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Break-out year for Victoria-based Blockstream; helped to create El Salvador's Bitcoin system

Blockstream builds the products — networks, storage, mining operations and transaction settling technology — that make cryptocurrency Bitcoin usable for all manner of transactions
At a glitzy cryptocurrency conference in El Salvador last week, Blockstream was on hand as President Nayib Bukele vowed to build a Bitcoin City. THE ASSOCIATED PRESS

So far, 2021 has served up nearly a year of doom and gloom with apocalyptic weather, a string of natural disasters and the ongoing spectre of the COVID-19 pandemic casting a pall over daily life.

But there have been wins among the shadows, and a Victoria-based high-tech firm is scoring 2021 as a break-out year.

Blockstream, a seven-year-old digital infrastructure company that builds the products — networks, storage, mining operations and transaction settling technology — that make cryptocurrency Bitcoin usable for all manner of transactions, has come into its own over the last year.

While expanding operations and establishing new Bitcoin mining sites, Blockstream also raised $210 million in financing giving it a valuation of just over $3 billion, and then helped create the infrastructure necessary for the government of El Salvador to declare Bitcoin as legal tender in that country.

Blockstream chief strategy officer Samson Mow said the company’s role in El Salvador has been to offer advice on how to roll out the Bitcoin program.

“It’s really trying to help them build a new financial system,” he said, adding he expects there will be other countries that eventually follow suit. “We do get people reaching out to talk about the technology that Blockstream is building.”

Mow said what the company has been focused on is building up the pieces of the ecosystem around Bitcoin in order to realize the cryptocurrency’s potential, including improving the technology that allows anyone to use Bitcoin for all kinds of payments, like at point of sale terminals.

“It’s a way for Bitcoin to reach planetary scale of use as a new base layer of the financial system, or as I like to say, money version two,” said Mow.

Mow acknowledged that every few years there is a a dump of press suggesting cryptocurrency is on the wane, too volatile or uses too much energy to mine, but he notes that always tends to pass and the long-term future remains bright.

He said looked at over a long-term horizon Bitcoin has appreciated significantly. At this time of year in 2018, for example, one Bitcoin was worth about $5,500 Cdn, while it closed out last week valued at just under $70,000 Cdn.

Mow said the world is already seeing a broader adoption of Bitcoin with digital payments companies such as Square getting on board, companies accepting it for payment and countries considering it legal tender.

“I think we’re kind of at this precipice, this tipping point,” he said.

Last week, Blockstream was part of a glitzy announcement in El Salvador where president Nayib Bukele vowed to build Bitcoin City.

The city, to be built via bond offering, is to be at the base of the Conchagua volcano to take advantage of geothermal energy to power the city and Bitcoin mining — an energy-intensive solving of complex mathematical calculations day and night to verify currency transactions.

The government will provide land and infrastructure and work to attract investors.

The only tax collected there will be the value-added tax, half of which will be used to pay the municipal bonds and the rest for municipal infrastructure and maintenance.

Bukele has said there would be no property, income or municipal taxes and the city would have zero carbon dioxide emissions.

The city would be built with attracting foreign investment in mind. There would be residential areas, malls, restaurants and a port, Bukele said. The president talked of digital education, technology and sustainable public transportation.

“Invest here and earn all the money you want,” Bukele told a crowd at the closing of the Latin American Bitcoin and Blockchain Conference in El Salvador last week.

Bitcoin has been legal tender alongside the U.S. dollar in El Salvador since Sept. 7.

Critics have warned that the currency’s lack of transparency could attract increased criminal activity in El Salvador and that the digital currency’s wild swings in value would pose a risk to those holding it.

Bitcoin was originally created to operate outside government controlled financial systems and Bukele said it will help attract foreign investment to El Salvador and make it cheaper for ­Salvadorans living abroad to send money home to their ­families.