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Blockstream: Their Allstar Team And SideChain Innovation

Amid SideChain whitepaper news, BlockStream adds Linkedin’s Reid Hoffman to their board of directors and $15 Million in VC funding.

Blockstream Quote 1

According to a SEC filing, tech venture capitalist and Linkedin co-founder, Reid Hoffman, is a new director for BlockStream. BlockStream is a sidechain development company and crypto-currency investment fund.

Sidechains are a new form of blockchain that hope to replace Altcoins. The blockchain is the public ledger that Bitcoin is based on. Crypto-currency alternatives are called Altcoins and these coins hope to improve upon Bitcoin. Many view, including BlockStream, Altcoins as mostly driven by the urge to get rich, instead of being true innovators. They also claim that they are, more or less, copies of Bitcoin and don’t provide any real improvements. Sidechains, pegged to Bitcoin’s blockchain, hope to accelerate blockchain innovation without falling prey to the same pitfalls, they claim, Altcoins do.

Blockstream recently launched a whitepaper about Sidechains that got a lot of attention. The Montreal based corporation, received $15.18M USD in funding from 15 investors. The company offered to sell $16.2 million in company equity, but have only received 94% of the offering so far. Austin Hill says that funding is still open and will close later this week.

"I think it’s an incredible system that’s created a distributed ledger across the whole world for it can be money but it can also be other things."
— – Reid Hoffman

Reid Hoffman is a lifelong tech entrepreneur and venture capitalist. He started what many claim as the first social network, SocialNet. Though SocialNet never took off, Hoffman went on to be a director, and eventually Executive Vice President, of the massively successful online payment processor, Paypal. He has also made numerous investments in major companies. Most notably, his very early investment in the popular social network, Facebook, and the social gaming company, Zynga. He is most well known for co-founding the business and job social network, Linkedin.

Hoffman has become very interested in Bitcoin. Speaking about it at tech conferences and on TV shows, like CNBC’s ‘Squawk Alley’. He says he only owns “a few bitcoins”, and is more interested in Bitcoin companies and the potential of smart property with Bitcoin’s blockchain. Smart property is using Bitcoin’s public ledger, the blockchain, to store and trade real estate, stocks, and other digital assets. He was reported as saying that Bitcoin is not about the daily horizon, but rather, the “three- to five-year horizon.”

Hoffman proved that he is in Bitcoin for the long term when the investment fund, Greylock, where Hoffman is a partner, led the series A funding round for Xapo, a Bitcoin online wallet provider and payment solutions company. The series A funding totaled $20 million with other investors including, former Yahoo! CEO Jerry Yang, PayPal co-founder Max Levchin, and Index Ventures. After the series A funding round, the company also announced that Hoffman, as well as Mike Volpi, would be joining their board of directors.

Hoffman wasn’t the only impressive person detailed in the SEC filing. Austin Hill, a cryptology investor and entrepreneur, was filed as a director, the President, and Chief Executive Officer of BlockStream. Adam Back, longtime hacker and early e-cash developer, was filed as a director and the Chief Scientist. Shahir Guindi, esteemed lawyer and investor, was filed as the Secretary.

Austin Hill is a lifetime tech entrepreneur and investor. He has founded and partnered several Canadian venture capital firms. One of his early companies, Zero-Knowledge Systems, a cryptographic privacy and anonymity development company, grew to over 200 employees and was involved with the early development of the first e-cash, Hashcash.

Adam Back is the one of the most impressive cryptologists of the last couple decades. He was an early pioneer of digital-cash with his project, Hashcash. Hashcash was very similar to Bitcoin, but without the blockchain and inflation control. Hashcash laid the groundwork for Bitcoin, as it developed the proof of work mining system that made Bitcoin possible. Besides advancements in digital cash, Adam has contributed to many other fields of cryptology, including anti-spam schemes and identity based encryption.

Shahir Guindi is a lifelong investor and lawyer. He is a partner of the Osler law firm. Osler specializes in international legal services for companies in North America and abroad. In 2012, he was appointed to the board of directors of the Business Development Bank of Canada, by the honourable Christian Paradis, Minister of Industry.

Other people, included on their website, were two of the Bitcoin core development team, Gregory Maxwell and Pieter Wuille. Both have contributed greatly to Bitcoin’s code and are major players in Bitcoin’s development.

“You can have bitcoin stand for something that isn’t just a bitcoin. […] It could mean your car. So then your car could be accounted for on a general ledger that can let you do electronic contracts. You could put liens against it, moving it all into the electronic age.”
— – Reid Hoffman

Recently, the company made big headlines as they released the long awaited sidechains whitepaper. Sidechains have been a conversational technology in the crypto-currency community. Many see them as pro-centralization and anti-competition, since sidechains would remove the need to have many different Altcoins. Yesterday, when asked about Altcoins and Sidechains, the Bitcoin Foundation’s chief scientist, Gavin Andresen, said he agreed with the economist, Daniel Krawisz, that no Altcoin can beat Bitcoin and any innovation in the Altcoin space could easily be added to Bitcoin. The developers behind BlockStream and developers of Sidechains feel the same way.

Possible advantages of sidechains are numerous. One of the sidechains BlockStream purposed is a “beta” blockchain, where new features and updates for bitcoin’s blockchain could be tested, before being added to Bitcoin itself. Other possibilities include, having financial assets stored and traded, such as property deeds, shares, and other digital assets on a sidechain. A third option is a sidechain that facilitates micro-transactions, or transactions only worth pennies. This has been one of the long held promises of Bitcoin but due to spamming issues, has not reached its full potential. These tiny transactions could be useful for the world’s poor, and digital content monetization. Sidechains would be double pegged to Bitcoin’s blockchain, meaning that units could be able to be exchanged between sidechains and Bitcoin’s blockchain at a fixed rate. These are just a few sidechains the BlockStream team has thought of and they hope people will experiment with their own.

Sidechains are very similar to alternative crypto-currencies in that they allow experimentation without changing Bitcoin’s codebase. The BlockStream team holds that sidechains are superior because sidechains are not a currency and just a different blockchain. This allows them to be free from worry with regards to market challenges, and specifically heavy speculation from Altcoin investors and traders, who try to recreate the profits early Bitcoin adopters experienced.

BlockStream has an off shoot investment firm called BlockStream Ventures. On the website, it says “Launching Spring 2014” but has nothing else except a few paragraphs and two contact emails. According to the site, the firm actively manages investments in digital currencies, as well as companies in the financial and technology sector. They see investment in this sector to be traditionally from people against the mainstream but they hope to be a middleman, by bridging the old way of finance with the future. Their focus is not just on digital currencies, but also related technologies, like the blockchain or sidechains. The page says they hope to profit from the rise of digital currencies and adoption of innovative technologies.

“Imagine a technology that makes it possible to trust anyone. Now imagine your bank, your mortgage and all your assets are all built with that technology. This is certainly not our present, but it could be our future.”

Sophie is an artist whose secret passion is finance, economics, and technology. Shh! Don’t tell the artists she works with, they hate that kind of stuff. She loves keeping up with the ever expanding and evolving world of crypto-currency. When she isn’t painting, she can be found trying to understand the complex inner workings of markets. Another complex system she is fascinated by, are ecosystems. She often observes them on her daily hikes through nature.


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