Original author: Steven Ehrlich, Forbes
Original translation: Luffy, Foresight News
Blockstream co-founder and CEO Dr. Adam Back is a British cryptographer and computer scientist best known for inventing Hashcash in 1997, which later became the basis for Bitcoins proof-of-work system.
As CEO of Blockstream, Back plays a central role in developing infrastructure and scaling solutions that shape the future of Bitcoin finance. Blockstreams major innovations include Liquid Network, Bitcoins first sidechain designed to enable faster, more private transactions, and seamless issuance of digital assets such as stablecoins and tokenized real-world assets (RWA). Back is well known in the crypto community because he interacted with anonymous Bitcoin creator Satoshi Nakamoto before he wrote his seminal white paper in 2008.
In this interview, we briefly touch on some of Back’s early work on Bitcoin, much of which relates to his work at Blockstream, which just completed a $210 million convertible bond offering and aims to create more functionality on top of Bitcoin.
Forbes: How did you first start working with Satoshi Nakamoto?
Adam Back: I was the first person to receive an email from Satoshi before Bitcoin was launched. The conversation was not very detailed. I believe that by then he had developed the Bitcoin software, and the next thing he did was write the white paper to describe how it worked. He asked about the correct way to reference Hashcash. Later in the conversation, he told me that he had published the white paper and asked if I would like to download the source code of Bitcoin. This was around January 2009.
Forbes: Do you think it’s important to find out who Satoshi Nakamoto is right now?
Back: I think this question is becoming less and less important because Bitcoin has been around for many years and is a decentralized product. I think Bitcoin is more of a discovery because it is decentralized and has no CEO or founder, unlike some other projects. Humans discovered that physical gold is a good currency, and now we have discovered an even better currency: digital gold. We have experienced a lot of dramatic changes, such as the block size war, and the market ultimately prevailed, so even if Satoshi Nakamoto returns, it is no big deal. If you think about it, this is a pretty positive result, and the market is a manifestation of users desire for electronic cash.
Forbes: Lets talk about Blockstream. Bitcoins biggest use case right now is as a store of value. How do you reconcile that with the goal of making Bitcoin a widespread payment system?
Back: We are prepared for both. We have one of the main implementations of Lightning, which is all about scalability and retail payments. Then we have Liquid, which is more focused on trustless transactions, smart contracts, assets, stablecoins, and securities. Although I have a computer science background, in the mid-90s I was a fairly enthusiastic day trader and investor, and I was curious to see what Bitcoin technology (blockchain) could do to improve trading infrastructure.
Events like the collapse of Mt. Gox taught us that we should have a technology that allows you to do atomic transactions in a non-custodial manner. In practice, everyone gives custody to the exchange, which means you need to trust someone. Liquid is doing a lot of things, and it is also used for stablecoins and retail payments. Now there is a new thing: cross-Lightning wallets, and there are three or four teams working on this. They look like Lightning wallets, but in fact, they are Liquid wallets, and when you want to pay, they use trustless transactions to exchange Liquid Bitcoin for Bitcoin on Lightning and vice versa.
We built a block explorer for Liquid, and now theres an ecosystem around Liquid. A startup called SideSwap offers a trustless central order book where you can place limit orders. We also made our own hardware wallet to innovate faster. You can approve transactions directly on the hardware wallet. Thats very innovative and very exciting because youre not giving up custody.
On the question of value storage, people have been thinking about inflation since the pandemic. In the short term, cryptocurrencies feel a bit unstable. But remember, about 50% of the worlds working population belongs to the informal economy, they get their wages in cash, and they dont have any government ID. These people dont have direct access to the global economic system. This is very interesting because even though Bitcoin is very volatile, its not as volatile as some of the emerging market currencies. So, we see the payment scenario of Bitcoin. Of course, some gray markets in the West also use Bitcoin, where industries may be legal, but banks dont support them, such as marijuana sales in certain states and countries, etc. Bitcoin does have these uses.
Forbes: I know that the usage of Lightning and Liquid platforms is growing, but it is still a relatively small percentage in terms of Bitcoin transaction volume. What is your comment on this? What can be done to accelerate the adoption of these networks? In addition, I see the same interest in stablecoins as the emerging markets you mentioned. What are the pros and cons of Bitcoin and stablecoins when trying to reduce inflation risk?
Back: In some ways, stablecoins are very convenient, while Bitcoin is a bit volatile, which is a side effect of rapid adoption. For those who dont have a lot of savings and have to make retail payments every week, this can be a bit troublesome. Stablecoins are very popular, and there are a few stablecoins on Liquid, the main one is USDT, as well as stablecoins pegged to the Mexican peso, the euro, and the yen from new issuers. The yen stablecoin is a bit special, it is limited to over-the-counter trading with Bitcoin. So far, the market capitalization is not very large, about $35 million or so. But this type of wallet is still in its early stages. We are working on some projects that may gain mass adoption and will promote retail payment use.
Weve seen other types of bonds issued on Liquid. One of them was a $1.5 billion promissory note issued by Mifiel. Several large U.S. public companies funded the promissory note. The promissory note was then a small business loan issued to Mexico. There were hundreds of loans, ranging from about $25,000 to $100,000 per company or individual. These activities used to be recorded on paper, which was prone to errors. With this new source of funding, they have been using Liquid to track debt instruments, which are resaleable. When a lender issues a loan, they get a DocuSign, and when its linked to the borrower, they get a DocuSign, and the issuer gets a transferable certificate of the loan so they can resell it to other lenders.
Forbes: Let’s talk about your recent fundraising. How do you think Bitcoin-centric companies raising money from investors differ from companies raising money through token offerings?
Back: I think the market has shifted. A venture capital firm called Trammell Venture Partners released an annual report that looked at crypto market investments and the allocation of Bitcoin funds relative to other blockchains. Because of the tokenization phenomenon, venture capital firms used to be heavily biased toward other networks. They didnt have to make a successful product that met market demand, as long as there was liquidity, they could sell tokens. But this situation has shifted a bit in the last year.
I also think the altcoin market is saturated. There used to be 20,000 altcoins, but now there are over 3 million, including memecoin. Another phenomenon I see is the growing interest in Bitcoin Layer 2. We are the oldest and largest company in this field. We also provide hardware and software wallets for consumers, and do RD work on privacy technology, etc.
Its a good time for us to expand into that. Theres also a way to handle securities on Liquid in a properly licensed way. There are a few different companies doing this, one of which is Stockr, which is a securitized fund manager based in Luxembourg. We did something similar in 2021. One was a Bitcoin mining note. We had a mining farm, and at the time, we hosted a lot of large corporate miners, like Fidelitys, and we got a lot of retail interest. Theres even MicroStrategy (MSTR) stock on Liquid now. You can trade it, and it has some interesting advantages over trading it on Interactive Brokers. For example, it can be traded 24/7.
Another novel thing about our round is that a large portion of the money that the lead investor paid was actually in Bitcoin, which we will keep. We did this back in our 2021 seed round, when we raised $21 million. In a way, we are the original MicroStrategy because we have Bitcoin on our balance sheet. Of course, many Bitcoin startups now do some of this, but we have been around longer than most companies, since 2014.
Forbes: What is the biggest risk facing Bitcoin or Blockstream?
Back: I think a lot of the initial risks of Bitcoin have subsided. The focus we had initially was on whether a major country or economic zone, like Europe, China or the United States, would ban Bitcoin, which was very uncertain. That created a lot of perceived regulatory risk. But I think Bitcoin is pretty well bootstrapped at this point. Now, ETFs mean that the financial institutions that issue these products are interested in expanding these products and keeping them in the market. So I think the banks or the financial institutions lobby now want to do that. And you have other allies, some sovereign wealth funds and countries that bought Bitcoin or Bitcoin-related products and instruments at an early stage. So I think a lot of the risks have subsided. Also, a lot of the technical risks have subsided. Of course, scaling blockchains is still challenging, and there is still room for innovation and improvement in how to do that. The Lightning Network is very reliable for point-of-sale terminals and person-to-person payments, but there is still room for improvement.
