Dialogue with Miao Yongquan on Blockstream's $210 million new financing: Already involved in the upstream business of the Bitcoin industry chain

This article is sourced from ChainNews, authored by Pan Zhixiong.

As one of the world's most focused companies on Bitcoin's underlying technology, Blockstream has just completed its $210 million Series B financing. This round of financing is also accompanied by their acquisition of the Israeli ASIC chip design team Spondoolies, marking Blockstream's gradual expansion from a software-centric business to a more upstream position in the Bitcoin industry chain.

Prior to this, Blockstream's commercial product line mainly focused on the Bitcoin sidechain Liquid network ecosystem and services related to Bitcoin mining, as well as some data-related businesses. Notably, Blockstream also maintains and iterates several free product lines within the Bitcoin ecosystem, such as the Bitcoin full node satellite network, the acquired Bitcoin wallet Green Wallet, and the Lightning Network client c-lightning.

Blockstream's Chief Strategy Officer Samson Mow told ChainNews that although these products are interconnected, they prioritize the Liquid network as the most important product line. "For example, the wallet we develop will ultimately connect to the Liquid network, so the wallet's own profit model is secondary; the main focus is on how to grow the Liquid network." Before joining Blockstream, he was the COO of BTCC, China's first Bitcoin exchange.

In addition to him, Blockstream's core team includes CEO Dr. Adam Back and others, who have almost the greatest influence in the Bitcoin community, and one of their small pleasures is to criticize the Ethereum community.

ChainNews previously reported on the heated debate between Mow and Vitalik Buterin regarding blockchain throughput in a podcast, and during this interview, Mow continued to criticize Ethereum without reservation. He believes that a truly "decentralized" financial system cannot be built on Ethereum, but can only be achieved through Bitcoin, the Lightning Network, and Liquid.

Although most mainstream DeFi still exists within the Ethereum ecosystem, the Bitcoin network is continuously evolving and may gradually incorporate more complex programming capabilities in the future. Recently, Bitcoin is also facing a significant upgrade, and Mow stated, "Currently, the Bitcoin network is focused on the Taproot upgrade, and Blockstream's research team has contributed a lot to this upgrade. Everyone should be looking forward to seeing Taproot activated in November."

Why Choose Bitfinex as One of the Lead Investors in Series B?

Previously, Blockstream has publicly disclosed financing information three times: a $21 million seed round in November 2014, a $55 million Series A round in February 2016, and a strategic investment from Digital Garage (DG Lab Fund) in November 2017, the specific amount of which was not disclosed.

Among these, it can be noted that Horizons Ventures, a venture capital firm founded by Li Ka-shing, invested in Blockstream's Series A round in 2016. Horizons Ventures, which focuses on technology investments, has not made large-scale investments in the blockchain or cryptocurrency industry, with Blockstream being one of the few, alongside DCG and Bitcoin payment solution BitPay.

The lead investors in this $210 million Series B financing are Baillie Gifford and iFinex, with a post-investment valuation reaching $3.2 billion.

Baillie Gifford is a well-established investment fund with a history of 110 years, headquartered in Edinburgh, Scotland. Baillie Gifford is also an early investor in Tesla, Google, Amazon, and Airbnb. As of June 30, 2021, the company's assets under management amounted to $486.8 billion.

They previously participated in the Series C financing of cryptocurrency wallet Blockchain.com, investing $100 million at a post-investment valuation of $5.2 billion. They also invested in online payment service provider Stripe, completing a $600 million Series H financing at a valuation of $95 billion.

iFinex has more business and technical cooperation with Blockstream. iFinex is the parent company of the cryptocurrency exchange Bitfinex and the US dollar stablecoin Tether, with Bitfinex being a well-established Bitcoin exchange, and Tether's USDT was originally issued on the Bitcoin network's Omni Layer, indicating that iFinex is a strong supporter of Bitcoin technology, aligning well with Blockstream's strategic direction.

In addition, Mow also stated, "iFinex is a seed round investor in Blockstream and one of the biggest supporters of the Liquid network. We are very honored to have their support in this Series B financing."

Business Gradually Expanding Upstream, Self-Developed ASIC Miner to Launch Next Year

Blockstream's early product line was actually focused on providing institutional Liquid network (Liquid) sidechain solutions. Later, they also ventured into consumer products through the acquisition of the Bitcoin wallet Green Wallet, as well as numerous product lines such as the Bitcoin full node satellite and Lightning Network client.

Although Blockstream's involvement in the development of Bitcoin Core is at the forefront of software development, the upstream of the entire Bitcoin industry chain also includes the mining industry, which participates in consensus. Therefore, they announced earlier this year that they would start Bitcoin mining services, collaborating with companies like Norway's Aker, Square, and BlockFi to engage in Bitcoin mining. They also launched a Bitcoin mining token, Blockstream Mining Note (BMN), which circulates on Liquid for qualified investors, with mining facilities located in Georgia, USA, and Quebec, Canada.

The main competitive factors in the Bitcoin mining industry include power resources and ASIC chip design and manufacturing, which are also upstream areas of the industry. In terms of power resources, they launched Blockstream Energy service a week ago, which helps energy producers sell excess power to miners, thereby providing scalable energy demand for power generation projects through Bitcoin mining, improving generation efficiency and enhancing the economics of renewable energy projects globally, especially in remote areas. This even resembles a global energy resource "arbitrage" solution.

In terms of chip manufacturing, Blockstream announced the acquisition of the intellectual property of Bitcoin mining hardware manufacturer Spondoolies at the same time as the public B round financing. The core team of Spondoolies will also join Blockstream and focus on ASIC chip design and manufacturing.

Spondoolies (a slang term for "money") was founded by semiconductor experts from Israel and has manufactured five types of mining products since its establishment in 2013. Blockstream stated that it will launch its first enterprise-level mining machine next year, accelerating the continuous expansion and decentralization of the Bitcoin mining field.

Mow stated, "Mining is one of our core businesses, and we have many major clients, such as Fidelity and Galaxy Digital. Over the past two years, we have started collaborating with Spondoolies to develop our own ASIC mining machines, and our goal is to bring them to market in late 2022."