Author: Steven Ehrlich, Forbes

Translated by: Luffy, Foresight News

Dr. Adam Back, co-founder and CEO of Blockstream, is a British cryptographer and computer scientist known for inventing Hashcash in 1997, which later became the foundation of Bitcoin's 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. Blockstream's key innovations include the Liquid Network, the first sidechain for Bitcoin designed for faster, more private transactions, as well as seamless issuance of digital assets like stablecoins and tokenized real-world assets (RWA). Back is well-known in the crypto community for having communicated with the anonymous Bitcoin creator Satoshi Nakamoto before the groundbreaking white paper was written in 2008.

In this interview, we briefly discussed some of Back's early work on Bitcoin, much of which relates to his work at Blockstream. Blockstream has just completed a $210 million convertible bond issuance aimed at creating more functionality based on Bitcoin.

Forbes: How did you initially start collaborating with Satoshi Nakamoto?

Adam Back: I was the first person to receive an email from Satoshi Nakamoto before Bitcoin was launched. The conversation wasn't very detailed. I believe he had already developed the Bitcoin software at that time, and what he did next was write the white paper to describe how it worked. He asked about the correct way to reference Hashcash. In subsequent communications, he told me he had released the white paper and asked if I would be willing to download the Bitcoin source code, which was around January 2009.

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

Back: I think that question is becoming less important because Bitcoin has been around for many years; it is a decentralized product. I see Bitcoin more as a discovery because it is decentralized, with no CEO or founder, which is different from some other projects. Humans discovered physical gold as a good form of currency, and now we have discovered a better form of currency: digital gold. We have gone through many dramatic changes, like the block size wars, and the market ultimately prevailed, so even if Satoshi were to return, it wouldn't matter much. If you think about it, that's a pretty positive outcome; the market reflects users' desire for electronic cash.

Forbes: Let's talk about Blockstream. The biggest use of Bitcoin currently is as a store of value. How do you reconcile this with the goal of making Bitcoin a widely used payment system?

Back: We are preparing for both. We have one of the main implementations of Lightning, which is all about scalability and retail payments. Then we have Liquid, which focuses more on trustless transactions, smart contracts, assets, stablecoins, and securities. Although I have a background in computer science, in the mid-90s, I was quite an enthusiastic day trader and investor, and I was curious about what Bitcoin technology (blockchain) could do to improve trading infrastructure.

Events like the Mt. Gox collapse taught us that we should have a technology that allows you to perform atomic trades in a non-custodial manner. In reality, everyone hands over custody to exchanges, which means you need to trust others. Liquid is doing a lot of things, and it is also being used for stablecoins and retail payments. Now there is a new thing: cross Lightning wallets, with three or four teams currently working on this. They look like Lightning wallets, but in fact, they are Liquid wallets that use trustless transactions to swap Liquid Bitcoin for Bitcoin on Lightning when you want to make a payment, and vice versa.

We built a block explorer for Liquid, and an ecosystem has already formed around Liquid. A startup called SideSwap provides a trustless central order book where you can place limit orders. We 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 do not give up custody.

Regarding the store of value issue, people have been thinking about inflation since the COVID-19 pandemic. In the short term, cryptocurrencies feel a bit unstable. But remember, about 50% of the world's labor force belongs to the informal economy, and they receive their wages in cash without any government identification. These people cannot directly access the global economic system. This is very interesting because, despite Bitcoin's volatility, its volatility is not as high as that of some emerging market currencies. So, we see Bitcoin's payment scenarios. Of course, some gray markets in the West also use Bitcoin, where the industries may be legal, but banks do not support them, such as cannabis sales in certain states and countries, etc. Bitcoin does have these uses.

Forbes: I know that the usage of the Lightning and Liquid platforms is growing, but in terms of Bitcoin's transaction volume, this proportion is still relatively small. What are your thoughts 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 what you mentioned about emerging markets. How do Bitcoin and stablecoins compare in trying to mitigate inflation risk?

Back: In some ways, stablecoins are very convenient, while Bitcoin is a bit unstable, which is a side effect of rapid adoption. For those who do not have much savings and need to make retail payments weekly, this can create some issues. Stablecoins are very popular, and there are some stablecoins on Liquid, the main one being USDT, along with stablecoins pegged to the Mexican peso, euro, and yen launched by new issuers. The yen stablecoin is a bit special; it is limited to over-the-counter transactions with Bitcoin. So far, the market cap is not very large, around $35 million. But this type of wallet is still in its early stages. We are working on some projects that may achieve mass adoption and enhance retail payment use.

We have already seen other types of bonds issued on Liquid. One of them is a $1.5 billion promissory note issued by Mifiel. Several large publicly traded companies funded the promissory note. Then, the promissory note is for small business loans in Mexico. There are hundreds of loans, with each company's or individual's loan amount being about $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 lenders issue loans, they receive a DocuSign, and after establishing a link with the borrower, they receive another DocuSign, and the issuer gets a transferable loan certificate so they can resell it to other lenders.

Forbes: Now let's talk about your recent funding situation. How do you think Bitcoin-centric companies raising funds from investors differs from companies financing through token issuance?

Back: I think the market has shifted. A venture capital firm called Trammell Venture Partners released an annual report studying crypto market investments and the allocation of Bitcoin funding compared to other blockchain-related projects. Due to the phenomenon of tokenization, venture capital firms have previously been heavily biased towards other networks; they did not have to create successful products that met market demand; as long as there was liquidity, they could sell tokens. But this situation has changed somewhat over the past year.

I also think the altcoin market has become saturated. There used to be 20,000 altcoins, but now there are over 3 million, including memecoins. 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 while conducting research and development on privacy technologies.

For us, now is a good time to expand this business. On Liquid, there is also a way to handle securities in a properly 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 a Bitcoin mining note. We had a mining farm at that time, and we hosted many large company mining machines, such as Fidelity's machines, and we garnered 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 novelty in our funding is that a large portion of the funds paid by the lead investors is actually in Bitcoin, and we will retain that Bitcoin. We did this back in our seed round in 2021 when we raised $21 million. In a way, we were among the earliest MicroStrategy, as we had Bitcoin on our balance sheet. Of course, now many Bitcoin startups are doing some of these things, but we have been around longer than most companies, having started in 2014.

Forbes: What are the biggest risks facing Bitcoin or Blockstream?

Back: I think many of the initial risks for Bitcoin have subsided. Our initial focus was on whether a major country or economic zone (like Europe, China, or the U.S.) would ban Bitcoin, which was very uncertain. This created a lot of perceived regulatory risk. But I believe Bitcoin is now well-guided. Now, ETFs mean that financial institutions issuing these products are interested in expanding them and keeping them in the market. So I think banks or financial institution lobbyists want to do this now. And you have other allies, some sovereign wealth funds and countries that bought Bitcoin or Bitcoin-related products and tools in the early stages. So I think many risks have subsided. Additionally, many technical risks have also subsided. Of course, scaling the blockchain remains challenging, and there is still room for innovation and improvement in how to achieve that. The Lightning Network is very reliable for point-of-sale and person-to-person payments, but there is still room for improvement.

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