As a professional translator, I will provide an accurate and coherent translation of the news article into English, maintaining a formal style and retaining proper nouns. Please find the translation below:
Title: What Role Does Blockstream Play in the Bitcoin World Behind Salvadoran Bitcoin Bonds?
(Previous Summary:
Salvador: Bitcoin “Immigration Visa” Sold Out by the End of the Year, $1 Million Price “Fair”
)
(Background Information:
Salvador’s “1 Billion Bitcoin Volcano Bonds” Set to Launch in Early 2024! Issued via Bitfinex
)
Table of Contents:
Blockstream’s Involvement in the “Bitcoin Full Industry Chain”
The Product Matrix of the “Bitcoin Suite”
Bitcoin Sidechain “Liquid”
Blockstream: The “Veteran” in the Bitcoin World
The Opposition in the Bitcoin Scaling Debate
Controversy over “Bitcoin Development” and “Corporatization”
Daily Banter with the Ethereum Community
Just this past December, Salvador’s National Bitcoin Office (ONBTC) released a statement announcing that the Bitcoin bond, known as the “Volcano Bond,” had received approval from the Salvadoran Digital Assets Council. It is expected to be issued in the first quarter of 2024 on the Bitfinex securities platform.
“The funds raised from the bond issuance will be used to build a city called Bitcoin City, and this bond issuance will make El Salvador a new global financial center,” said Samson Mow, the former Chief Strategy Officer of Blockstream, at the Salvadoran Bitcoin Bond gathering in November 2021.
So, what role does Blockstream, the company behind the Salvadoran Bitcoin bonds, play in the world of Bitcoin?
In August 2021, Bitcoin and blockchain infrastructure company Blockstream completed a $210 million Series B financing round and simultaneously acquired the Israeli ASIC chip design team, Spondoolies. This marked Blockstream’s expansion from its original software-centric business to the upstream of the Bitcoin industry chain.
Prior to this, Blockstream’s commercial product line mainly focused on the Liquid sidechain ecosystem of Bitcoin and mining-related services, as well as some data-related businesses, aiming to provide expansion tools and enhance the Bitcoin ecosystem.
Blockstream’s early product line primarily served institutional clients with Liquid sidechain solutions, and later entered the consumer market by acquiring the Bitcoin wallet, Green Wallet.
At the same time, Blockstream also maintains and iterates several free product lines for the Bitcoin ecosystem, such as the Bitcoin full node satellite network, Blockstream Satellite, the multi-signature wallet Blockstream Green, and the Lightning Network client c-lightning, among others.
Although Blockstream’s involvement in Bitcoin Core development is at the forefront of software development, there is also the mining industry involved in the upstream of the entire Bitcoin industry chain. Therefore, Blockstream began offering Bitcoin mining services in early 2020 through partnerships with Norwegian public company Aker, Square, and BlockFi.
This includes the subsequent launch of the “Blockstream Energy” service, which aims to help energy producers sell excess electricity to miners, providing scalable energy solutions for mining projects and improving the economic feasibility of renewable energy projects, especially in remote areas, through Bitcoin mining.
From the perspective of chip manufacturing, Blockstream announced the acquisition of the intellectual property of Bitcoin mining hardware manufacturer Spondoolies during its public Series B financing. The core team of Spondoolies will also join Blockstream and focus on ASIC chip design and manufacturing, filling the gap in this area for Blockstream.
In addition, Blockstream has also launched the Blockstream Mining Note (BMN), a Bitcoin mining token traded on Liquid for qualified investors. The mining facilities are located in Georgia, USA, and Quebec, Canada.
With the perfect layout of the mining sector, Blockstream now covers almost all dimensions of the Bitcoin industry, including Bitcoin development, institutional services, and mining, among others, forming a comprehensive product matrix.
The key core of Blockstream’s “Bitcoin Suite” is “Liquid.”
“Liquid” is the Bitcoin sidechain mentioned earlier, on which the plan to issue Bitcoin bonds in El Salvador is based. It can be simply understood as the “smart contract layer based on Bitcoin”:
As a second-layer network of Bitcoin, it allows the issuance of security tokens and other digital assets, aiming to provide financial products and services through the Bitcoin network and be used for financial asset settlements.
Currently, the Bitcoin network ecosystem can be divided into four basic layers:
– The main chain, which mainly oversees the value system of Bitcoin, carrying the decentralization and security of Bitcoin, as well as the value orientation represented by the Bitcoin community.
– The second layer, represented by the Lightning Network, focuses on expanding the payment experience of Bitcoin.
– Sidechains, where the smart contract part is mainly placed, have the most important function of incorporating smart contract applications into the Bitcoin ecosystem.
– Cross-chains, where almost all mainstream public chains introduce Bitcoin into their own ecosystems through cross-chain bridges, and within their ecosystems (especially Ethereum), Bitcoin is used for developing Bitcoin-related DeFi projects.
The “Liquid” sidechain is also the core product of Blockstream. Although other products are interconnected, Liquid Network is given priority as the most important product line. “For example, the wallets we develop will eventually be connected to the Liquid Network, so the wallet’s profit model is secondary, and the main focus is on growing the Liquid Network.”
In 2014, as Ethereum began its presale and Mt. Gox was hacked, the Bitcoin community’s scaling debate became increasingly intense, attracting the attention of the entire crypto world due to its profound impact on the industry.
At the same time, Blockstream, which had been founded just a few months earlier, raised $20 million in Series A funding and clarified its project positioning – expanding the Bitcoin protocol layer’s functionality (sidechains).
The company had an impressive lineup, led by Adam Back, a former HashCash developer; Hammie Hill, an early developer of e-cash and founder of zero-knowledge systems, with HashCash and e-cash being foundational products for Bitcoin.
Additionally, Blockstream had an all-star development team, including Gregory Maxwell, who would later become a leading Bitcoin Core developer, along with Jonathan Wilkins, Matt Corallo, and Pieter Wuille; Jorge Timon, the project lead of Freicoin, and former NASA engineer Mark Friedenbach, among others.
In the Bitcoin scaling debate, the community leaders at the time, such as Gavin Andresen and Bitmain, were proponents of scaling, while Blockstream, represented by core developer Gregory Maxwell, was among the opposition.
The scaling proponents believed that the network congestion issue needed to be resolved immediately, as further growth in the user base would lead to significant payment delays and skyrocketing transaction fees. This was unacceptable for Bitcoin, which aspired to be “electronic cash.” Gavin Andresen bluntly stated, “Rising Bitcoin transaction fees will drive the poor away from Bitcoin.”
The opposition, however, believed that the congestion issue could and should be solved in the long term through second-layer networks. They argued that scaling only solves short-term congestion, and as more people enter the Bitcoin network, it will have to continue scaling. They advocated for keeping the Bitcoin network at 1MB while introducing off-chain solutions like Segregated Witness (SegWit) and the Lightning Network outside the Bitcoin network.
The conflict between the developers and mining representatives lies in their mutual distrust. Developers do not trust mining representatives, believing that mining pools and mining companies have hijacked the miners’ voice, turning industrialized mining into a centralized commercial activity that undermines the decentralization of digital currencies.
Mining representatives, on the other hand, believe that once the Lightning Network is built, the majority of transactions will occur on the second layer, which will eventually become highly centralized, with transaction channels monopolized by central nodes. The underlying network will become the channel for settling transactions between central nodes, and most people will never use the underlying network, contradicting the original intent of Bitcoin’s creator, Satoshi Nakamoto.
In the subsequent negotiations at the New York meeting, due to various conflicts, Samson Mow, representing Bitcoin Core and Blockstream, was excluded from attending.
The subsequent twists and turns in the debate and conflicts that followed are well-known, as the Pandora’s box of Bitcoin forks, such as BCH, was opened, and everything became irreparable.
Prior to this, Blockstream had made three public financing announcements, including a $21 million seed round in November 2014, a $55 million Series A round in February 2016, and a strategic investment by Digital Garage (DG Lab Fund) in November 2017, with the specific amount undisclosed.
It should be noted that Bitcoin Core is an open-source project responsible for maintaining and releasing the Bitcoin client software “Bitcoin Core” (including full node validation and Bitcoin wallets) and other related software maintenance work.
Among the core developers and contributors involved in the Bitcoin Core project, a significant portion are Blockstream employees who are funded by Blockstream for their development work. This has led to a double controversy surrounding Blockstream’s involvement in “Bitcoin development” and “corporatization”:
On the one hand, Blockstream has gradually gathered the most outstanding developers in the Bitcoin community, contributing to the daily code development and maintenance of Bitcoin.
On the other hand, these developers have a different form of involvement in the open-source project – they are directly employed by Blockstream and are salaried employees. Combined with Blockstream’s financing and business development centered around second-layer networks and other Bitcoin products, this has raised concerns among some community members about the independence of Bitcoin Core developers. The community’s worry is that Blockstream’s influence may turn the entire Bitcoin underlying network into a dependency of the second layer, with some even stating that “Blockstream controls the Bitcoin code.”
“Based on the fact that Ethereum cannot build a truly decentralized financial system, it can only be achieved through Bitcoin, the Lightning Network, and Liquid,” Blockstream can be seen as the most influential “KOL organization” in the Bitcoin community. Both CEO Adam Back and COO Samson Mow enjoy taking jabs at the Ethereum community.
Adam Back once referred to Ethereum as similar to a Ponzi scheme in response to others’ information, while Vitalik Buterin believes that Ethereum is rising, and the tide of history will not favor Bitcoin maximalists.
In the subsequent debate between Samson Mow and Vitalik, they even raised questions about the potential harm between Ethereum and Liquid, with Mow stating, “No one will build any secure (e.g., financial) system on the Ethereum platform. If you want tokens, you can issue them on the Liquid Network, and you can thank me later.”
To some extent, behind Blockstream is the entire Bitcoin community – the Bitcoin scaling debate, the Lightning Network and sidechain solutions, and the route competition with Ethereum, all forming an inextricable mess.
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