On the 28 of January 2016, Blockstream announced its strategic
partnership with PriceWaterCooper (PwC), one of the four largest
international accounting firms.
“PwC brings deep industry experience, a broad range of business services
and cutting-edge client insights,” read part of a blog
post
that announced this development, “Together, PwC and Blockstream will
help companies evaluate cryptocurrencies and blockchain technologies and
launch new uses for the Bitcoin protocol.”
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Exactly 5 days later, the Montreal-based blockchain startup has made
another attention-grabbing announcement. It has raised a relatively
significant amount of venture capital in its second Series A funding.
“I’m excited to announce that we raised $55 million in Series A
funding,” declared Austin Hill, who is listed as Blockstream’s Chief
Instigator, in a blog
post
“to further enhance our Sidechain technology, expand our operations
globally, and support new industry partnerships, bringing our total
investments in the company to $76 million.”
There has been no Bitcoin price shift attributed to these pieces of news
yet. However, in the words of Austin Hill, “Blockstream is off to a
strong start this year”.
In the minds of many within the Bitcoin community, there are reasons to
wonder whether a successful Blockstream will turn out to be stumbling
block or stepping stone for Bitcoin as a whole, and, by extension, the
Bitcoin price. More of that later.
Who are Blockstream?
Blockstream is a company started by several of the core Bitcoin
developers including Adam Back, Matt Corallo, Gregory Maxwell, Gregory
Sanders and Pieter Wuille. Its primary mission is to develop
interoperable blockchain markets, which it has given the technical term
of
Sidechains.
For Blockstream, the Bitcoin Blockchain is a foundation on which to
build smaller blockchains that are tasked with specific functions such
as asset markets, exchanges and smart contracts.
It therefore makes some sense to think of Blockstream as standing at the
opposite end of the spectrum from where the private blockchain projects
such as R3, which is a consortium of over forty
commercial banks, and Digital Asset
Holding, known better through its
CEO Blythe Masters, who used to work for JPMorgan Chase, stand.
Digital Assets and R3 are working on blockchains that are not connected
in any way, at least not yet, with the Bitcoin blockchain. They copy
many of the Bitcoin Blockchain aspects, though.
As a matter of fact, most of those behind private Blockchain projects
such as Charley Cooper, Managing Director at R3, and James Dimon, CEO
JPMorgan Chase, have
insisted
that the Bitcoin public blockchain will not survive for long. And that
it is the private blockchains that will revolutionize the future of
finance and other sectors of business.
Public versus Private Blockchains
It is therefore interesting when a startup like Blockstream, which has
based its entire business model on the Bitcoin Blockchain forms
strategic partnership with the likes of PwC and raises huge amounts of
venture capital.
Perhaps, the recent achievements of Blockstream drive the point home
that the battle line between the private blockchains and the public
blockchains are still being drawn. As to which one will be the winner
when the dust settles is far from being clear at the moment.
Now back to the question of whether a successful Blockstream is good or
bad for Bitcoin; both the protocol and the bitcoin price.
In other circumstances, there will be no question that it is a good
thing that a company that seeks to build solutions for mainstream
businesses on the public and decentralized Bitcoin Blockchain is making
the steps that Blockstream making.
However, that is not the case because of the ongoing block size scaling
debate. As things stand now, Blockstream hold a critical position in the
debate. The core developers of bitcoin who also work in the startup have
their own proposal on how to increase the Bitcoin block size.
Not so fast
And theirs is a conservative approach. They do not think it is proper to
put the need to increase the size of the Bitcoin block size ahead of
other considerations such as the risk of centralization and security of
the network.
As a matter of fact, the Blockstream group of Bitcoin core developers’
proposal, which is known as the Bitcoin Core, has seemed to antagonize
other developers, especially those pushing for a hard for to adopt
Bitcoin Classic, another Bitcoin block size scaling proposal.
The Blockstream group of Bitcoin core developers is also the same one
that has proposed the Segregated Witness (SegWit) solution. With SegWit
transaction signatures will be separated from transactions hence
creating more room for transactions in Bitcoin blocks without the need
for a hard fork.
The accusations that have been leveled against the Blockstream team
include that it seeks to keep the block size smaller so that scaling
could be achieved through the Sidechain solutions it is working on.
“I like what Blockstream is currently doing, but I do find this
particularly worrying. It is good that bitcoin is used for other – for
profit – production use cases. It is good that bitcoin’s core codebase
is adapted to allow for this,” one redditor has pointed
out,
“It is NOT good that this is the same team doing so. This will
inevitably lead to decisions regarding prioritization and direction that
are in conflict with the public utility of bitcoin.”
Will conflict of interest affect Bitcoin price?
However, not everyone within the Bitcoin community thinks that a
successful Blockstream will present a conflict of interest on the part
of the Bitcoin core developers who are actively involved in both
projects.
“Blockstream doesn’t have 60% of power over commit privileges for
Bitcoin. For a single Bitcoin repository Blockstream has as much power
as Garzik has, as well as Gavin since every committer gets a veto,”
another Redditor has observed, “They only represent 1/4 of that repos
contributors with merge access. You are taking the truth and making
little stretches in a bunch of dimensions to paint a completely
different picture.”
Whatever your persuasion might be on the role of Blockstream in the
development of Bitcoin, one fact stands out; investment going into it
proofs that there is a lot of confidence in the Bitcoin technology
amongst investors. And this is a good thing for Bitcoin price, in the
long if not in the short term.
Images courtesy of
YouTube and
Flickr.
