Forbes interview with Blockstream founder: How did Satoshi Nakamoto's first collaborator build BTC?

Author: Steven Ehrlich, Forbes

Compiled by: Luffy, Foresight News

Blockstream co-founder and CEO Dr. Adam Back is a British cryptographer and computer scientist, known for inventing Hashcash in 1997, which later became the basis of the Bitcoin Proof of Work system.

As the CEO of Blockstream, Back plays a key role in developing infrastructure and scaling solutions that shape the future of BTC finance. Blockstream's major innovations include Liquid Network, the first Sidechain of BTC, aiming to achieve faster and more private transactions, as well as seamless issuance of stablecoins and tokenization of real-world assets (RWA) and other digital assets. Back is well-known in the encryption community because he had communication with the anonymous BTC founder Satoshi Nakamoto before Satoshi Nakamoto wrote the groundbreaking White Paper in 2008.

In this interview, we briefly discussed some of Back's early work in the BTC area, most of which is related to his work at Blockstream. Blockstream has just completed a $210 million convertible bond issuance, aimed at creating more functionality based on BTC.

Forbes: How did you start working with Satoshi Nakamoto in the beginning?

Adam Back: I was the first person to receive an email from Satoshi Nakamoto before the launch of BTC. The conversation was not very detailed. I believe he had already developed the BTC software at that time, and what he did next was to write a White Paper to describe its operation. He asked about the correct way to reference Hashcash. Later in the conversation, he told me that he had released the White Paper and asked if I would be willing to download the Source Code for BTC, which was around January 2009.

Forbes: Do you think it's important to find out who Satoshi Nakamoto is now?

Back: I think this issue is becoming less and less important because BTC has many years of history and it is a product of decentralization. I think BTC is more like a discovery because it is decentralized and has no CEO or founder, which is different from some other projects. Humans discovered physical gold as a good currency, and now we have discovered a better currency: digital gold. We have experienced many dramatic changes, such as the block size war, and the market ultimately prevailed, so even if Satoshi Nakamoto returned, it wouldn't be a big deal. Think about it carefully, this is a quite positive result, and the market is a reflection of users' desire for electronic cash.

Forbes: Let's talk about Blockstream. The current main use of BTC is as a store of value. How do you coordinate this with the goal of making BTC a widely used payment system?

Back：We have made preparations on both fronts. 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 background in computer science, in the mid-90s, I was quite passionate about day trading and investing, and I am very curious about what BTC technology (blockchain) can do to improve trading infrastructure.

The events such as the collapse of Mt. Gox tell us that we should have a technology that allows you to make atomic transactions without custody. In fact, everyone gives custody to the exchange, which means you need to trust others. Liquid is doing a lot of things, it is also used for stable coins and retail payments. Now there is something new: Cross-Lightning Wallet, currently three or four teams are doing this. They look like Lightning Wallets, but in fact, they are Liquid Wallets. When you want to make a payment, they use trustless transactions to exchange Liquid BTC for BTC on Lightning, and vice versa.

We have built a blockchain explorer for Liquid, and now there is an ecosystem forming around Liquid. A startup called SideSwap provides a trustless central order book where you can place limit orders. We have also made our own hardware wallet to speed up innovation. You can approve transactions directly on the hardware wallet. This is very innovative and exciting because you don't give up custody.

Regarding the issue of value storage, since the outbreak of the new coronavirus, people have been considering Inflation. In the short term, Crypto Assets give people a sense of instability. But please remember that about 50% of the world's labor force belongs to the informal economy, receiving wages in cash without any government identification. These people cannot directly access the global economic system. This is very interesting because although Bitcoin's Fluctuation is large, its volatility is not as high as some emerging market currencies. So, we see the payment scenarios for BTC. Of course, some gray markets in the West also use BTC, where the industries may be legal, but banks do not support them, such as marijuana sales in certain states and countries and so on. BTC does have these uses.

Forbes: I know that the usage of Lightning and Liquid platforms is rising, but in terms of BTC volume, this proportion is still relatively small. What is your opinion on this? What measures can be taken to accelerate the adoption of these networks? Additionally, I see that people's interest in stablecoins is similar to the emerging markets you mentioned. How do BTC and stablecoins compare in trying to reduce inflation risks?

Back：In some ways, Stable Coin is very convenient, while BTC is a bit unstable, which is a side effect of rapid adoption. This may cause some trouble for those who do not have a lot of savings and need to make retail payments every week. Stable Coin is very popular, and there are also some Stable Coins on Liquid, among which the main one is USDT, as well as Stable Coins pegged to the Mexican peso, Euro, and Yen introduced by new issuers. The Yen Stable Coin is somewhat special, as it is limited to Over-the-counter Trading with BTC. So far, the Market Cap is not very large, around 35 million US dollars. But this type of Wallet is still in the early stages. We are developing some projects that may gain widespread adoption and will enhance retail payment usage.

We have seen the issuance of other types of bonds on Liquid. One of them is a $1.5 billion promissory note issued by Mifiel. Several large US-listed companies provided funding for the promissory note. The note is then sent to small businesses in Mexico as loans. There are hundreds of loans, with each company or individual loan amount ranging from $25,000 to $100,000. 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 that are transferable. When the lender issues a loan, they receive a DocuSign, and after establishing a link with the borrower, they receive another DocuSign. The issuer receives a transferable loan certificate, which they can then resell to other lenders.

Forbes: Now let's talk about your recent financing situation. What do you think is the difference between companies centered around Bitcoin raising funds from investors and companies financing through token issuance?

Back: I believe that the market has undergone a transformation. Trammell Venture Partners, a venture capital firm, released an annual report studying the investment in the encryption market and the allocation of BTC funds related to other blockchains. Due to the phenomenon of tokenization, venture capital firms used to heavily favor other networks, where they didn't have to create successful products that meet market demands, as long as there was liquidity, they could sell tokens. However, this situation has changed somewhat in the past year.

I still think the altcoin market is saturated. There used to be 20,000 altcoins, but now there are over 300,000, including memecoin. Another phenomenon I see is people's interest in the rise of Bitcoin Layer 2. We are the oldest and largest company in this field. We also provide hardware and software wallets for consumers, and conduct research and development in privacy technology, etc.

For us, now is a good time to expand this business. On Liquid, there is also a way to handle securities in a proper licensed manner. Several different companies are doing this, one of which is Stockr, a securitization fund management company based in Luxembourg. We did something similar in 2021. One is the BTCMining note. We have a Mining Farm, at that time, we hosted many large company Mining Rigs, such as Fidelity's Mining Rig, and we attracted a lot of interest from retail investors. There are even MicroStrategy (MSTR) stocks on Liquid now. You can trade it, and it has some interesting advantages compared to trading on Interactive Brokers. For example, it can be traded around the clock.

Another unique aspect of our financing is that a large portion of the funds paid by the lead investor is actually Bitcoin, which we will retain. We did this as early as the seed round financing in 2021, when we raised $21 million. In a sense, we are the earliest MicroStrategy because we have BTC on our balance sheet. Of course, many BTC startups have also done similar things now, but we have been around longer than most companies, since 2014.

**Forbes: What is the biggest risk facing BTC or Blockstream?

Back: I believe many of the initial risks associated with BTC have subsided. Our initial focus was on whether a major country or economic zone (such as Europe, China, or the United States) would ban BTC, which was highly uncertain. This created a lot of perceived regulatory risks. However, I believe that BTC is now well-guided. With the issuance of ETFs, financial institutions are interested in expanding these products and keeping them in the market. So I think banks or financial institution lobbying groups now want to do this. And you also have other allies, some sovereign wealth funds and countries buying BTC or BTC-related products and tools in the early stages. So I think many of the risks have subsided. In addition, many technical risks have also subsided. Of course, scaling blockchain is still challenging, and there is still room for innovation and improvement in how to do this. The Lighting Network is very reliable for point-of-sale and peer-to-peer payments, but there is still room for improvement.