Transparency and decentralization at Bluesky: reality or illusion?
Bluesky attracts millions, but doubts about transparency and decentralization are growing. Critics question the ownership structure and long-term independence.
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The onslaught on the short message network Bluesky continues unabated. More than 20 million people have now signed up –, the majority of whom turned their backs on X (formerly Twitter) and Threads after the US election. But while Bluesky advertises transparency, openness and decentralization, critical voices are growing. They are particularly questioning the financing and ownership structure of the network as well as the actual degree of decentralization.
When Twitter founder Jack Dorsey launched the alternative platform in 2019 – and was financed by Twitter –, his goal was to create an independent, decentralized social network. But in May 2024, Dorsey left the board, deleted his account and publicly criticized Bluesky for repeating Twitter's mistakes and moving away from its original ideals. This about-turn subsequently sparked some debate, as many people have been more suspicious of new social platforms than before, at least since the Twitter takeover by Elon Musk.
Non-transparent financing
An important point here is the ownership structure. In July 2023, Bluesky raised 8 million dollars in a crowdfunding round, followed by 15 million dollars in a financing round in October 2024. The financing round was led by the venture capital firm Blockchain Capital. This resulted in two points of criticism: On the one hand, its co-founder Brock Pierce has been criticized for links to controversial figures such as Steve Bannon. On the other hand, users fear that Bluesky could be taken over by "Crypto Bros".
Bluesky CEO Jay Graber rejected the accusations and emphasized that Blockchain Capital is only one of many investors. Other investors in Bluesky include funds such as Alumni Ventures, True Ventures and SevenX Ventures. Nevertheless, critics criticize the lack of transparency: it remains unclear exactly who holds how many shares and which investors may exert influence.
Safe from takeover?
Accordingly, there are fears that Bluesky could suffer a similar fate to X. However, Elon Musk showed no interest in Bluesky, although Jack Dorsey had explained the advantages of the Bluesky project to him before the Twitter takeover.
One possible reason for this could be that, according to Jay Graber, Bluesky is "billionaire-proof" by design, i.e. protected from takeovers by billionaires like Musk. In an interview with the US news channel CNBC, she referred to four key mechanisms:
- Bluesky is based on open source software, so that the source code would remain publicly available even in the event of a takeover.
- Users would have control over their data at all times, allowing them to switch to their own server instance with all their followers.
- Like ActivityPub, the ATProtocol allows federated instances, making centralized control more difficult.
- Bluesky operates as a "Public Benefit Limited Liability Company" (PBLLC), meaning that the company formally aims to have a positive social impact.
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These are all important points to make the influence of individual investors or even a takeover more difficult. However, not all of these promises have been implemented to date. In fact, Bluesky had published the source code of its app and the underlying ATProtocol, but parts of the server software are still proprietary. The choice of a proprietary protocol also hinders interoperability with other decentralized networks such as Mastodon and restricts users' freedom of choice.
And while it is basically true that users can control their data and move it to their own instances, this function is still in "early access" and is severely restricted. For example, the Personal Data Servers (PDS), which are intended to give users more control over their data, are currently limited to just ten accounts. Due to these restrictions, Bluesky is currently working with a largely centralized structure.
As a public benefit LLC, Bluesky is subject to certain restrictions. Unlike a regular limited liability company (LLC), a PBLLC must meet additional legal requirements to be transparent and accountable. These include using independent standards to evaluate performance, disclosing conflicts of interest and informing members whether their social goals have been met. This does indeed provide some protection against takeovers, but only those aimed solely at maximizing profits. Exactly how a company fulfills this positive social impact is at its own discretion. Bluesky has set itself the goal of "developing technologies for open and decentralized public conversations and driving their widespread adoption."
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Financial independence
Bluesky's business model is still quite vague. Revenue is to be generated via paid premium functions, while the basic version is to remain free of charge. Bluesky promises that paying users will not receive preferential treatment in the algorithmic timelines – a dig at competitor X. However, critics doubt that an ad-free model will be sustainable in the long term in light of the onslaught. A planned payment system for creators also raises questions about financial sustainability. Critics warn that financial bottlenecks could drive the platform into dependence on external investors, which would jeopardize its independence.
Conclusion
Bluesky is currently failing to deliver on some of its promises of openness and transparency. While the network advertises decentralization and user autonomy to the outside world, a look behind the scenes reveals some discrepancies, at least so far: The ownership structure remains opaque, the business model raises questions about long-term independence and central technical functions for true decentralization are still in their infancy. On closer inspection, the mechanisms touted as takeover protection have so far proved to be incomplete. It remains to be hoped that Bluesky will indeed become the open and transparent alternative to the established social networks before it collapses under the weight of its newly acquired users.
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