What causes a quantum state function to collapse?

We know that “when we make an observation” the “state/wave function collapses” into a particular eigenstate. But never have we defined what “making an observation” is. This seems to be a really crucial part of the whole process!

I have two theories:

1) An exchange of information. This means that any physical process or particle which can carry the state of the quantum system causes the system to collapse into an eigenstate. This implies that processes in nature are collapsing quantum states into eigenstates all the time.

2) A conscious observation ie someone somewhere is trying to make sense of the system. According to my instructor, somebody did a double-slit experiment with randomized parameters. They found that the way they attempted to analyze the data gave different answers. This implies that no quantum systems “choose an eigenstate” (exist) until someone tries to observe them consciously. Therefore, reality happens as we experience it.

*Note, I think that there is no way to tell the difference between these two theories. While case 1 may be true, we can never test if it is so because as soon as we try we have entered the conditions of case 2. Could this mean that they are actually a single case, then?