Bitcoin holds a lot of promise as a decentralized currency, but there are many technical issues to be tackled as adoption increases.
No one knows this better than core developer Gregory Maxwell, who has been contributing to bitcoin's software since the early days.
A long time open-source and cryptography advocate, Maxwell was an early contributor to Wikipedia and worked for the Mozilla Foundation. He is now a co-founder of Blockstream, which has raised $21m with ambitious plans to push forward the development of bitcoin to better secure its future.
Maxwell recently talked to CoinDesk at the Future of Money Summit about his early disdain for the idea of digital currency, how he plans to create more core developers and the technical issues Blockstream intends to take on.
From skeptic to believer
Satoshi Nakamoto introduced the concept of bitcoin on a cryptography mailing list back in 2008. Like many members of that list, Maxwell was initially skeptical of a digital currency not requiring third party trust.
He told CoinDesk:
"When bitcoin first came out, I was on the cryptography mailing list. When it happened, I sort of laughed. Because I had already proven that decentralized consensus was impossible."
Much of his doubt came from the fact Maxwell was an early supporter of Wikipedia, becoming a contributor to the online encyclopedia in late 2004. He realized during those formative years working on Wikipedia that complete decentralization is hard to pull off.
"Traditional consensus systems have needed an admissions control system," Maxwell said, referring to the fact that Wikipedia needed gateways to provide highly accurate information to visitors.
"Bitcoin gets around [admissions control] with the proof-of-work stuff. I thought, this is cool. Maybe some people will use it for anti-spam, but it can't be secure," he said.
Later on in 2009, Maxwell noticed bitcoin was still around. He then read over the source code.
"I started contributing to the bitcoin software basically right after paying attention to it and learning how it worked. Seeing, 'oh, this isn't impossible'."
After that, he started sending in patches to Sourceforge, the precursor to GitHub where bitcoin's codebase was originally stored.
The origins of Blockstream
According to Maxwell, Blockstream was born out of the sheer amount of work that needs to be done developing bitcoin's core software. "On the technical side, there is no end to interesting technical problems," he said.
Sidechains, which allow bitcoin to move to an alternative blockchain for additional uses and features, and also allow experimentation with the technology, are a key aspect the company is focusing on.
A proof-of-concept whitepaper on sidechains was released in October that caused much buzz in the community for its potential to reshape the digital currency ecosystem.
Prior to this, Maxwell said, the concept of one-way pegged sidechains had long been discussed. However, this idea gained little traction because users could end up with worthless coins if a proposed sidechain project didn't work out.
"The problem with a one-way peg is that if it turns out to be a lemon, you're stuck. You can't get out, you can't go back," Maxwell explained.
Blockstream, though, found a way to perform a reciprocal peg.
"I realized how to go in the other direction - something that could reasonably go back and plausibly have good security. Every other proposal before then just wouldn't work or couldn't be secure."
Funding bitcoin development overall is also a part of Blockstream's mission. There are few companies today working on deep infrastructure issues which will help bitcoin scale.
"It's very difficult to fund infrastructure development. Particularly forward-looking, longer-term things."
Maxwell conceded that sidechains, for example, is a complex project. "It's not a small piece of engineering to go build this," he said. However, Blockstream will have dedicated developers who will devote time to working out the specific complexities of sidechains, Maxwell assured.
Creating core developers
Blockstream's Adam Back and Austin Hill have both talked about the need to accelerate the development of bitcoin technology, yet there simply are not enough core coders available right now.
One of Maxwell's roles at Blockstream is the creation of new talent to help drive bitcoin development. "The real problem is just expanding the base of people who can do this stuff," he said.
"We're going to make more core developers. My goal in hiring has not been to sort of fight over the meager scraps of stuff that's available."
Maxwell described development work on bitcoin as "mission critical." Blockstream also aims to offer thought leadership within the industry to voice opinions on how bitcoin can remain a stable and secure technology.
"I think [bitcoin is] easier for the folks at Blockstream to talk about. Because we've been involved in this stuff, we are the biggest technical guns in the bitcoin space," he said.
November's $21m funding round, led by Reid Hoffman, Khosla Ventures and Real Ventures, among many others, was completed with long-term bitcoin development as a focus.
"[Development] is some of the stuff that we told our investors about. It takes money to go and do that. It does not have a short-term immediate payoff, it's a long-term payoff," said Maxwell.
Addressing centralization concerns
Many in the bitcoin community are concerned the ethos of bitcoin's decentralization is eroding.
They point to off-chain transactions, regulatory scrutiny and companies like Blockstream employing many bitcoin core developers as problematic.
Maxwell stressed that while the company would generate new bitcoin core developers, this doesn't mean that they will have to stay at the company permanently.
"If we manufacture someone who is making this stuff, they are not bound to Blockstream forever," he said.
"From one perspective, it shouldn't matter. Because if having a bunch of people, [or] control over a bunch of people, working on the reference client is bad, then we're already in trouble."
Problems with decentralization as bitcoin grows are not going to diminish either, according to Maxwell: "There's an inherent tradeoff between scale and decentralization when you talk about transactions on the network."
The problem, he said, is that as bitcoin transaction volume increases, larger companies will likely be the only ones running bitcoin nodes because of the inherent cost.
He pointed out:
"You'd need a lot of bandwidth, on the order of a gigabit connection. It would work. The problem is that it wouldn't be very decentralized, because who is going to run a node?"
This brought the core developer back to why sidechains, in the end, will be critically important to bitcoin. Figuring out how to properly scale bitcoin will require a lot of testing.
"The tradeoff isn't a constant. We can do some things where you can get some scale without hurting decentralization. But that requires some experimentation," he said.
Maxwell image via Lwn.net