Libra is out. The code and the “white paper” for Facebook’s cryptocurrency were published on Tuesday, ahead of the official launch in 2020. It is the crowning of a project the company kicked off in May 2018 with the appointment of David Marcus, then the head of Messenger, to lead its new blockchain division. Marcus, a former Paypal president and a Coinbase board member at the time of his appointment, set out to quickly grow his unit, which by early 2019 numbered over 40 staff.
One of the key moments in Facebook’s march towards the creation of Libra came in February 2019, when the company announced it had acquired Chainspace, a London-based, Gibraltar-registered blockchain venture which counted among its ranks several academics from the University College London Information Security Research Group, including George Danezis, one of the UK’s leading privacy engineering researchers. (Danezis did not reply to an interview request.)
Founded in early 2018, over its relatively brief lifetime Chainspace tallied up several noteworthy achievements. Blockchains – the digital pipelines on which cryptocurrencies and other cryptographic assets are exchanged – are supposed to be decentralised: transactions are processed and verified by a swarm of independent computers, rather than a single arbiter, such as a central bank. Decentralisation makes the system less vulnerable to hacks or shutdown attempts, but it requires time: the Bitcoin blockchain, for instance, can only process some seven payments per second, while Ethereum can handle about twice that; by comparison, the centralised payment network Visa reaches 24,000 transactions per second.
Chainspace was on its way to overcome those problems by leveraging “sharding” – a technique that can achieve scale by running a web of interconnected blockchains – and a transaction verification system (or “consensus protocol”) called Blockmania, which could theoretically handle up to 400,000 transactions per second. A third Chainspace invention, a program called Coconut, could greatly enhance blockchain users’ privacy.
“The real potential that we saw in ChainSpace was one of the first serious implementations of state sharding across a trustless network,” says Lior Messika, an early investor in Chainspace with his VC company Eden Block. “We were impressed by a pioneering approach and solid plans for implementation.”
Chainspace’s open-source research was partly supported by Decode – an EU initiative aimed at increasing European citizens’ control over their personal data. Ironically enough, the work of an EU-backed company working on decentralisation and privacy caught the eye of EU-fined data-guzzling monopoly Facebook.
According to sources familiar with the blockchain industry, Facebook’s move should be interpreted chiefly as an “acqui-hire” – an acquisition driven by a desire to snap up Chainspace’s staff, rather than by an interest in the individual technologies they developed. The startup’s team members had valuable and relatively rare profiles, as they combined blockchain-developing experience with a solid academic background. And their track record in creating scalable systems would come in handy for a company eager to launch a cryptocurrency coin geared towards 2.3 billion users across the planet.
Read more: What is Libra? Facebook's cryptocurrency, explained
This week, less than six months after the Chainspace buyout, Facebook published its detailed plan for the Libra coin cryptocurrency. The Chainspace bunch – George Danezis, Shehar Bano, Alberto Sonnino – were all listed as coauthors of the main technical white paper and of some other key documents. But the Chainspace technology itself was conspicuously absent from Libra’s blueprint. Blockmania was referenced in passing in a report expounding on Libra's own consensus protocol, HotStuff; the main paper mentions sharding, but as a future implementation rather than a present feature.
All this was expected, and is indeed consistent with Libra's current makeup. Chainspace had developed technology for decentralised, leaderless blockchains – like Bitcoin or Ethereum. Libra, in contrast – and despite the white paper's wording – has been described by blockchain grandees on Twitter as a centralised, managed project. Libra transactions will be processed by a group of “validators”, which currently only comprises members of the Libra Association, including major companies like Facebook, Uber, and eBay among others.
The declared ambition is to gradually open up the membership over the next five years, until the network of validators encompasses whoever holds a certain quantity of Libra coins. One optimistic hypothesis is that Chainspace's pro-privacy, pro-decentralisation tools could be introduced at that stage. It is far from guaranteed that that will ever happen, or that Facebook will meet its five-year deadline for implementing greater decentralisation. (US regulators have already urged Facebook to stop developing Libra while they investigate its potential impact).
As of today, some elements of Chainspace technology are living on in another startup. A company called Nym Technologies is building on the Coconut privacy protocol to create a “mix network” – a blockchain-powered platform for anonymous cryptocurrency payments, messaging, and web navigation. The project was spawned from Panoramix, another EU initiative kick-started in 2015, aimed at developing an alternative to Tor, the privacy-focused internet browser. Danezis himself worked on Panoramix, and advised Nym before Facebook's offer; Chainspace co-founder, Dave Hrycyszyn, recently joined Nym as its CTO after a brief stint with Facebook's blockchain unit; Mustafa Al-Bassam, another Chainspace co-founder, who did not join Facebook in February, is now a Nym advisor.
“Both Nym Technologies and Chainspace are the products of the genius of George Danezis. It's unfortunate that only Facebook had the acumen to recognise his genius,” says Nym Technologies CEO Harry Halpin, also a Panoramix veteran. "But we are still committed to carrying on the legacy of his work on privacy.”
Updated 20.06.20189, 13.37 GMT: This article has been amended to rectify Mustafa Al-Bassam's former role in Chainspace: he was a co-founder, not just an employee.
This article was originally published by WIRED UK
