Austin Hill has lived through boom and bust cycles in digital currency that predate Bitcoin by years. In the 1990s, he founded Zero Knowledge Systems and brought together many of the Cypherpunks who b
Austin Hill has lived through boom and bust cycles in digital currency that predate Bitcoin by years. In the 1990s, he founded Zero Knowledge Systems and brought together many of the Cypherpunks who built the earliest versions of digital money. At TechCrench Disrupt in London, he talked about the decades between his early work and his return to cryptocurrency.
After Zero Knowledge landed the rights to Stefan Brands' patents, Hill and his colleagues tried to turn Ecash into a real product. "We built tool kits and were doing projects with Nokia and financial institutions who were all trying to figure out how to bootstrap Ecash and as we and others found out, it was incredibly hard to bootstrap," he said.
Hill had stepped away from the space. Then in 2013, Adam Back got in touch. "In 2013 Adam called me. I'd gone off, I was a venture capitalist, had a bunch of different start ups. Adam had gone off, spent some time at Microsoft and had a start up of his own. He called me and asked for help with Bitcoin and my first answer was no, but thankfully he wouldn't take that for an answer and he showed me a vision on how we could build interoperable blockchains, even beyond Bitcoin."
On private blockchains, Hill sees a lot of confused thinking. "Unfortunately, a lot of the discussions about private chains are very shallow and not very informed. You have some people who think they're just databases, that they have no benefit. You have some people who say that Bitcoin as a public chain is the only one that'll ever work and everything else will fail. Where in fact that entire conversation is broken and shallow."
He used a network analogy. "It's like going back to 1994 and saying you deployed TCP/IP on an intranet—that's not the internet! We don't talk that way these days. You just say you're using the internet and using a common protocol and how they've used it differs dependent on their needs. Some people are using IPv6 to route to long haul mobile data on very large fibre networks that don't route public TCP/IP but it's still part of the internet. It's all using the same protocol and that's the more interesting potential future."
But Hill worries about companies that dismiss Bitcoin's work. "There is danger in the marketplace because a lot of people say they're going to build a private blockchain but are ignoring the entire body of code and a system that's been so heavily stress tested and had the single largest security bounty ever posted. You can't overlook that amount of peer review, that amount of testing and the work of the core development team."
Bitcoin Core's security rigor stands apart. "The expertise needed to do this work is quite high and there's a huge learning curve. But there's a core Bitcoin community of which we have members who contribute. But it's not our community. It's THE community and the work that's been carried out on scalability, on security is so much bigger than anyone appreciates. I saw some numbers recently that for every 20 or 30 hours of coding that goes into Bitcoin Core, there's almost 100 hours of security reviews and testing because they're treating it as fiduciary code. If they make a break and accidentally fork the network, the whole thing could blow up. If it blows up, all the benefits of digital currencies could be forgotten and set back adoption and investment."
He pointed to specific examples of this work. "You look at the work of Pieter Wuille and Greg Maxwell on Libsec and they discovered a bug that had existed, undiscovered in OpenSSL for almost 18 years. They found it, patched it. That kind of security review and analysis is hard to do and it's a rare expertise. Building on top of that as a stack and using this as a common protocol makes sense for a lot of reasons. A company who thinks that blockchains are popular, writes their own and pushes a proprietary blockchain, are dangerous."
Visa's project lead acknowledged this reality, Hill noted. "There have been comments from the project lead at Visa who basically said well there's a lot of exciting things happening but there's only one production system that does this and that's Bitcoin. And I think that's very true."
On Ethereum, Hill had reservations. "Vitalik is very smart, but I've had concerns about Ethereum on a number of fronts which I have voiced at length. From a technological point of view it's very ambitious, but it's a massive crowd funded science project and I don't think crowd-funding science in that way is necessarily good as a long term funding model when these sorts of projects take so much effort."
He noted Ethereum's own funding struggles. "Even recently Vitalik has been vocal about their funding problems and how do you do a secondary initial coin offering? How do you resell coins to the public? Whereas VCs have a known model: Series A, Series B. You may have a down round, but they have the expertise to absorb that risk and make informed decisions on whether or not a company gets funded through multiple stages of its development."
Security concerns also troubled him. "Aside from the business and funding model, the goal is still exciting: How do we open up blockchains and platforms to more general purpose smart contracts? Security analysts who I know and trust have pointed out that there are a lot of problems with their approach. They have a Turing complete programming language which at present allows for things like viral contracts which could essentially turn the blockchain into your Windows XP box because of the non-sandbox restraints on contracts."
He compared this to Bitcoin's approach. "Bitcoin's approach is more rigid but even in that there were security risks that were identified early on, such as when some op-codes were turned off. So I think when you are developing fiduciary code as a platform, there's a requirement to be very conservative on your designs. Though Ethereum experimented, for example with its proof of work, with its smart contract language—which is great for innovation—but I really question which production systems we'll actually see deployed on it."
Hill praised what Sergio Lerner was building with Rootstock. "What Sergio is doing with Rootstock is really interesting. They are using a hybrid, federated and merged mined security model and have built an Ethereum compatible VM into the Bitcoin ecosystem which is really exciting!"
He saw sidechains as the path forward. "The whole sidechains concept allows for innovation to happen. Segregated Witness, which was just introduced by Pieter, allows for a lot of solutions to problems including transaction malleability as well as giving us an immediate 4x scalability improvement without the risks associated with a hard fork. This is code that was written and tested 6 months ago and has been running on sidechain elements."
The model matters. "I really like this approach where we have multiple chains running the same infrastructure where we can prototype and test certain features which could be rolled back into Bitcoin. Other features just aren't appropriate but can exist on their own chain while still being interoperable. An interesting example is the ability for trustless, atomic cross-swaps which contain market orders but never have custodianship over any funds. So you could enable a marketplace where people can place their order, but without the exchange ever having to hold the funds. This reduces the barrier to entry, changes compliance and regulatory issues and allows for improved security on exchanges who can no longer have their hot wallets attacked."
When asked about proposals from Scaling Bitcoin, Hill mentioned specific work. "There is some really interesting work from one of our co-founders, Mark Friedenbach, who's introduced research around cost allocation, so that the cost of generating large blocks is accurately reflected which helps towards a healthier market. The work Rusty Russell has done on IBLT—Invertible Bloom Lookup Tables—which allows for faster mechanisms for transaction merging and block creation, which is very interesting. I am very optimistic that the combination of proposals I've seen give us a lot of breathing room if they're adopted in short order."
Blockstream structured itself to avoid controlling Bitcoin development. "The core dev community needs to review these and decide, but I can't speak for anyone. I actually can't because we designed the whole company, including employment contracts around that purposely. We believe that no company should have influence over core. However, core still needs to be funded. When we created Blockstream, the only other option was the Bitcoin Foundation who were funding members of the team. But that went away when the community lost face in them and all of a sudden there were core developers with no income."
He described the safeguards built in. "We made a decision that we aren't going to hire any more core developers. Instead, we'll have our team work on the open source project. But at no point will Blockstream the company dictate what we think is right for Bitcoin. We developed this into our contracts including a clause where if we ever ask our developers to do anything which they feel goes against the principles of Bitcoin or if we try to push something that is to our advantage then they have the right to resign and we have to pay them."
Decentralization guided their approach. "We care massively about decentralisation. For example, Lightning was developed open source so there will be no monopoly. The same applies to sidechains. Sergio didn't need our permission to develop Rootstock. The code is open source and anyone can use it. If the BIP is approved then we'll see hundreds and thousands of sidechains emerge that are interoperable with their own economic playing fields. We think this is healthy for the ecosystem. We never were and never will be interested in designing or even participating in a system where everyone has to go through us."
Blockstream's first commercial sidechain was Liquid. "Liquid was designed around one narrow use case but one that we thought was immediately solvable. The response so far has been phenomenal. We announced 5 initial participants but since then have signed up more. The onus is on our partners to fully launch the network, but we are expecting to launch mid-February. We are currently focused on getting it right for each partner, making sure the UI is clean and that the network is tested."
The benefits were practical. "Essentially Liquid allows for companies to access liquidity without having to adopt complex hedging strategies. It also means that there's no need for balances in every exchange in the world which is capital intensive and risky. When you give liquidity providers instant clearing you can help pricing across the whole eco-system. We have large plans for where we can take this. We now have a large portion of the Bitcoin exchanges talking to each other on a sidechain which allow for even more interesting use cases, all of which benefit the ecosystem."
Looking ahead to 2016, Hill had hopes. "I hope and strongly believe that a large part of the scalability discussions which at times have become very toxic and unnecessarily distracting will be resolved. I think we are going to focus on a lot more hard problems that when solved will unlock more value in the ecosystem, for example, mining centralisation. At the moment there is too much concentration and transaction governance. This is something that we've had a team working on and will announce some ideas and technology that will solve this problem in 2016."
He was excited about the platform's potential. "I also think we will begin to see much more examples of the blockchain being used as a general purpose platform which has been discussed previously, but without enough examples. Bitcoin has an incredible velocity and network effect and I don't think people appreciate it because they focus so much on price and which banks are building private blockchains. I think we are going to see interesting use cases where people build interoperable chains which is something very exciting!"
