A group of high profile Silicon Valley entrepreneurs and technologists, who were behind such juggernauts as Google, Paypal, Microsoft, Yahoo, Sun Microsystems, and Linkedin, have just backed the innovation of bitcoin technology in a big way.
Blockchain technology startup Blockstream revealed this week that it had closed a $21 million seed round of investment. The round was led by Linkedin co-founder Reid Hoffman, Khosla Ventures, and Real Ventures. The round also included Google Chairman Eric Schmidt’s Innovation Endeavors, former Yahoo co-founder Jerry Yang’s AME Cloud Ventures, Paypal co-founder Max Levchin, former Microsoft CTO Ray Ozzie, Thinking Machines co-founder Danny Hillis, billionaire investor Nicolas Berggruen, Crypto Currency Partners, Future Perfect Ventures, Mosaic Ventures, and Ribbit Capital.
Blockstream’s major area of innovation is improving the blockchain technology behind the crypto-currency bitcoin, making it safer, more secure and more stable, as well as expanding the applications of the technology – Many are calling this Blockchain 2.0 or Bitcoin 2.0.
Blockstream co-founder Austin Hill described the company’s focus in the startup’s blog:
Blockstream is the first startup focused on advancements to the core technology underpinning Bitcoin. The hundreds of millions invested in Bitcoin startups over the past few years have been to companies building applications and services on top of Bitcoin. Blockstream is the first company extending the capabilities at the protocol level to support massive scaling of Bitcoin and blockchain technology to a broad range of asset types. Put another way, the extension mechanism of sidechains, the company’s initial area of focus, allows any number of so far unthought of developments to happen in an open and interoperable way.
Essentially, sidechains are an improvement and extension of bitcoin’s blockchain technology that are decentralized, peer-to-peer networks with significant enhancements to security, risk and performance. They can be applied to any systems of value exchange that work without the need for intermediaries, central banks or other third parties.
There already is a movement to apply bitcoin’s decentralized and distributed network to areas beyond peer-to-peer payments to such tasks as notarizing documents, transferring assets, confirming property title ownership, and establishing ownership of online content.
Linkedin co-founder Reid Hoffman commented Monday in his blog regarding the blockchain :
The blockchain protocol doesn’t just enable the trustless exchange of bitcoins. It enables the trustless exchange of any kind of digital asset – domain name signatures, digital contracts, digital titles to physical assets like cars and houses. It’s also possible to attach various conditions and potential actions to digital assets stored in the blockchain – i.e. Bitcoin is ultimately a programmable currency. It can be used to create automatically executable wills. It can automate dividend distributions and escrow and notary services.
Groups like Ethereum and Ripple have already created independent blockchains, based on their own independent, volatile currencies. The sidechains enable innovation without the speculation of new currencies – or altcoins, avoiding liquidity shortages, market fluctuations, fragmentation, security breaches and fraud.
Blockstream released a white paper on the sidechains technology in October that resulted across the virtual currency sphere.
A big attraction for investors in Blockstream is that it has pedigree. Some of the company’s founders are important players in the bitcoin coding community, namely Adam Back, Matt Corallo, and Mark Friedenbach. Back is a British cryptographer who developed the “hashcash” and “proof of work” inventions for the bitcoin technology and is second only to Satoshi Nakamoto in the crypto-currency’s conception. Corallo and Friedenbach are key bitcoin developers. Hill has been an entrepreneur in the cryptography technology space since 1998, when he co-founded Zero-Knowledge Systems, one of the first large scale attempts to combine cypherpunk principles with a for-profit technology.
As Hoffman indicated:
As Bitcoin evolves, Blockstream will play a huge role in helping it maintain its momentum, by making it easy to add new capabilities to the platform. And Blockstream’s success will in turn generate new waves of technical and entrepreneurial innovation. It will help make Bitcoin the kind of open, highly adaptive platform upon which a vast array of complementary products and services can be built.