Blockstream aims to support “massive scaling” of Bitcoin’s secure and distributed infrastructure to include a “broad range of asset types” and to eliminate the fragmentation that varying cryptocurrencies in general suffer from. The startup has raised $21 million in seed funding to work on advancements to the Blockchain through so-called “sidechains” in order to realize this goal.
To date, most Bitcoin-oriented startups have focused on the financial transaction side of the cryptocurrency and cryptocurrencies in general. Startups like Blockchain.info and Coinbase offer users a way to transact with one another using online wallets and payment gateways. Yet some have established their own alternative systems and currencies, called altchains and altcoins, respectively. There is the Dogecoin, Peercoin and dozens of other cryptocurrencies that run their own modified version of the blockchain.
Blockstream wants to focus on the next evolution of Bitcoin, which will ensure that improvements are both re-incorporated into, and extended from, the base system rather than forked off as independent systems altogether. In gist, Blockstream wants to scale up the use of the Blockchain, the so-called “public ledger” of the Bitcoin ecosystem, the transaction database shared across all of the ecosystem’s participants where each transaction is recorded securely and semi-anonymously.
One potential application is the use of the Blockchain to transact and exchange more than just Bitcoin (or fractions, thereof). In the future, Blockstream aims to build on its concept of sidechains, which will enable exchange of digital assets between the main Blockchain and alternates. These can include documents and data and even other content that will require de-centralized encryption and security.
“Blockstream is the first startup focused on advancements to the core technology underpinning Bitcoin,” writes co-founder Austin Hill on the Blockstream blog. He stressed how Blockstream and its sidechain concept “will help make Bitcoin the kind of open, highly adaptive platform upon which a vast array of complementary products and services can be built.”
For his part, LinkedIn founder Reid Hoffman, one of the investors in the Series A, says Blockstream will be at the forefront of the innovations to Bitcoin’s core technology. “The blockchain protocol doesn’t just enable the trustless exchange of bitcoins,” he writes on LinkedIn Pulse. “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.”
Apart from Hoffman, Khosla Ventures and Real Ventures also led this Series A funding round. Other participants include Nicolas Berggruen, Crypto Currency Partners, FuturePerfect Ventures, Danny Hillis, Eric Schmidt’s Innovation Endeavors, Jerry Yang’s AME Cloud Ventures, PayPal luminary Max Levchin, Mosaic Ventures, Microsoft former Microsoft CEO Ray Ozzie and Ribbit Capital, among others.
Hill says the sidechain concept is proof that Bitcoin’s importance is bigger than its ability to facilitate cashless transactions. “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.”
With Blockstream gaining resources to realize its goals, the focus is likely to move away from simple top-layer products and services that facilitate already-present transaction mechanisms. Rather, Blockstream and other companies like it will be the ones to truly prove Bitcoin’s worth as an innovative and disruptive technology.