Exclusive Dialogue with Blockstream CEO Adam Back: Bitcoin to $250,000? Turing Completeness a Mistake?
“In the longer term – some years time – Bitcoin as a competitor to physical gold might, if it met some comparable metrics may reach $250,000.
For Turing completeness I think it is a mistake because it creates storage requirements which are hard to scale, statefulness which creates race conditions that Bitcoin’s UTXO model I believe is designed to avoid, and is technically unnecessary for reasons that…
If every individual makes his own coin, little progress will be made and the network effect of money will break down.
Blockstream is also invested in Bitcoin, and also all Blockstream employees are paid partly in Bitcoin.”
– Adam Back, CEO of Blockstream
Adam Back is a well-known British computer scientist and cryptographer with 25 years of experience in cybersecurity. In 1997, he developed the idea and wrote the code for Hashcash which draws Satoshi Nakamoto’s attention and influences Bitcoin’s proof of work algorithm in very early days. Both historically and currently, Back is an important figure in the crypto space.
In 2014, he founded the leading Bitcoin development company Blockstream and has been the CEO of the company since then, other founders of the company include prominent bitcoin core developers Gregory Maxwell, Pieter Wuille, Jonathan Wilkins, Matt Corallo, etc. Over these years, Blockstream has been committed to the development of bitcoin, launching multiple bitcoin-related products and a number of heavyweight open source technologies including sidechain solution Liquid, Blockstream Satellite, as well as technology solutions of Lightning network, Schnorr signature technology, Confidential Transactionsions, etc.
Since entering 2019, Lightning network and cross-chain projects have been heatedly discussed in the crypto community. We, 8btc (the oldest bitcoin news outlet in China), gladly have the chance to have a talk with Back about his thoughts on the latest buzzwords trending in the crypto space and what’s coming to Blockstream in future.
The full text of the dialogue between 8btc News and Back is as follows.
Q1. As a well-known cryptographer, the inventor of Hashcash, what makes you decide to devote to the development of bitcoin?
Back: Bitcoin has several advantages over previous ecash systems, particularly that it is deployed in a robust way, that it is here to stay because it is decentralised and resilient where previous systems were centralised and often came to an end due to that single-point of failure. But Bitcoin has relatively weak privacy and fungibility compared to the previous systems. As someone with experience in privacy tech and the applied cryptography of previous ecash systems, it was therefore interesting to me to try to improve Bitcoin’s privacy and fungibility. One thing I was able to do was propose the concept and outline a mechanism for Confidential Transactions in 2013 (before Blockstream), which since then was optimised and improved by early Blockstream co-founder Greg Maxwell and others and is today available as a confidentiality, privacy and fungibility feature in Liquid and Elements, and Confidential Transactions has also been adopted by some other blockchains
Q2. Blockstream has been focusing on developments of bitcoin technologies, such as Lightning Network and sidechain. Your company has a lot of scientists and prominent developers. Has Blockstream considered to create its own blockchain and token?
Back: For me, I tend to think it is more plausible that there is a Shelling point for a single money so that it is more constructive to work together with everyone else in the ecosystem and improve and build adoption of Bitcoin. Conversely if every individual makes his own coin, little progress will be made and the network effect of money will break down.
Q3. Liquid is mainly based on bitcoin’s core code, it was limited in terms of ease of use and functionality. Does Blockstream plan to improve the functions, like script or UTXO mechanism, of Liquid in the future plan?
Back: Yes the R&D team, led by Blockstream’s Research Director Andrew Poelstra, works on and collaborates with independent experts, academics and other ecosystem companies on multiple R&D tracks which we hope to bring to Liquid and Bitcoin over time, either via consensus upgrades directly into Bitcoin as for example Schnorr related work may, or via more permissionless layer2 features as Liquid can provide.
Q4. There are many Chinese blockchain projects focusing on sidechain, such as Bytom. They have a sidechain project called Vapor (https://github.com/Bytom/vapor). Vapor has improved UTXO to enable it to hold more assets (not just its native token) and make it work with more complex scripting languages that are Turing-complete, optimize two-way-peg(2WP), and also use the mechanism of DPOS+ PBFT to realize the function of federation. What do you think of this kind of sidechain roadmap？
Back: Independent research and experimentation is useful, and there are many projects internationally so that I am not familiar with them all so it is hard to comment specifically. Liquid also has native support for multiple asset types, together with confidentiality for both Bitcoin and liquid assets.
On the general technical directions, I do think that proof of stake has some fundamental limits so I am not so far positive on that direction.
Similarly for Turing completeness I think it is a mistake because it creates storage requirements which are hard to scale, statefulness which creates race conditions that Bitcoin’s UTXO model I believe is designed to avoid, and is technically unnecessary for reasons that Blockstream’s formal language security expert Dr Russell O’connor has explained – namely that contracts should be thought of as proofs of execution success rather than programs that need to be executed. Treating contracts as proofs of execution reduces storage and verification resources.
Philosophically I think blockchains should be optimised, space efficient, designed to be free of race-conditions and as simple as possible – as complexity is the enemy of security, and already the minimum complexity for Bitcoin itself is quite high. At Blockstream Russell has been working on a formally secure smart contract system, intended to be design-compatible with and extend Bitcoin’s UTXO model and security first approach, called Simplicity. We may add Simplicity to Liquid in the mid-term and perhaps eventually Simplicity related technology concepts may be adopted by Bitcoin.
Q5. What are the major future application scenarios for Liquid besides exchanges? How does it compete with other blockchains?
Back: Liquid is a network technology and Blockstream focusses on providing infrastructure so we hope that individuals open source contributors, applied researchers and startups try out many use cases and find interesting new use cases for blockchains. There are already a number of use cases that companies are working on. I think that the differentiator Liquid aims to bring, is to build on a security first model drawing from Bitcoin’s robust security record. And to do so in a way that just extends Bitcoin via a modular layer2 approach without introducing any new tokens.
Q6. Both sidechain and Lightning Network are the research focus of Blockstream. So how does sidechain compete with lightning network in the commercial market, or can they complement each other?
Back: They are complementary as Lightning, due to liquidity, capacity and online wallet tradeoffs is best able to provide fast retail payments, where Liquid aims to provide for a different use case: fast cross-exchange transfers for traders for Bitcoin and other assets.
Q7. Lightning Network has been one of the hottest topics in the crypto community. What are the challenges of its mainstream adoption? What will be the future of Lighting Network look like？
Back: Lightning has been evolving very quickly and there is a parallel engineering effort on lightning with many individuals, and companies and a few academics making fast progress on protocol concepts, implementation, interoperability and wallets, use-cases, applications. I think simpler user-interface and combining main-chain and lightning wallet functionality and fast-start mechanisms which are starting to be built on top can help end users use lightning more simply. Lightning adoption is growing very fast in terms of network nodes and network Bitcoin capacity.
Q8. As we know, two-way-peg(2WP) does not achieve trustless, what do you think are the difficulties in the current implementation, are there any research results or directions (for guidance and learning), and will trustless cross-chain solutions be the answer?
Back: There are some security tradeoffs with the current types of two-way-peg, and one so-far fundamental open question is the incentive compatibility, meaning that with Bitcoin honest behavior is profitable so long as not too much hashrate is not short term rentable, because the miners are invested in the long term. In some ways sidechains offer a preview of the far future where there is less Bitcoin reward – ie less Bitcoins mined per block after many more halvings – so some of the sidechain issues will have to be tackled by Bitcoin in the future.
There are multiple people working on this area so maybe some fresh ideas or fundamental new building blocks can eventually provide a p2p solution in a very robust way. For example major advancements in efficiency in technology like bullet proofs, could enable verification of code without execution risk nor scalability side-effects.
Q9. Because of going against CSW, several exchanges recently announced their delist of Bitcoin SV, while some argue that it goes against the spirit of decentralization. What do you think about that? Do you think exchanges have too much power? Do you think decentralized exchanges are the future?
Back: This is a controversial area and not something that Blockstream takes a position in. Speaking personally I have commented publicly that I think exchanges should be neutral and provide a marketplace so long as an asset has enough demand to cover the engineering and maintenance cost for exchanges, and other common sense precautions. Unpopularity of the coin promoters views or actions should not be cause for delisting in my opinion as I feel this strays into politics, or becomes a popularity contest.
Q10. Liquid is primarily used for exchanges, will it be useful for the development of decentralized exchanges and solving the power abuse of current exchanges?
Back: Yes Liquid has features that help reduce exchange custody risk. Firstly because coins can be moved faster users can keep funds off-exchange in wallets and deposit quickly. But also a kind of native atomic swap is supported and being worked on. Blockstream has a Joint Venture with Digital Garage and Tokyo Tanshi which is providing atomic trade for OTC traders in Japan, using a JPY fiatcoin in development. This is of interest to users, traders and regulators in safe-guarding users from exchange-hacks, and helping exchanges avoid even needing custody to operate a market function and trade matching.
Q11. As previously reported, you think that bitcoin sidechains will win out over altcoins. Now there are thousands of coins, do you think there are too many? Or, do you think developers don’t need to create new blockchains for these altcoins, but develop them on sidechains instead? If all blockchains are attached to bitcoin as its sidechains, doesn’t that mean bitcoin becomes a centre? Wouldn’t that hurt the free development of blockchains?
Back: At blockstream we promoted the idea of “innovation without speculation” which we demonstrate by example that innovative technologies can be added to Bitcoin in a permissionless, modular way using sidechains and other layer2 technology, like Lightning, so that it is not necessary to have more coins. Liquid and lightning are layer2 technologies that provide new functionality and capabilities to Bitcoin. For example Liquid adds Confidential Transactions which provide better confidentiality and value privacy than mainchain transactions – but with trade-offs, Liquid is optimised for exchange traders, and people interested to benefit from Confidential Transactions, but the main bitcoin chain is always better for censorship resistance and long term storage security.
Developing sidechains is also permissionless so I do not think impedes innovation, rather it accelerates network effect and technology value and helps cryptocurrency reach its potential faster.
Q12. You pointed to mining centralization as a key reason P2P sidechains have not seen as much traction up to this point. Although current bitcoin mining centralization has been improved, it does not mean it will not become centralized again in the future, and this kind of centralization cannot solve once for all, so how can sidechain get rid of it and continue to develop?
Back: It may be that as people have seen the adverse effects of centralisation, they may take more direct participation in securing the bitcoin network as individuals and small companies. I think that a more decentralised Bitcoin is more valuable as it is more secure, independent and trustable.
There are extensions needed for Bitcoin to support p2p sidechains and there are some R&D questions about how to do that securely even if we assume Bitcoin’s decentralisation is secured. So more work is needed.
Q13. Bitcoin network itself is difficult to suffer from 51% attack, it has no single point of failure, but some think sidechains could suffer this. If one sidechain was attacked, it could destroy the whole network, such as double spending, how to solve this problem?
Back: The sidechains we know how to build today, do have some extra seemingly fundamental security tradeoffs unless major technical breakthroughs are made for example in proof of execution efficiency. Several different approaches are being tried, Liquid uses a federated model with incentive compatibility from business use (crypto exchanges etc), drivechain has a slow withdrawal process to give time for detection and human cancelation of attacks, and rootstock has a hybrid between federation and signing in development.
Q14. One solution to sidechain 51% attack is to use merged-mining to protect, but this way can just reduce the possibility of 51% attack, and it is easy to cause mining centralization. What do you think is the difference between them?
Back: I think merge-mining is reasonable and probably a good solution but does not solve the incentive issue as an attacker could mine the Bitcoin chain honestly but attack the sidechain, and Bitcoin won’t notice as it is not at a technical level aware of the sidechain attack.
Q15. Cross-chain technologies have gotten a lot of attention this year, such as Cosmos, IRISnet, and they have launched their mainnet, and Polkadot also plans to launch its mainnet this year, so what do you think of cross-chain technologies? Sidechain and cross-chain are similar, what do you think is the main difference between them?
Back: There are many blockchain projects and I am not familiar with most of them. I do think they often suffer from complexity, security risk and there is a shortage of skilled developers with deep experience in general, even Bitcoin has shortages in these areas and it is many times higher resourced due to the attraction of working to improve the main network. So I think it is hard for new projects to compete on a security and robustness basis. For example, in my professional opinion, as someone who has worked in security for 25 years, it is likely the case that there are flaws in many of the systems, undiscovered simply because people with the expertise to analyse are busy building Bitcoin and do not have the time or interest to analyse. This is because it is a recurring issue in network security that independent expert security review is critical to obtaining real-world security.
Q16. The crypto bear market has lasted for almost 2 years. As the IEO waves come, bitcoin and other coins have rebound to the year high, do you think the bear market has ended? what the bitcoin halving in 2020 will bring to bitcoin?
Back: Obviously I am unable to give financial advice, but personally I am long term bullish on Bitcoin, and indeed I have said publicly that I think in the longer term – some years time – Bitcoin as a competitor to physical gold might, if it met some comparable metrics may reach $250,000.
Blockstream is also invested in Bitcoin, and also all Blockstream employees are paid partly in Bitcoin which we and our investors considered a good strategy for a company significantly aligned with Bitcoin and working on improving and building on Bitcoin technology.
Short term market moves are hard to predict of course. Historically the halvings have seen price appreciation before and after the event, where it seemed that the impact of halving on the rate of supply from newly mined coins was underestimated, or not priced in by the market. We can’t be sure if this will happen again – but the Bitcoin markets are, on the scale of traditional markets often thinly traded, and the supply of coins for sale and actively traded is a fraction of the total stock due to long term investor mentality, so this does contribute to the potential for violent price movement.
Q17. What do you think of Chinese blockchains and Chinese crypto community?
Back: I have been to China a few times, and used to come to China before Bitcoin with a previous startup. China is quite big in Bitcoin and cryptocurrency as traders, for some time being the single biggest crypto market, and there are many Chinese community and technologists who I have gotten to know via meetups and conferences and discussion of Bitcoin mining, Bitcoin pools and protocol work over the years. It is interesting to see people’s interest in Bitcoin and crypto trading being a very global phenomena.
Kyle contributed reporting.