Blockstream is a Bitcoin development company that has positioned themselves among the leaders of innovation in the broader industry.
Founded by a team of notable cryptographers and Bitcoin developers, Blockstream offers a suite of open-source technology and projects designed to push the edges of a novel industry.
Founded in 2014, Blockstream has raised $90 million from investors such as Blockchain Capital, Reid Hoffman, and Khosla Ventures.
Evaluating Blockstream’s technologies and products is important because of the prominent role that they play in the Bitcoin ecosystem. Adam Back, one of the founders and current CEO, created Hashcash — which Satoshi based his PoW consensus design on –, and another co-founder, Gregory Maxwell, is one of the leading contributors to Bitcoin’s protocol having proposed innovative solutions such as Graftroot and Taproot.
Besides the ensemble of prominent members, if you’re a developer, Blockstream offers some of the most extensive and useful resources in the broader cryptocurrency ecosystem. From their Lightning Network implementation (c-Lightning) to its Liquid sidechain project, resources are abundant.
- 0.1 Blockstream Elements
- 0.2 Blockstream’s Liquid
- 0.3 Blockstream Lightning
- 0.4 The Cryptocurrency Data Feed
- 0.5 Blockstream Green
- 0.6 Blockstream Satellite
- 1 Blockstream Standardized Proof of Reserves for Bitcoin Exchanges
- 2 Ensuring Best Practices for Bitcoin Exchanges
- 3 Blockstream Bitcoin Mining Center
- 4 Conclusion
“An Elements based blockchain can operate as either a standalone Blockchain or be pegged to another and run as a Sidechain. Running Elements as a Sidechain enables assets to be verifiably transferred between different blockchains.”
Elements is built on the Bitcoin codebase and can effectively function as a testbed for Bitcoin’s protocol while also easily producing and managing blockchains with a suite of resources at the command of developers — such as the Elements Code Tutorial. Blockstream’s Liquid is a production-grade sidechain implementation of Elements.
The general purpose of Elements is to allow businesses, developers, and other crypto firms to explore and research new applications within a resource-rich environment that has an intriguing feature set. For example, Elements is built on Bitcoin’s codebase, so it is compatible with Bitcoin’s API, and even extends the functionality of sidechains and blockchains with confidential transactions (CTs), additional opcodes, issued assets, a federated two-way peg, and signed blocks to reduce settlement times.
Elements incorporates SegWit and time-locked transactions into the technology. Blockstream is also helping to lead research on Schnorr Signatures — particularly with their proposed MuSig multi-signature standard for Schnorr.
Liquid is one of Blockstream’s flagship products that is an inter-exchange settlement network that exists as a Bitcoin sidechain. It connects numerous exchanges to provide better liquidity through faster Bitcoin transactions, and users can even issue their own assets. It has a native asset, L-BTC, which is pegged to Bitcoin via the sidechain.
Sidechains are blockchains, and Liquid leverages Blockstream’s open-source Elements Project to build a sidechain network for exchanges, market makers, and brokers for fast and private Bitcoin transactions with other users of the network.
Liquid has a suite of features including its Liquid Issued Assets technology, which enables users to tokenize traditional assets like fiat currencies, securities, and even other cryptocurrencies. Other features of Liquid include confidential transactions (CTs), an innovative method for masking transaction details originally proposed by Gregory Maxwell.
Liquid also enables a more standardized environment for interacting with pegged and tokenized assets that rely on Bitcoin’s codebase. Atomic swaps can be executed between participants in the network, further increasing security and privacy — particularly for OTC trades.
Liquid works through a 1:1 peg between BTC and its sidechain asset, L-BTC. BTC is locked on the Bitcoin blockchain, unlocking L-BTC on Liquid that can be redeemed for BTC at any point. Liquid is currently operated by a federation of exchanges and financial institutions running distinct hardware. Individuals traders can access Liquid through its wallet.
Blockstream Lightning is the company’s other major technology, consisting of its c-Lightning implementation — one of the most popular full Bitcoin Lightning Network (LN) implementations. The project is also open-source and falls under the Elements Project GitHub, where numerous repositories from Lightning Charge to FileBazaar are available.
Significant work has been performed with Blockstream’s c-Lightning implementation, including various lightning applications (lapps) that cover web games to e-commerce plugins.
Blockstream’s c-Lightning is their version of the LN, similar to Lightning Labs’ lnd implementation. Some of the notable applications so far of c-Lightning include Lightning Charge and FileBazaar.
Expect Blockstream’s c-Lightning implementation to become more widespread among enterprises and developers as further adoption continues for Bitcoin’s layer two scaling mesh network.
The Cryptocurrency Data Feed
The Cryptocurrency Data Feed (CDF) from Blockstream is a product formed in conjunction with the Intercontinental Exchange (ICE), which is the company behind the New York Stock Exchange. The product targets financial firms and institutions with historical and real-time trade data from multiple primary cryptocurrency trading venues.
Access is not open to everyone, and you need to contact the Blockstream team to gain access to the CDF.
According to Blockstream, the CDF enables true price discovery via more than 200 million trade requests per day across more than 400 crypto and fiat pairs. The product also includes market depth tools (i.e., level 2 order book), daily metric summaries, and is supplemented by ICE’s SFTI network for provisioning redundancies.
Blockstream Green is Blockstream’s official Bitcoin wallet. Designed with security and user-friendliness as the foremost considerations, Green Wallet is available for both iOS and Android. The wallet is entirely open-source.
Although Green Wallet does have some advanced security and privacy, such as dual private keys, timelock smart contracts, and no KYC processes; it does not explicitly offer features like Chaumian CoinJoins or Stonewall — available in Wasabi Wallet and Samourai Wallet, respectively.
That being said, Green Wallet is compatible with hardware wallets — Trezor and Ledger — and offers fee control along with full API support. The app is highly customizable and is a refreshing compromise on user-friendliness and security in a wallet market saturated with options.
One of the most compelling products offered by Blockstream, Blockstream Satellite is an integrated satellite network that continuously broadcasts the Bitcoin blockchain around the world.
The network works by Blockstream’s on-ground ‘teleports,’ which are full Bitcoin nodes that transmit blocks to their series of geosynchronous satellites. Each satellite — there are 5 — receive the data from the teleports and subsequently broadcast them to vast areas of the earth.
Users with a satellite antenna and USB receiver can receive the broadcasted blocks, which are broadcast 24/7, and can continuously stay in sync with the Bitcoin network. Blockstream also takes steps to ensure global redundancy and no partitioning of the teleport blockchain data.
The advantages of Blockstream Satellite are that users can plug into Bitcoin’s blockchain without an Internet connection — assuring both a more robust multi-homing network and granting broader access to the legacy cryptocurrency. Cost barriers for accessing the network are also reduced, and network stability is increased by diminishing Bitcoin’s reliance on the Internet.
Some intriguing developments regarding Blockstream Satellite have made headlines recently. Notably, Blockstream Satellite is integrated with their c-Lightning implementation and users can even pay to broadcast global messages with LN invoices using Spacebit.Live which leverages Blockstream’s satellite API.
Sidenote — Blockstream also has a useful Block Explorer that includes the Bitcoin blockchain, testnet, and their Liquid sidechain.
Blockstream Standardized Proof of Reserves for Bitcoin Exchanges
Blockchain development company, Blockstream, published a standardized method by which Bitcoin exchanges can provide an accurate audit of their Bitcoin reserves. The technology startup revealed that it had submitted its Proof of Reserves protocol as a Bitcoin Improvement Protocol (BIP).
Blockstream announced the news in a blog post published on February 4, 2019 by Core Tech Engineer, Steven Roose.
According to the announcement, the project was brought about by the need to create a single method that allows anyone, be they traders or regulators to audit a Bitcoin exchange platform.
How Blockstream’s Proof of Reserves Work
Rather than requiring live transactions, this new protocol relies on unspent Bitcoin transactions (UTXOs). To use the tool, an exchange creates a new single transaction that contains all of its UTXOs and an invalid input parameter.
The purpose of the invalid parameter is to prevent the execution of the transfer when propagating the transaction throughout the network. Blockstream says this method if done correctly, presents proof of all spendable Bitcoin UTXOs belonging to a particular exchange platform based on the structure of the transaction.
Furthermore, Blockstream says, the process allows for external validation. A customer or regulatory agency can simply request for the transaction data from the process. All that is required would be a Proof of Reserves client and a basic knowledge of Common Language Infrastructure (CLI).
According to the announcement, Blockstream noted that the present state of the protocol gives potentially gives away too much information about an exchange’s finances. Thus, the data would only be safe in the hands of auditors and regulators. However, the company is planning integration with its own Liquid technology to reduce these risks drastically.
Ensuring Best Practices for Bitcoin Exchanges
The Proof of Reserves idea is another step towards ensuring best practices for cryptocurrency exchanges. A standardized auditing process for exchanges could enhance the perception of the market among investors. On the face of it, the Proof of Reserves protocol could potentially shine the spotlight on platforms that are overstating their balances.
Fantastic, really hope this gets picked up. Bitcoin hasn't seen exchanges do significant Proof of Reserves since right after the MtGox collapse in 2014. https://t.co/bE0Rcu0skZ
— Tuur Demeester (@TuurDemeester) February 5, 2019
Back in September 2018, Zaif, an Osaka-based cryptocurrency suffered a hack, with the cybercriminals able to steal $60 million worth of cryptocurrency. At the time, the Zaif team say it didn’t discover the hack for five days.
With continuous Proof of Reserves in place, a situation like Zaif wouldn’t be possible. Once the hack occurred, a check on Bitcoin UTXOs would show a deficit from previous values. With more advanced programming, the process could even be automated, providing real-time proof of Bitcoin reserves.
Creating a standardized process also ensures the participation of more stakeholders in the auditing process. Presently, the platforms that enable Proof of Reserves use different protocols. Thus, anyone wishing to audit them needs to become acquainted with each process which usually requires expert programming knowledge.
Blockstream Bitcoin Mining Center
Last year Blockstream, announced that it has established a mining division, which already sports a star-studded cast of clients.
Meet Blockstream Mining
As it stands, the Bitcoin mining industry is very centralized.
Bitmain, a Chinese outfit, manufactures and distributes a majority of the machines used to mine cryptocurrency. It also is affiliated with mining pools that have around 50% of Bitcoin’s hash rate, depending on which pools you count.
What’s more, reports suggest that a majority of the mining of blockchains are taking place in China, where electricity is often cheap, ASICs are easy to come by, and land is easy to come by. This fact was accentuated when Bitcoin’s hash rate dramatically dropped off after a flood in China last year.
Blockstream is looking to change this centralization with their newfangled mining division, which was actually launched in secret way back in 2017, back during the whole spat between Roger Ver’s crowd and Blockstream & Co.
This new division is a “mining equipment colocation” service, which promotes “institutional and enterprise customers” to deploy “virtually any type of Bitcoin mining equipment” in any of Blockstream’s centers.
Currently, the colocation service is used by Fidelity Investments, the prominent Wall Street firm that has been mining Bitcoin in-office for years; pro-crypto LinkedIn founder Reid Hoffman, and Blockstream itself, which claims to have machines that power “less than 1%” of the Bitcoin network.
The company currently has data centers in Quebec — Blockstream claims to be one of the first Bitcoin mining operations to set up in the Canadian province — and in Georgia.
The two centers currently have an energy capacity of 300MW, which Forbes contributor Kyle Torpey believes could power 7.5% of the Bitcoin network at full capacity with the latest ASIC models.
🚨🚨🚨@Blockstream has revealed they've gotten into the Bitcoin mining business.
They have 2 massive mining facilities in Quebec and the state of Georgia with a combined 300 MW of energy capacity.
Could power 7.5% of the network hashrate at full capacity with latest ASICs. https://t.co/SZTE1oWbBu
— Kyle Torpey (@kyletorpey) August 8, 2019
Blockstream gives its clients “full control over their mining operations”, which presumably helps to mitigate the aforementioned centralization risks.
To further prevent the centralization of Bitcoin mining, Blockstream has also launched its own mining pool, which is harnessing the technology of BetterHash, a pooling protocol that disallows the pool maker from having control of what transactions should be included in blocks. Blockstream explained this decision:
BetterHash is an improved mining pool protocol that gives individual miners the ability to control which Bitcoin transactions to include in their newly mined blocks. As a result, the Bitcoin network becomes more decentralized and censorship resistant as operators of large pools no longer centrally determine which transactions to include into blocks.
Blockstream is poised to continue its trajectory as one of the leading development firms in the Bitcoin ecosystem.
Led by a talented team who have built some fascinating open-source projects, companies like Blockstream are drivers of innovation in the sector. Other companies like Lightning Labs and Bitfury also are pushing innovation in Bitcoin and have their own LN implementation as well.
For developers, if you’re interested in working on Bitcoin’s LN, Blockstream’s open-source Github repos are a great place to start.