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Anyone reading discussions in the Bitcoin scene these days probably has seen the following argument (or similar):

"Blockstream is preventing a blocksize increase because their products can only turn profit in a small block environment."

What evidence is there to support or refute this statement?

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As far as I know, they don't have an explicit business model published anywhere. We do know that they are working on:

  • Side chains - a two-way peg that has fixed transfers of value from bitcoin to a sidechain and back.
  • Lightning network - a network of transactions that can be updated relatively quickly (seconds, theoretically) and provably given if the transaction is published on the blockchain.

Both these things are innovations, but how they will make a profit off them is not clear. That said, both these innovations potentially could be more useful if transactions on bitcoin proper were more costly. For both, that would be because transactions on a side chain or lightning network can be potentially cheaper and thus more utilized. That is in theory. Neither of these things are public or even built. Most of the accusation is in theory. Only the Blockstream people know the business model and given that they're a startup with no profits, I wouldn't be surprised if they pivot a few times before they actually find a business model that works for them. This may or may not involve profiting from the innovations above.

Essentially, there is no clear revenue model so the statement about blockstream is mostly speculative.

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  • Essentially, there is no clear revenue model so the statement about blockstream is mostly speculative. Couldn't agree more. Unfortunately we are going to have to wait a while to see exactly what comes of it.
    – Kristine Aurum
    Commented Jan 19, 2016 at 16:31
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    Both Side chains and Lightning Network (they pay one of the developers, but there are many more) highly depend on Bitcoin succeeding. If Bitcoin fails, so will Side chains and LN. So incentives are actually well aligned there.
    – Jannes
    Commented Jan 21, 2016 at 13:54
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It is unlikely that the Blockstream business model requires small blocks. For Blockstream to succeed, Bitcoin will need to succeed independently or there will be limited demand and other devs will increase the block size and the model will fail anyway.

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Blockstream's for-profit product is called "Liquid", for which its usefullness diminishes when on-chain transactions are cheap and fast to process. Blockstream proudly admits that the product is already being sold to large exchanges and perhaps even conventional banks.

https://blockstream.com/liquid/

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