Since 2014, Victoria’s Blockstream has focused on Bitcoin infrastructure, a profitable pursuit for the company which has just raised $210 million in a series B financing on a valuation of $3.2 billion.
Blockstream is the global leader in Bitcoin and blockchain infrastructure. Its recent valuation achieves the company Unicorn status. Blockstream’s new backers — U.K.-based private equity firm Baillie Gifford and Hong Kong-based iFinex, the operator of crypto exchange Bitfinex — join existing investors such as Twitter CEO Jack Dorsey.
What is Bitcoin?
Bitcoin is digital gold or money re-imagined. The decentralized currency offers users a safe place for their cash and has a high uptake where currencies are at risk of substantial fluctuations.
“Imagine there is a new form of money,” says chief innovation officer, Samson Mow. “Blockchain is building a new financial system on top of that new form of money.”
Value is secured through a collection of rules that can’t be changed when you are running the bitcoin software. The transactions made on that network create a blockchain — a chronologically ordered set of transactions made all over the world.
What does Blockstream do?
Blocksteam’s offer has grown exponentially to include a number of technologies that support payments and currency exchange. This is in line with the company’s mission to build the financial infrastructure of the future with Bitcoin-focused financial products.
Blockstream’s sidechain technology, the Liquid Network, creates a modified copy of Bitcoin (a fork) that enables users to make multiple assets out of Bitcoin. Those assets that might range from Cineplex vouchers to Aeroplan rewards.
The Lightning Network is another layer, this time not attached directly to Bitcoin. It’s a peer-to-peer network that lets users route money directly to each other, like a tab between two people, or to make micro-payments, like buying a coffee.
“Where it really gets interesting is routing through the network,” says Mow. “People can allocate some capacity on their lightning channels. And I can route it through to you through three other people in the network. So we don’t need a direct connection. In effect, you have this payments network built on Bitcoin, where you can achieve millions of transactions a second,” explains Mow.
What’s Next?
The company’s acquisition of Adamant Capital, a bitcoin hedge fund manager, and Spondoolies, a Bitcoin mining hardware manufacturer, will allow Blockstream to launch more financial products buying Bitcoin and to build Bitcoin ASICs — machines designed to mine Bitcoin.
“The raise really accelerates our two business lines,” says Mow. “With Adamant Capital our pilot is to launch more financial products buying Bitcoin, using things like the Liquid Network. These could be anything like a Bitcoin bond or a Bitcoin mortgage.”
“What our goal is, with Spondoolies, is to start building these Bitcoin miners. That’s a very capital intensive endeavour — the price of the machine tends to fluctuate with the Bitcoin price,” says Mow.
A current shortage in Bitcoin miners means it’s an expensive but profitable investment.
