Why BlockCypher will Help Unlock the Next Wave of Blockchain Developer Adoption
For the digital currency Bitcoin, 2014 was the best of times and the worst of times.After peaking at over $1,100 and seeming unstoppable, bitcoin dropped by more than 60% and became the worst performing currency of 2014, below the Russian Ruble and Ukraine’s Hryvnia. In just the time between writing and posting this piece, Bitcoin had a $100 swing! The price swings certainly reflect how cryptocurrencies continued to suffer security, regulatory, and questionable activity hits.
At the same time, the uptake and adoption of Bitcoin and other cryptocurrencies continues to explode. By any measure — number of wallets, merchants accepting the currency, developers working on blockchain related projects, and level of venture investment — digital currency is, well, gaining currency.
Catheryne Nicholson, Matthieu Riou, and the team at BlockCypher have introduced a multi product solution that is both powerful and innovative. Their solution enables developers to immediately ramp up their work with any blockchain technology via hosted environments like AWS. The team at BlockCypher is also bringing significant improvements to the way transactions are confirmed. One of their APIs uses statistics to generate a transaction confidence score that allows merchants to confirm transactions in a matter of seconds with greater than 99% confidence, vs the standard 10–20 minute wait.
Companies like BlockCypher are becoming leaders in speeding adoption by increasing speed, security, and transparency. That’s why BlockCypher’s recently completed (and oversubscribed) seed funding round of more than $3 million is significant in this space. My colleagues at Foundation Capital and I are excited to be participating in this round as a part of our on-going belief that the Financial Services industry will be the target of a series of disruptive innovations.
I first met Catheryne and Matthieu at one of the Bitcoin developer meet ups we hosted at Foundation Capital’s San Francisco office. (You can nerd out with the video of that evening here.) I was hugely impressed by the logic behind their approach of reconstructing the bitcoin core client from the ground up, and the possibilities that would open up if they were successful. After a long period of working hard with their heads down, they came out the other end, and they came out swinging.
What started out as a meet up quickly turned into an inadvertent investor pitch — even if it took months to get them to formally meet with us! But when they did, it was clear that we had a shared belief that the next frontier of innovation in crypto-currency will be powered by the blockchain and companies like BlockCypher that enable block chain development at increasing speed and ease.
BlockCypher has done some solid development by recreating the bitcoin client and providing blockchain capabilities via web services. Not only will this allow them to launch several products and scale the company, it also is contributing to an upgrade of the block chain infrastructure, which will support mass scaling of the technology.
BlockCypher provides tools that help with both bitcoin developer adoption and scalability of infrastructure.
But let me step back to Bitcoin adoption. In my own work, I’m seeing world class technologists and entrepreneurs taking the plunge and deciding to work full time on cryptocurrencies. And that anecdotal experience is borne out by the numbers.
(source Bitcoin Pulse)
This chart tracking the number of bitcoin repositories in Github, suggests that the number of developers and projects dedicating serious time and effort to develop bitcoin applications continues to increase.
Another impressive visualization is the one above, because it shows that the number of developers has increased even as working on the blockchain becomes more complex. A common complaint, for instance, is that a new user has to download a full copy of the bitcoin blockchain — which grew from 12 to roughly 28 GB just in the last year (and 1 GB in the last month). It often takes multiple days for the download to fully verify and start running as a full node.
Only at that point can the developer start deciding on which wallet and basic tools to use, a decision that itself is fraught. After all, a bad choice of provider might mean getting hacked and losing your coins. I’ve had friends whose bitcoins disappeared because they didn’t have a test environment, or hit the wrong key while running a test in a production environment!
While some of the early members of the bitcoin community often see developing most of their tools and working environments themselves as a badge of honor, that’s a real barrier to bitcoin and blockchain adoption. A front-end developer interested in building a lightweight app with blockchain functionality in a few hours shouldn’t have to get so deep into the blockchain to make that happen.
Regarding scalability of the infrastructure — the blockchain infrastructure will likely face serious challenges if it is to be widely adopted. One example of this is the capacity of the blockchain to process transactions. The bitcoin protocol can accommodate roughly 7 transactions per second, or roughly 600,000 per day. Today, at roughly 100,000 transactions a day, the protocol is functioning smoothly. But the network will certainly start showing strains as transaction volume and merchant acceptance continue to grow. As a frame of reference, the Visa network can handle volumes of 10,000 transactions per second!
A more immediate expression of this scalability — derived from operating in a consensus network like the blockchain — is that even with the current small volume, transactions can take 10–20 minutes to get confirmed against double spend. For time sensitive transactions (like buying a cup of coffee), this is an unacceptable delay (I want my coffee NOW!).
There are so many exciting applications that developers are eager to build as they become aware of the huge potential that blockchain technology holds. At Foundation Capital, we believe that 2015 will be a year in which the infrastructure will continue to expand to accommodate more use cases, and that all these new businesses will need enterprise grade, six-sigma reliability to make a dent in the world. We believe that BlockCypher will play a significant role in unlocking the next wave of blockchain developer adoption.
Originally published at www.foundationcapital.com.