Is Blockstream a peril to Bitcoin’s decentralization?
- Canadian blockchain developer Blockstream is prominent in building out the Bitcoin ecosystem.
- The company’s interests in funding Bitcoin core development, mining, and satellites have raised concerns over centralization.
- Blockstream refutes the concerns, noting that it cannot dictate what miners do with its equipment.
There are few companies doing as much for Bitcoin as Blockstream. The Canadian blockchain developer is prominent in building out the ecosystem for the world’s biggest cryptocurrency, with a core mission of delivering sidechains to enable Bitcoin to scale.
But since it was founded in 2014, Blockstream has been dogged by accusations of conflict of interest. Critics claim that the sole sidechain it’s developed to date, the Liquid Network, doesn’t meet community needs, and they warn that Blockstream Satellite and Blockstream Mining could lead to the company extending its hold over Bitcoin—a process that could, however inadvertently, centralize some of the Bitcoin ecosystem, compromising its founding principle of decentralization.
Blockstream, for its part, firmly rejects its critics’ assertions. “Since 2014, Blockstream has developed and collaborated on multiple tracks of decentralization,” founder Adam Back told Decrypt. He emphasized that the company has no ability to dictate to miners or Blockstream Satellite users.
Centralization is a touchy issue for the community as a whole, but particularly for the industry’s most decentralized cryptocurrency. Whether Blockstream’s interests and ubiquity in the industry threaten Bitcoin and its users, however, likely depends on which camp you’re in.
A sterling pedigree
There’s no doubt that Blockstream has a sterling pedigree, which has helped the startup raise around $100 million, from investors such as Reid Hoffman, Blockchain Capital, and Digital Currency Group, since it launched in 2014.
Back is behind Hashcash, forerunner of the proof-of-work consensus design used by Satoshi Nakamoto for Bitcoin. Cofounder Gregory Maxwell is a leading contributor to Bitcoin’s protocol, and a long time open-source and cryptography champion.
Blockstream provided early funding for the Lightning Network. Launched in 2015, this “layer 2” solution allows peer-to-peer, instant, and almost free payments to be made with Bitcoin.
But the bulk of Blockstream’s development is directed at other projects. First up, there’s the Liquid Network, a sidechain intended to give institutions and crypto exchanges more privacy, faster finality, and tokenized assets while using Bitcoin.
Blockstream Satellite is a project aimed at reducing Bitcoin’s dependency on Internet access by broadcasting the Bitcoin blockchain via satellite. And Blockstream…