Blockstream 2021: Towards Hyperbitcoinization

Blockstream 2021: Towards Hyperbitcoinization

Blockstream Team

2021 has been a tremendous year for Blockstream and the Bitcoin ecosystem in general. Thanks to our talented and dedicated team of Bitcoiners, we continue to be at the vanguard of many of the industry's most influential and cutting-edge projects.

In the spirit of the new year, we wanted to reflect on some of our most ambitious undertakings in 2021, their impact, and where they currently stand.

Growing with Bitcoin

This year, Bitcoin achieved new highs, became one country’s legal tender, and reached another leg up in its quest for worldwide adoption. We had a similar breakout year, and our CEO Dr. Adam Back was pleased to announce officially reaching unicorn status, successfully raising $210 million as part of our Series B financing on a valuation of $3.2 billion.

Several new acquisitions helped further our mission of building financial infrastructure on Bitcoin. We acquired Adamant Capital, one of the first Bitcoin fund managers, and launched Blockstream Finance to serve as an on-ramp for Bitcoin-focused financial products like the Blockstream Mining Note. We also acquired mining hardware manufacturer Spondoolies which is now the basis for our new ASICs division and set to launch the industry's first enterprise-grade miner.

We have continued to integrate Bitcoin layer-2 solutions like Lightning and the Liquid sidechain into the Blockstream product and service suite  (i.e., Elements, Green, AQUA, Jade, Satellite, c-lightning), all of which are free and open to developers.

Using Proof of Work to Solve Energy Market Inefficiencies

During the first half of 2021, our Blockstream Mining division scaled at an impressive pace, signing high-profile clients to colocation services and announcing a slew of partnerships focused on alternative energy solutions. The most notable were collaborations with Macquarie to pilot a carbon-neutral Bitcoin mining facility and with Square (now Block) to develop a $5 million open source, solar-powered Bitcoin mine in the US.

Ultimately, the Macquarie and Block mining facilities will demonstrate how we can incentivize the creation of more zero-emission power infrastructure through Bitcoin's innovative proof-of-work and help drive the transition to cleaner energy. Contrary to the mainstream narrative surrounding Bitcoin and energy use, we believe it can provide a market-oriented solution to many of the problems faced by today’s energy sector. For example, hundreds of thousands of megawatts of electricity go unused and wasted in West Texas alone. Bitcoin fixes this.

We believe in being part of the solution, so we launched a new service, Blockstream Energy, which leverages our modular mining units (MMUs) with Blockstream Satellite to deliver scalable energy demand to power producers. The service is able to tap stranded and otherwise wasted energy to maximize energy production efficiency and, in turn, improve the economics of renewable projects around the world.

Championing Lightning Network Scaling and Decentralization

Layering functionality and complexity on top of a minimal base layer allows Bitcoin to remain a decentralized form of hard money. BTC capacity and the number of payment channels on the Lightning Network have more than tripled YoY, laying the groundwork for the wide-scale use of P2P payments on Bitcoin's second layer. We expect the rapid adoption of Lightning and other layer-2 protocols to compound in the near future, especially as nation states like El Salvador increasingly rely on them to onboard their citizens to the new Bitcoin economy.

We believe our Greenlight service and other Lightning infrastructure projects will play an integral part in meeting the scaling and onboarding demands of hyperbitcoinization. Greenlight, in particular, allows everyday citizens and small businesses to easily access the Lightning Network without having to run a node themselves and to do so without handing over custody to their private keys and funds.

Low cost, on-demand node management will also help streamline the development and innovation of Lightning-enabled apps by removing technical barriers. Apps such as Sphinx and Lastbit are already running Greenlight, and we expect a further rollout to the general public in 2022.

c-lightning remained an innovator and leader in the space, from opening the first dual-funded channel to decentralizing the liquidity offering landscape to simplifying payment routing for Lightning app developers. One of the hallmarks of c-lighting is its rich set of features and plugins, many of them a result of the BOLT12 specification, which allows users and developers to experiment firsthand with new Lightning tools not available or widely used in the ecosystem.

There are several newly launched protocols poised to make a big impact in 2022: PeerSwap, an atomic swap plugin for nodes that allows on-chain channel rebalancing, and Minimint, a scaling solution that integrates federated mints (Chaumian banks), will further promote a more reliable and confidential network for Lightning users.

There is also BOLT12 on the horizon, which will introduce offers to allow spontaneous payments, blinded paths, recurring payments for subscriptions and donations, onion messages, and much more.

Building the Financial Layer of the Bitcoin Economy on the Liquid Network

This year the Liquid Network saw impressive ecosystem growth through a wide range of trading platforms, wallet providers, and integrations leveraging the sidechain, including HodlHodl, SideSwap, TDEX, WooCommerce, Specter Wallet, and many others.

Liquid infrastructure continued to be built out and advanced with new protocol upgrades, such as the addition of decentralized atomic swaps and an update to the Simplicity branch of the Elements codebase, allowing for more expressive smart contracts in the future. In October, we activated Dynamic Federations with a full deployment planned later in 2022, which will enable the Liquid Federation to add more functionaries for further decentralization and securement of the network.

2021 was also the year Liquid became the platform of choice for companies and, yes, even nation states seeking secure asset issuance on Bitcoin.

In October, El Salvador made bitcoin legal tender and rolled out a nationally-sponsored Lightning Network wallet to onboard its citizenry. A few months later, on stage at Feel the Bit, El Salvador President Nayib Bukele, alongside Blockstream CSO Samson Mow, proposed a $1 billion bitcoin-backed bond (EBB1) tokenized on the Liquid Network to expand the country's energy and Bitcoin mining infrastructure.

Like its Bitcoin Law, El Salvador's planned Digital Securities Law will pave the way for additional bitcoin-backed financial instruments and create new markets and exchanges for investors to trade security tokens on.

Our Blockstream Mining Note, launched in July, is a Luxembourg-regulated security that offers investors exposure to Bitcoin hashrate at our mining facilities. Through seven tranches, it has raised a total of €33.5 million (~$38 million) and mined more than 2.5 BTC per BMN in the first 170 days.

As a tradeable security token issued on Liquid and managed using our asset platform Blockstream AMP, investors can easily adjust their exposure by trading the BMN on secondary markets or peer-to-peer. From a Bitcoiner perspective, the BMN creates a win-win for investors and the broader ecosystem by expanding investor participation in Bitcoin's proof-of-work.

Going forward, we are optimistic about the mainstream adoption of security tokens, their further regulatory clarity, and their subsequent reformation of capital markets. The BMN, the EXO token, and other Liquid security tokens are slated for release on new STO platforms Bitfinex Securities and MERJ Exchange, and the EBB1 is expected as early as Q1 2022.

Note: As the El Salvador Bitcoin Bond (EBB1) proposal matures and is more finely tuned, Blockstream will remain a technical consultant, with Bitfinex as bookmaker taking on the primary duties of distribution and network issuance.

Thank You

We are now more than 13 years forward from Bitcoin's genesis block and another four years from the activation of SegWit. Looking back over the years is a humbling reminder of how far Bitcoin has come and the incredible pace at which we are moving closer to hyperbitcoinization.

We want to sincerely thank the community and each Bitcoiner for their unwavering belief in a better future.

As a show of our appreciation for a remarkable year, Bitcoiners can now receive 15% off our Blockstream Jade hardware wallets with the coupon 2021END. The offer expires 1/27/22 at midnight PST while supplies last.

With your support, we look forward to continuing our company mission of building out innovative Bitcoin infrastructure, with layer-2 solutions Lightning and Liquid as cornerstones of the new Bitcoin economy.

Don’t Trust. Verify.

A version of this article was published online at Blockstream Magazine on Sunday, January 9, 2022. You can read it here:

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