Blockstream”.

MIT DCI is such heavily core focused and directly dismisses blockchain R&D even when MIT is supposed to be agnostic of corporations/chains and review, research and develop tech that makes a difference. Some devs external to Core report their intereactions with DCI the members in Boston/Cambridge, their connection with BitDevs meetup comes up (funded by Fidelity Investments) and they refuse to even talk about any alternatives to Blockstream’s approach.

Since van der Laan controlled the merge process for Bitcoin Core he was basically the ultimate gatekeeper.

The real number of developers involved in Bitcoin:

As we can see on the Bitcoin Core client github page, https://github.com/bitcoin/bitcoin/graphs/contributors, there are 32 contributors with over 30 commits. Out of these 32, 8 have made no contributions at all in 2017 so lets drop that number to 24. There are 10 contributors with over 200 commits.

Wladimir J. van der Laan he is funded by MIT Media Labs Digital Currency initiative.

Pieter Wuille, co-founder of Blockstream.

Matt Corallo (https://blockstream.com/team/matt-corallo/), also works for Chaincode Labs.

Corey Fields, funded by MIT Media Labs Digital Currency initiative.

Jonas Schnelli is cited as 'independent'. Works on the GUI.

Marco Falke - Chaincode Labs

Luke Dashjr - Blockstream

John Newbery - Chaincode Labs

Alex Morcos - Chaincode Labs founder

Suhas Daftuar - Chaincode Labs founder (199 commits)

So just scratching the surface this is far from a decentralized team. 7 of the top 10 developers of Bitcoin Core work for Blockstream and Chaincode.

Now let's take a quick look at Chaincode. It was self-funded by its founders Alex Morcos and Suhas Daftuar who also started Hudson River Trading in 2002. Here's where it gets interesting. Alex Morcos also participated in funding MIT's Media Labs Digital Currency initiative, which is who funds Wladimir J. van der Laan and Corey Fields. Matt Corallo (Blockstream) is a team member of Chaincode. While everybody is focused on Blockstream, we have Alex Morcos funding 6 of the top 10 developers for sure. Only Jonas Schnelli is uncertain how he is funded.

One curious investor not in the graphic above: Jeoffery Epstein, the source of some of the money to those who controls the Bitcoin Core repository.

Relevant points:

1: Epstein had considerable interest in Bitcoin, parroting a Blockstream promoted narrative: “Bitcoin is not a currency. Bitcoin works as a store of value.”

2: Epstein money (at least $525.000) went directly to MIT Media Lab, which employs Wladimir van der Laan, the lead maintainer of Bitcoin Core.

Mr. Ito, who has helped the lab raise at least $50 million, revealed that he had taken $525,000 from Mr. Epstein for the lab and $1.2 million for his own investment funds .

3: There will be an independent investigation by an external law firm about the sources of the funding to MIT.

MIT Media Lab not only funds the key gatekeeper of Bitcoin Core but also is funding Lightning Labs. Why this is important we’ll see later.

Chaincode is basically a fork of Blockstream: Some of the investor group and developers just spun off into another corporate entity. Perhaps as Blockstream reputation was getting rocked a bit.

Anyway, there’s always just one guy at the top you have to buy off to buy the entire ecosystem with him, so on the fact of it one guy permissions the BTC blockchain.

This one guy maintains 97% of all active BTC consensus code installations.

That means he's a gatekeeper who can block almost anything he doesn't want. For example:

Wladimir van der Laan, wrote on Friday that Andresen’s ability to make changes to the main code running Bitcoin has been revoked. The circumstances in which Andersen code repository privileges were revoked were interesting in themselves to make it very brief, he was invited to London for a first person “proof” Craig Wright was the real Satoshi, and when he later posted he “found Satoshi”, van der Laan wrote: “the prudent thing to do was to revoke his ownership of the ‘bitcoin’ organization on github, under which the Bitcoin Core repository currently lies, immediately.” (we’ll see later how these two dots, Blockstream and Craig Wright, connect togethe.)

One guy was able to completely kick out Gavin (the leader of the project!) for nothing more than saying something politically incorrect.

A very powerful gatekeeper indeed.

Bitcoin is now Blockstream.

Bitcoin is a software, an open source free project. According to the FOSS principles the code with the best merit is supposed to win. It doesn’t produce a highly complex pipe dream software but through a never ending series of incremental small steps of improvements where anyone could build upon and expand on it’s always going forward, just like life itself in an evolutionary process. As we’ll see, Blockstream didn’t provide any evolutionary code, but made revolutionary changes instead, based on promises for a future breakthrough, as a result delaying as much as possible actual improvements years into the future, when all of Bitcoin’s problems will be solved. They basically said to the public: “just sit tight for a few years and see how it’ll work out after a complete overhaul when a new solution no one has tried before or knows how it will work will be implemented”. This brings up one of the most important questions for a decentralized cryptocurrency: how should it be governed? When we look at how a single private company successfully took over the project, apparently Bitcoin never was governed at all. It’s ruled after it was conquered in a carefully planned way years ago.

There are three stages in decision making in crypto: client (devs), miners, market. Normally the devs suggest their code, the miners decide if it pays off to run it, and the market works as an arbitrator and chooses the price of the network based on the code and votes of the miners, and the price feeds back the previous stages. So the market votes by pricing the network’s worth, but that’s an oversimplification, since the first stage in the decision making are the developers, and their opinions can be bought. There’s no way to stop an entity from paying them and hiring them to develop certain code, and what exacerbates that problem even more, is that due to the requirement to be backwards compatible and not make changes to the properties of the coin, which will change it fundamentally, changes are easily becoming entrenched, therefore even by capturing the client for a short duration, say one year, it could take the whole network with it to an alltogether new path.

Cryprocurrency brings with it a promise to effect decision making, but everything points out it’s too late, at least for Bitcoin.

The entire space can be bought with a small amount of money relatively to the coins’ market size, because it’s enough to influence the developers, and the public figures “the ideologues” - who speak on its behalf and eventually the whole network will follow like a river diverted at a critical meeting point of a ravin. Blockstream has been in a position in which it fundamentally changed Bitcoin since at least 2015.

We can’t do any investigative journalism leading to a hard “proof” like a leaked document Blockstream was set up to serve exterior motives, but the smoking gun are their decisions and actions and own words, which speak stronger than any document which wouldn’t come with authenticity proof anyway. There's alsono hard evidence Blockstream bought off Theymos, the famous forum admin either, it's just a “coincidence” that he got 6000BTC in donations, then r/bitcoin started kicking everyone who didn't agree with Blockstream plans to reengineer Bitcoin.

This experience must have been a serious wake up call for many people who previously only considered programs and code and believed everything can be solved with technology alone and accustomed to question governance - in general: the story of Bitcoin is really the story of digital age propaganda, should we conclude from Bitcoin’s history truth is democratic? Is it enough to make it look like the majority of people believe something to make it true?

Generally speaking, in the 2016 elections Russian online manipulation was taking place behind the scenes. In the same time a USA based mega-forum is so heavily manipulated it’s hard to not reach a conclusion “everyone is doing it”.

BTC is unlikely to fail because of simply “bad code”:

It’s not hard to find computer scientists who give valid reasons to side Blockstream from a pure code perspective, and ignoring assuming goodwill in the Blockstream devs, who are unlikely to hide a kill switch in the code (although that assertion can be debated as seen in the CVE-2018-17144 bug found in 2018, and possibly the reason why China is encouraging their own platforms made by Chinese developers is to decrease the likelihood for backdoors) which is open source, but as often is the case, the same programmers easily can judge software existing in itself while ignoring data external to it (reality), missing the big picture, grading the code alone, while the larger view requires many parts beside the code itself to fit together. The small details is where Bitcoin failed. Some programmers seem to be completely blind to politics and to the human factor. Some even value projects not based on practical considerations but based on how complex it is (the more the better). The human factor is the weakest link in the blockchain.

How Blockstream killed Bitcoin:

The problem Satoshi approximately solved which made BTC possible was the Byzantine Generals Problem (BGP) arriving at consensus between parties which aren’t forced to cooperate - and he solved it using the hashing power the miners provide to the network to vote on the chain following the rules. In reality the miners vote for the “true” chain with every new block they mine and add to the chain. In short, the BGP is when one battalion defects from the battle the whole war plan to fails. Only when all work together it can succeed, and the problem is to make them work together.

As we saw, the only way to completely get rid of Bitcoin would be to acquire 51% of the mining power, which isn’t likely to happen since mining equipment manufacturers don’t want to kill their own business.

What actually happened was that the attackers didn’t even have to do any mining at all to take over BTC the miners were completely useless in this case - all they had to do to take over Bitcoin was to take over the dev team, then NOT change a line in the code the limit was already there, self-imposed while changing everything else around it. The rest was making sure anyone trying to change the code will become a minority fork and not gain any traction, which is easy since he won’t have the first mover’s advantage. The remaining problem for the attackers is to convince the BTC holders keeping Blockstream’s software is the best option for them, especially by convincing them the main scaling solution, the Lightning Network, is being worked on and is going to change everything.

The details of how it was conquered is a subject that could be covered in several books. This a summary of that history:

The BTC user-base was fed with excuses and propaganda all along, from the start, but that alone probably was not enough for Blockstream to succeed in its plan. At the end of the day these were just distractions. It’s impossible to conclude if people actually believed them or it was nothing but an avalanche of astroturfers the word commonly used in social media for users paid to create a semblance of real grassroot support. What actually mattered was at the economic level, that the exchanges all accepted Blockstream’s code (via UASF, a user activated soft-fork, a workaround to avoid a hard-fork) while abandoning an agreement between the miners and Blockstream called The New York Agreement. That in combination to how Blockstream modified the Bitcoin software (in a softfork) in effect sealed Blockstream’s position as the sole maintainer of the Bitcoin software. As we’ll see later, a most relevant fact is that this was only made possible when the exchange Bitfinex promised the Bitcoin name will belong to Blockstream’s implementation, and the other exchanges followed suit out of fear a conflict over the “brand name” Bitcoin would follow and hurt the price of the coins they mine.

Note: The fact alone the miners can meet and negotiate is a proof the original model broke - the solution to the BPG relied on the fact it’s hard to collude when large groups are involved whereas mining is mostly centralized industry today and is influenced by the public opinion and short term profit.

How was it possible for Blockstream to take over Bitcoin? 1. It was just organized and well funded, while its target wasn’t. Unfortunately, in reality the interest of the thousands of holders doesn’t add up to a massive force, while the adversary, the bad guys who want to kill cryptocurrencies were able to act instrumentally, devise a strategy, and follow it through. We all know too well this problem exists similarly in real life societies and nations as well. 2. The holders were thinking in terms of fiat. How is a war good for business? It never is since it introduces a great level of uncertainty and puts off potential new buyers. People wanted to get more fiat in return for their coins, thinking in the short term, that’s why they made the speculation in the first place, and Blockstream made promises and invested money how can new capital and interest be bad for a business?

Satoshi’s original model created an incentive system which is supposed to make it self-sustaining, but no system is perfect, and thus Bitcoin always relied on the “free market self-correcting itself” to sustain it and keep it on course. The miners’ and holders’ interests are aligned with it working properly.

To sum this up, Bitcoin has the highest market cap because Blockstream was cunning enough to find a way to retain the ticker the “brand name” - (by softforking instead of hardforking) while drastically changing the way Bitcoin works, all done in plain sight.

The LN, the 2nd layer, means the bulk of the tx’s will just move to a second layer and no harm will be done? It’s important to understand the debate whether a 2nd layer is a good thing or a bad thing on its own is a distraction from the real issue, which is how the 2nd layer is used as part of a whole set of actions.

Interestingly, Blockstream’s main argument against the block-size is to artificially create a “fee market”, which was never shown to work in practice since 1. in part because the LN will simultaneously make it ineffective to enforce high fees on the LN which will be inter-operable across different blockchains, and 2. the exactly same “fee market” could’ve been formed with much higher capacity, with 8MB blocks as originally suggested by Gavin Andersen and Blockstream’s Adam Back himself, as long as the demand is slightly higher than supply. Note: the fees currently are still a negligible percentage of the miners’ income. There’s no justification for it even as a preparation for the future since imposing a limit could be done later on. Currently the hash-rate is very high and the BTC blockchain is un-attackable, so all it does is make BTC useless for transacting and the blockchain model was broken irreparably because of it.

Blockstream’s Bitcoin is limiting it to only 7tps (transactions per second) for comparison Visa can process 2000tps. But why is the blockchain limited and why limiting it is such a bad idea ?

That is a subtle point but a crucial one because it’s where Bitcoin ceases to be Bitcoin. In the old design the coins were transacted directly and there was nothing that could be done to stop the network from running, or as Satoshi Nakamoto said, it set the rules in stone. It was unstoppable.

Self-perpetuating. As long as a miner, somewhere, accepted a tx (transaction), it would be included, and there was no way to stop a miner from operating somewhere in a barge in the middle of the ocean from adding all the tx’s even when all other miners following regulations of some evil World Government in a hypothetical future, didn’t include and therefore it’s permissionless.

The distribution of the network makes it like playing whack-a-mole impossible to hit all nodes when another one will always pop up.

On the other hand, a design which isn’t using the blockchain and isn’t sending the tx’s directly has no such decentralization and can’t ensure permissionless. It bypasses the miners, since the 2nd layer doesn’t inherit the blockchain’s properties, at most it could only alleviate from the load by taking care of “micro transactions” (usually defined as a few cents), and the inclusion of all tx’s will rely on the individuals operating it who provide the liquidity and connectivity to send the tx’s in channels they maintain, similarly to how banks wire money to other banks. As a result, since liquidity can be bought with money - anyone who has the power to dictate regulations in “the real world” can win control over the network.

This isn’t just a theoretical concern but a concrete and real one in fact this certain outcome can’t be averted.

On the outset, considering the LN’s prospects, incredible as it sounds, the majority of investors and users supporting it were fooled, Blockstream set BTC on a path which could only end in two possible paradoxical outcomes, both mean BTC will necessarily lose all value: either 1. there will be demand for a high number of tx’s and they’ll all have to go to a 2nd layer which doesn’t have any of the special properties of the blockchain and therefore will make BTC pointless, and no one will have a reason for using BTC in the first place, or 2. there will be no demand for a high number of tx’s and therefore there will be nothing to protect by limiting them. It’s a choice between two undesirable outcomes, a dilemma forced on the network by the devs.

Note: The difference between 1MB and 10MB sounds quantitatively tiny but qualitatively it makes all the difference because it changes the whole game theory model and even the goal of BTC in the first place. A 10MB block has capacity for 70 tps (transactions per second), which provides the transactional demand of a town.

It’s important to mention at this point no one has ever showed raising the blocksize would create centralization pressure (and as a counter argument, Blockstream created a whole fallacious “run your own node, don’t trust verify” campaign in social media).

This is important because even if the 1MB block limit had a valid argument (More about the history of the scaling debate), as we will see, it was only used as an excuse as part of a trick to gain time to push the Bitcoin into a corner, it was a sub-plan of a bigger plan of theirs and wasn’t important on itself.

The war on the Blockchain:

Blockstream’s shift to a new model requires the blockchain the LN is running on to decrease in usability to push transactions to the new layer, or there’d be reason to move into it, with the pretext “to create a fee market”. A long almost endless technical debate preceded it, but most of the arguments for it proved at the end to be bad excuses, as evident from how the LN turned out like the predictions saying it’s castles in the sky. But the important part for us to understand is that their model makes the blockchain artificially choked up so that in the near future only tx’s costing hundreds of dollars will use it, effectively making it too expensive for 99.99% of the transactions, which will all have to move to the LN. The situation is similar to a public highway which at some point was turned into a toll road without the citizens having memory of the tax money they had paid to build it in the first place...

Slowly and gradually over the years while the users made concessions after concessions it turned BTC into something completely different than it originally was (the salami method).

In the meantime the official “use case” of BTC was changed from a currency to digital gold and the community in the official forums accepted it without questioning it despite it being absurd the more the coin fails as a technology the more it succeeds. There are several problems with this approach. The immediate one: it does bear many similarities to the Greater Fool Theory. Today’s speculators are not speculating on the future of bitcoin’s economic activity, but rather they’re speculating on what the speculators of tomorrow would speculate about the speculators of the day after. Once the market has run out of greater fools, bitcoin’s price is guaranteed to drop because of higher supply than demand.

How that poses a problem we’ll explore later more in depth.

Calling it digital gold doesn’t easily satisfy questions such as how hard to transport does it have to be in order to be considered digital gold and not a currency (the limit is artificial)? Where the line between gold and currency is drawn (perhaps 24% a currency?)? Is it a teleology given it first succeeded as a currency? Would it still be a store of value had the capacity wasn’t limited and there was no choking of the blockchain?

The changes were made in ways that make it vulnerable to all sorts of possible new attacks. In fact, the changes essentially made it a new coin which bears little resemblance to the original.

Perhaps the most popular narrative which helped to push the changes were through a “run a full node to verify your own tx” propaganda. Peter Todd, a Bitcoin dev, was advocating in a Youtube video for a blocksize limit so users will be able to verify their own tx’s. We can’t get into all the myriad of technical debates but there’s no need to it, since the propaganda was simply lying. "Full nodes" are not offering the network even one iota of protection against malicious attackers. That’s the jobs of the miners (and full nodes never stopped any fork from taking place). We will see later how this was tested and proven to be true in practice and not only in theory.

Convincing people to run their own full verifying nodes bear similarity with the campaigns from the 1940’s trying to convince girls to smoke, and convince women instant food wasn’t taking away from their roles as housewives.

Another change Peter Todd pushed for in 2013 was to create RBF, and according to some evidence was coerced to do so. In 2016 he pushed for turning BTC into a permissioned payment system.

That was one of the earliest signs something was way off.

But why was that change made? What did Blockstream try to accomplish? That was used as an excuse to take away from the special properties which give the blockchain its strengths. It didn’t want to make Bitcoin forkable, because that would risk someone taking away from its power, so instead it used a hack by which way to change the rules by which Bitcoin runs in what is called a soft fork - which also means in this case the full nodes are validating... nothing it wasn’tan upgrade, it was an exploit that’s breaking the rules, and lying to the nodes about it.

The open source principles are renowned for making some extremely popular software possible. The strengths of FOSS (free open source software) include the ability to program competing implementations and let software succeed based on merit instead of market monopoly (for example thanks to first mover’s advantage) that can be created by closed source restrictive-license software. Another hidden motive behind the changes Blockstream made to Bitcoin was for the way they limit the number of programmers who can compete, review, and modify the code, by making it as complex as possible, effectively creating a mostly closed garden due to the low number of programmers who would be able to invest the months in learning the program and then years to actually implement their specification.

Blockstream proved it’s the enemy of open standards. They want to be the authority which makes the call on how the technology is actually implemented, therefore their goal is creating the standard, not just doing the programming - and pushing out any coders from the community of who might contribute code in an incremental way shaped the future Bitcoin decision the Lightning Network.

As the number of implementations available show, almost all of BTC is a monopoly of Core 96% of the clients are Blockstream’s. The way that hegemony was obtained showering money on the software development to have all the influence. Joi Ito, former working for Media Labs, explicitly made it clear Blockstream, and therefore Bitcoin Core, has to do what the "venture money" says because they gave them $900 million.

Bitcoin’s protocol was designed to be set in stone self-perpetuating.

Once the circle breaks there’s nothing that can hold it against an external adversarial manipulation.

In fact, everything that happened so far shouldn’t have been possible. All the properties of Bitcoin are dictated by the code and were designed to penalize anyone trying to change them. The novel incentive system should have prevented any diminishing of the properties which give the network its value and shouldn’t have been possible by design. At the lack of any overseeing authority, it really had no choice but to be self perpetuating. That’s what Satoshi meant when he wrote the rules (the protocol) is “set in stone”. Note that doesn’t mean any change to the code shouldn’t be possible, like with any software it has to be maintained and fixed and updated, but it shouldn’t be possible to change it in any way which alters it functionally - that would break the incentive model which keeps it running and supporting itself to give more value to the coins the miners mine.

To put it in simpler terms: the critical flaw happened the moment any change at all was possible. The damage was done the moment Bitcoin was changed since Bitcoin was invented to offer people a monetary system where there is no intermediary to trust, no middleman, and no state or corporate entity stopping anyone from transacting on a decentralized network. Instead of using fiat money which is predicated by force and violence, individuals and organizations can voluntarily choose to use a system that is transparent (the protocol makes it impossible to cheat), permissionless, censorship-resistant, reliable, fast and empowering individuals over corrupt states and greedy corporations alike. Once any of these properties can be changed, no other property can be guaranteed to remain. The system breaks. Blockstream hasn’t only shifted Bitcoin slowly in what’s called the salami method into a lesser use case which covers a smaller part of what it used to, but found a way to break the incentive model, part of which was the income going to the miners from the transactions.

Now that we are familiar with the key concepts of Bitcoin, and with how Blockstream made changes to it, we are ready to examine the three components used to stop Bitcoin from succeeding:

1. by choosing the LN as a scaling option replacing the blockchain:

There are many technical reasons why it’s a bad choice, but these reasons may be irrelevant, since the LN (Lightning Network) likely won’t get a chance to prove itself working at all for other factors as we shall see, but since there’s a small chance the LN will be a working product in practice we have to study it to see what it is actually capable of and why it can’t be a replacement for the blockchain.

Reasons why the LN isn’t going to be useful:

1. The Lightning Network is economically nonsensical - keeping $5m locked up online in a hot wallet as the LN requires, makes the coins subject to a potential hack, while only earning $20 per month (A study, “A Cryptoeconomic Traffic Analysis of Bitcoin’s Lightning Network”, concluded the LN is economically irrational), making it not a good risk-reward trade-off.

2. If you thought the LN were going to be hugely popular one day (and owned a lot of BTC), it might make some sense to fund a lot of channels as an early position play. The LN has an obvious inherent tendency towards massive centralization (a tendency that is greatly amplified by high on-chain fees). Being highly active in the network's formation early on could increase your chances of ending up close to its center as it grows.

It’s important to keep in mind that the Lightning Network is not a piece of software. It’s a network of nodes and channel connections that grows and changes as people open channels, route payments through those channels (thereby changing their liquidity states), and close channels. There is of course a cost to opening a channel. This cost includes the cost of the requisite on-chain transaction as well as an opportunity cost, e.g., funds committed to one channel can’t simultaneously be used to fund another channel. There is also a cost associated with the risk that a particular channel will not prove useful, leading to its closure in the future and the re-dedication of those funds to some other channel, thereby necessitating additional on-chain fees. On the other hand, the primary benefit of opening a channel, at least as far as end users are concerned, is the possible future payments it will allow you to send and receive. The greatest benefit in these terms is provided by a well-funded (on both sides) channel connection to a channel partner who has a huge number of other well-funded channel connections, i.e., a “hub." That's the kind of channel that enables you to send and receive the most payments and do so with the shortest - and thus, likely the cheapest, easiest-to-find, and least-likely-to-fail - routes. Of course, becoming such a “hub” will require massive capitalization to fund all of these channels.

3. There’s also a positive feedback loop / network effect aspect to hub formation. As an emerging hub grows more connected, it becomes an even more desirable channel partner, encouraging even more connections, making it an even more desirable channel partner, etc. A constrained base blockchain amplifies this naturally-centralizing dynamic by greatly increasing the cost of opening and closing channels. If, for example, it costs $50 every time someone goes to open (or close) a channel, individuals will have a strong incentive to be very reluctant to open channels with any nodes other than those who can provide the most benefit (i.e., massively-capitalized, massively-connected hubs). And of course, the real minimum number of LN channels for a user is not one -- it's zero.

4. High on-chain fees will price some users out of using the LN entirely. They'll opt for cheaper (and infinitely easier to use) fully-custodial solutions.

5. Of course, the tendency towards massive centralization described above is itself (one of) the reasons the Lightning Network is "economically nonsensical." So the ultimate conclusion is the same.

6. The LN has the chicken-and-egg problem (a problem that permeates crypto). To have coins locked in it, first it has to have usage, and to have usage it first have to have coins locked.

7. It’s possible to steal funds, so doesn’t solve the double spend problem. To steal funds without revealing the attacker’s identity, Bob could: 1. Find a target, Alice, that routes lightning tx’s with channels with only n confirmations, 2. have a channel open that can receive BTC that is older than n confirmations, 3. open a channel with Alice, 4. make an LN payment to himself to the channel from (2), 5. double spend the (3) tx.

Everything above assumes the devs actually are trying to solve its problems. The funding to the LN devs has connections to Blockstream, which raises a hugely important question for understanding the motives which may lie behind the network of the generous “investors” was it designed to fail? Did they have the intention try to succeed at all? Even after 5 years of work it’s simply too complex to work hassle-free and is considered experimental and has recurring serious bugs which stop users from relying on it with anything but small amounts of BTC coins.

Since the block-reward declines over time, time is of the utmost importance. Each more 4 years they’re able to delay a release will make it easier to prevent a miners block-size increase.

The devil is in the details in this case, since there doesn’t seem to be any wrongdoing in the eyes of the BTC speculators who speak on behalf their position, while for non-stake holders BTC’s failures are nothing but a proof Bitcoin was a bad idea. Even for the speculators who have the knowledge to evaluate software, the complexity and the uncharted territory of the LN makes it beyond the capacity of most devout BTC supporters to criticize. The investment in time and knowledge to understand the technology is how they hid themselves in plain sight. Any other competing implementations to the LN are kept at bay by the sheer development costs.

That’s how the attackers locked out other devs from “their” coin to freeze it in time as it were for a few years.

One common criticism against Blockstream was it’s at conflicting interests by moving the tx’s to side-chains which they hope to profit from. There’s no reason whatsoever to believe they’re working for profit or that they could profit from their solutions at all. That common “anti- Blockstream” argument is actually serving Blockstream by helping it hide the real goal they’re working towards, which is stopping Bitcoin from succeeding, so quite the opposite.

Once we understand the biggest threat of all to Blockstream’s plan is the threat of an alternative implementation gaining in popularity by making many small incremental steps of improvements instead of one giant leap years in the future, Blockstream advocating for the LN makes more sense than ever before.

All the major flaws in the design that have been pointed out from the very beginning suggest the LN is all about gaining time. Most of the flaws were never addressed, even theoretically. There was enough time to implement the specification several times already, yet they can't do it even once... It's in a permanently broken state: as of date it's been 3.5 years since the white paper release. Compare it with Bitcoin itself: it was specified, coded by very few people (maybe even one person), and released within a year, and it was pretty much running in production within months.

You can also compare it to Ethereum, which was coded by 2 or 3 guys, it's not a bitcoin fork, so it was coded from scratch. And it has advanced features - a Turing-complete language built in. Not a simple thing, when billions of dollars are literally at stake. In only one year a new technique called ZK Sync was coded for Ethereum enabling scaling far superior to the LN reaching 3k tps (as of late 2019 it’s still in testing).

The failure of the LN to be deployed on time is likely intentional.

Compare the “cautious” design choices Blockstream made with the original version which assumed that in order for it to succeed, it first needs to be used as money. If it is ever used as money, then transactions will cover the miner subsidies. If it's not then it failed anyway, and the experiment is over. In either of the cases, eventually BTC will have to hard-fork anyway to accommodate for more transactions.

The LN was never shown to work but it was hard to argue against it at the time it was first proposed since cryptocurrency technology as a whole is so new.

2. a narrative change from a currency to a store of value:

The interest in Bitcoin led to phenomenal returns for investors who bought their coins early enough, but the pool of potential buyers who could increase the price based on nothing but trying to guess the future price will increase, and at one point dreams will have to meet reality, which is where utility is found (see Gersham’s Law). A subtle narrative change has been pushed on the users, that of “digital gold”, which the users had no choice but to accept, and it’s now widespread. Many economists have argued Bitcoin can’t be valuable based on merely marketing it as such, without having serving a purpose - utility, as illustrated by a famous scam taught in economics history when Gould cornered the gold market successfully in 19th century. Bitcoin is proclaimed as “digital gold”. The inherent value as money is what gives it velocity a function of utility measured by how many hands the average coin changed. It’s hard to see how the market will value BTC for long based on a social media marketing alone which could be spread by bots calling it “digital gold” - especially not after it won’t perform as well compared to cryptocurrencies with hard demand based on utility, so for example if Ethereum wasn’t accepted as digital gold but its usage steadily rose until its base token backed 1% of the global capital market which amounted to 282K billion USD in 2013, it’ll far surpass BTC both in being adopted and in ROI (return of investment) for the holders, which would make it more attractive as a store of value as well.

BTC as realized by Blockstream is an abomination of incentives since it must perpetually charge a small niche of users a premium that is greater in sum than the aggregate of all its rivals employing the same SHA256 miners in order to retain it's sole advantage the brand name. Not only that, but the target is moving, and the use cases Blockstream caters to must continually evolve - a cryptocurrency doesn’t have real physical properties that can’t be replicated (Gersham’s Law).

How did the shift from a currency to a store of value become such a critical problem? The LN will require more blockchain capacity, which for the foreseeable future will likely be completely at the hands of Blockstream, and to ever increase capacity beyond the 1MB limit requires blind faith in them, and not in any line of code, since they make the software and control the Bitcoin protocol. This is a most grievous concern that seals the fate of Bitcoin forever, since everything points at another vector of attack is worked on making it impossible to hard-fork (required to change the protocol) Bitcoin by anyone. When considering everything discussed here together, and since the choices only make much more sense as part of a lateral plan, and not separately on their own, the conclusion is the real reason why BTC is marketed as a store of value isn’t because it can in itself stop bitcoin but because it helps to delay as much as possible the inevitable hardfork! In Bitcoin, time is of the utmost importance. By the time there will be no other option but to hardfork Bitcoin it’ll be impossible to do it because of the reduced security of the blockchain.

All the methods we discuss here only viewed together reveal to be a full attack, so it can be said Bitcoin is silently attacked - since reaching that conclusion requires accepting several premises against the normal assumptions most users make, e.g. that the devs work having the goal of the software succeeding as intended. There’s no reason to accept these assumptions without an in depth review of the details and all the different aspects involved.

The Fee Market:

In the meantime the Blockstream model necessitates the blockchain to decrease in usability it’s their declared goal, not a side effect! It’s supposed to be so choked up only tx’s costing hundreds of dollars will be used in it, effectively making it useless for transacting on it, with the goal of creating a “fee market” to artificially create high fees. According to Blockstream only the LN will to be used, with a promise to eventually increase the blockchain capacity as needed while keeping fees high. The reason given is to provide more security to the blockchain but rewarding the miners even when the block reward decreases in the future, but it’s a given the network will have to hard-fork to accommodate for increasing demand from the LN, which also uses the blockchain to create routing channels between the users on the network. The fee market, like the store of value narrative, helps to delay the future hardfork to a time when the hashrate will be low, since by the time there’ll be high demand for LN tx’s to keep the fees artificially high, so much time will pass there’ll be no fees to secure the blockchain.

3. perhaps the most overlooked:

Adding a 2nd layer which doesn’t use the coins themselves but adds an abstraction layer makes it possible to enforce rules or take over over the network directly through owning a large enough share of the coins, or indirectly by having authority over the owners of the liquidity. It’s a silent conquest of the network without anyone being able to know what’s really going on.

Adding a 2nd layer which doesn’t use the coins themselves but adds an abstraction layer makes it possible to enforce rules or take over over the network directly through owning a large enough share of the coins.

This sort of attack could be pulled using any centralized instrument which represents cryptocurrencies, including the new product Bakkt, but the currently the biggest by market capitalization is USDT.

Tether (USDT) is one of the biggest “cryptocoins” by market capitalization, as a stable-coin it aims for a peg to the dollar so that 1 Tether will always represent 1 USD (United States Dollar) and help users to hedge against cryptocurrencies’ volatility while still holding a token and not rely on an exchange for it, while the exchanges save money and hassle by not having to go through regulations required for handling fiat money. The company running it, a sister company of Bitfinex, one of the largest exchanges, is “issuing” more to the existing supply when the ratio increases above one dollar to maintain its peg to the USD, and “destroying” from the supply when the ratio decreases, while promising the outstanding supply is backed up by real USD. This is in short how Tether works, as unbelievable as it may sound.

Coincidentally, a huge printing of USDT has preceded two of the great price surges in BTC.

Considering more than 40 % of Tether volume is BTC/USDT emphasizing that as a huge gap in our knowledge is critical. It’s important to understand Tether is a potential kill switch not only for Bitcoin itself but for the whole cryptocurrency market. So far the rest of the market, the “alt coins”, were heavily dependent on the performance of BTC, so its collapse most likely will trigger a massive crash of the whole market, and with it the mining hash-rate which follows the price.

First, let’s look at the manipulation potential of the price. The simplest case: when there's none or very little liquidity (no one is buying and selling BTC), Alice could just sell BTC to herself at any price and that becomes the market price. If there's just 1 BTC being bought and sold at the current price (let's say 10k), Alice could still manipulate the price by having more volume, let's say 2 BTC. By buying out the 1 BTC at 10k and then selling to herself at 11k, she’s just increased the market cap by 10% at the cost of 0.00002% of the market cap.

Of course, when there's more volume it gets harder. The more Alice raises the price, the more she'd have to buy out people shorting, so Alice has to be careful. She has to always have more volume than the actual traders, else the manipulation won't be that effective. USDT has been having more volume than BTC for quite the time now. Based on the fact alone it is allowed to exist it should be assumed USDT has been successfully manipulating the prices for that time.

Such manipulation is especially bad in Bitcoin because by having such a tool to affect the price the hash-rate can be manipulated as well, and liquidity in the LN be bought.

Aside from market price manipulation, at the right hands Tether could be used for much worse vectors of attack:

It could be used to completely hijack Bitcoin. The LN (Lightning Network) is really an independent network which transacts with notes representing BTC coins similarly to how old dollar bills were representing real gold inherently there’s no accounting of the BTC coins that are being transacted in the LN. That means if there’s a way to control the network which transacts the “BTC bills”, it’ll really control Bitcoin.

To make it clear, in that case the goal of the hubs and spokes LN transaction system isn't simply printing money like the FED creating a fractional reserve, but rather the goal is to force a specific topology in the LN to practically form banks by manipulating the market with a large number of coins acquired with fake Tethers - or equivalently, any other means like a fractional reserve on large exchanges. That attack is relatively easy and shouldn’t be ignored since it’s hard to see how it can not be employed. Letting a decentralized crypto win in the market is not an option for the attackers, and letting a decentralized coin which they only control the developing team which could theoretically be replaced one day by a foreign country win over all the market share isn't much better option for the attackers either. On the other hand, secretly transforming a coin which appears to the unsuspecting observers to be a decentralized crypto into a banking system that isn't much different from the current banking system is the best option they have.

It should be added, of course people will still have the freedom to use the first layer, similarly to how bank clients have the freedom to withdraw their USD from their bank accounts (ignoring limit on cash), and use them directly without relying on an intermediary, but that is impractical. Also a 1st layer with fees kept high by a “fee market” will be too costly to use.

Some pointed out Tether‘s (see history of Tether) and Blockstream’s interests often seem to be aligned.

Once we consider the figures involved, and the pivotal role Tether has in the crypto market, a warning flag should be raised. It’s a prime target and easy to pressure since it’s completely based on trust.

Adam Back, Blockstream CEO, sided with USDT numerous times: "The FUD around Tether is being repeated in publications without citation, please do not repeat @bitfinexed FUD, it does Tether a disservice. Tether is the biggest fiat coin, and no other fiat coins to my knowledge have particularly clearer audits."

That’s despite Bitfinex (sister company of Tether) themselves already admitted to only have 75% backed by currency and also admitted to buying Bitcoin with Tethers reserve! Bitfinex in the past helped Blockstream tremendously by being a lever which pushed the other miners for Blockstream’s controversial software change, SegWit.

As one study suggested, Tether also to be used for price manipulation in the crypto market.

One of the unexplained open questions in crypto is how Tether got away with it for so long.

The CEO of Crypto Capital was arrested for being a member of an international drug cartel and involved in its money-laundering operations using the Bitfinex exchange.

Bitfinex used Crypto Capital because Bitfinex needed Crypto Capital's money laundering services in order to move USD. It’s hard to explain how no one suspected that Bitfinex was not involved in money laundering given that's exactly the reason why they hooked up with Crypto Capital in the first place.

Coincidentally, Tether is now also being offered on Bitfinex using BlockStream’s Liquid Network sidechain, an inter-exchange settlement layer built on top of the Bitcoin blockchain.

What Tether is doing would probably be illegal had it wasn’t used to stop decentralized money.

It’s not necessary to own a huge amount of BTC coins to do the above manipulation, getting the required liquidity using fake Tether would only make it cheaper, but the same could work just by operating LN hubs operating at a small loss, therefore pushing aside any honest players playing for profit.

It’s important to note that even if Tether wasn’t used to procure BTC for free to run hubs, it’d still cost very little for a state actor to take over the network, since the profit margin for running a node is so low, and the initial capital required so high, and the threshold for running a LN node relatively high, and the potential for making a profit is so small, there’d be no financial incentive to run one, so it’d almost certainly end with a hostile LN with and without Tether.

The same problem exists with hostile miners mining Bitcoin as well.

Honest miners are working for profit, and the competition is perfect once everyone can buy mining equipment or some is rented. As a result even at a small additional cost over operational profitability a cahoot of miners can be formed by out competing the honest miners and become the majority of the network. That way it’s possible to clandestinely take over the network over time at a much lower cost than the original model predicted even profiting from killing the original Bitcoin replacing one product with another.

Long Living Connections:

In the envisioned Lightning Network which will have ever-increasing on-chain fees, it won’t even be necessary to own the BTC coins in hubs in order to make the network permissioned. The high fees are meant to force the users into using the 2nd layer in payment channels, and the hubs holding the liquidity aren’t meant to open channels often, so eventually the connections that will arise in the LN will be those which provide maximal connectivity between nodes with minimal number of failed routes, meaning a centralization power will force the network into fewer bigger nodes. These hubs will necessarily be long living connections, or in other words, they will be linked to a physical location or identity, and in affect their legal status will be that of banks (legally, money transmitter), and later on the regulators could enforce on them any policy they want, which will be back to the old centralized permissioned currency and all of the advantages of Bitcoin will be lost, including the designed scarcity, since normal users will be left without the power to enforce any of the rules of the network by losing the power to close payment channels.

Summary: a new model was sneaked in on top of the old model which using enough BTC coins and regulation of exchanges (which hold large amount of coins as custodians) allows forming huge LN hubs that turn Bitcoin into a banking system.

To sum up the above, three vectors of attacks are being worked on:

1. The name of the game: a race to delay adoption as much as possible before a high demand for tx’s will be reached, then there would be little remaining to give much value to the network, and it’ll be too late with no turning back there will be no income for the miners, then either the hashrate will decrease as a result and it’ll become attackable like BCH/BSV proved would happen, or the block reward would be increased to compensate miners for a decrease in fees from transactions.

2. The ability to change the protocol (a hardfork) to make Bitcoin scalable relies on pure faith in Blockstream and in Bitcoin not being attacked. It won’t be hardforked as promised until eventually it won’t be hardforkable at all and become congested forever and at most remain a mostly non-disruptive uesless tech a “digital gold” speculative asset.

3. the most insidious reason for why a 2nd layer was chosen was because it does not have the same inherent properties of the blockchain and as such it leads the way for taking over the LN by running hubs or enforcing policy on hubs.

We’ll see why these aren’t only a possibility but an inevitable outcome later on.

Mid-way conclusions:

At this point, given everything Blockstream did without providing convincing reasons for their actions points at them working towards the above outcomes which are the certain end of Bitcoin, and given the sheer force and scope and success of the social media censorship and propaganda campaigns, it’s extremely likely Blockstream was set up from the start for bringing this ends.