Cypherpunks Write Code: Gregory Maxwell and Bitcoin Core

10 May 2024

Satoshi Nakamoto and Bitcoin weren’t exactly popular in the early days, not even among their peers. Privacy-inclined people, who were also experts in programming, and were looking for an alternative to banks and traditional money, were the first ones to read the Bitcoin whitepaper —and most of them didn’t think highly of it. Gregory Maxwell, a self-declared cypherpunk, was one of them.

Maxwell is an American programmer well-known for his deep involvement in Bitcoin, to the point of being one of the most important developers of Bitcoin Core (its main implementation) for years. It wasn’t like that since the beginning, though. He first got involved in other open-source and collaborative systems, being an early contributor to Wikipedia and later an employee at the Mozilla Foundation. However, he believed that decentralized consensus wasn’t possible.

“When Bitcoin first came out, I was on the cryptography mailing list. When it happened, I sort of laughed. Because I had already proven that decentralized consensus was impossible.”

Before really paying enough attention to the Bitcoin code, he was helping to develop the now widely-used Opus Audio Codec. This is an audio format specially designed to compress and transmit audio over the Internet. It offers high-quality sound while using less data, making it ideal for applications like voice calls, video conferencing, and streaming music. Household names like YouTube, Spotify, Netflix, Discord, and Skype use this technology today.

Maxwell on Bitcoin

Even before Bitcoin, Maxwell was involved in the Reusable Proof-of-Work (RPOW) project created by Hal Finney —who would also turn to Bitcoin later. This system created RPOW tokens that could be transferred between users and exchanged for new units, but it wasn’t exactly like decentralized money. Maxwell was aiming to create conditional transfers (similar to smart contracts) in the platform, but the adoption of it wasn’t high.

He came back to Bitcoin in late 2010, as a miner first, just trying to use his GPUs in something useful. Soon after, he paid closer attention to the whitepaper and the source code and changed his mind about the project. He then started to collaborate at a technical level, and he’s been doing it since 2011. In those early days, he focused on protocol design, incentives, and cryptographic review.

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In 2014, he also co-founded Blockstream, a company mainly created to boost and fund Bitcoin development. While there, Maxwell helped to create the two-way peg, which makes sidechains possible. These are separate chains connected to a parent distributed ledger, like Bitcoin, enabling experimentation with new features and functionalities without risking the main chain's security. The two-way peg would allow assets to move between chains without losing their value.

As a Bitcoin Core developer, Maxwell also helped to build the homomorphic key derivation in Bitcoin Improvement Proposal (BIP) #32, which allows for the generation of multiple public and private key pairs from a single master key. Additionally, he co-authored the BIP-9 to establish a standard for light updates (softforks), and the BIP-173 to define a new type of address for SegWit —another improvement update to increase efficiency.

He left Blockstream in 2018 and focused on the creation of smart contract features for Bitcoin. That way, he became the author of a new important improvement for Bitcoin, the Taproot update. This technique combines multiple spending conditions into a single signature, enhancing privacy and reducing transaction costs —which encourages the creation of complex smart contracts.

Some Concerns, and Time

As much as other fellow cypherpunks, Maxwell has also expressed some concerns about Bitcoin's internal functionality. This is the system that really spread the idea of decentralized money, but it’s not perfect. For starters, Maxwell told the story about his early days as a miner, and how the overheating caused by the machines even drew the police to his home. Mining is, indeed, worrisome, given the great amount of electric energy that it needs.

Privacy is another issue in the Bitcoin ledger. People tend to believe that Bitcoin is anonymous, but that’s quite far from the truth. Bitcoin is actually pseudonymous, which means instead of names and ID documents it uses cryptographic addresses. However, that doesn’t mean you can’t be tracked, especially because every transaction is publicly available in a blockchain explorer. And they include data like amount, date, and connected addresses (senders and recipients).

Bitcoin transaction details in a public blockchain explorer

Maxwell is also trying to fix this issue in the first cryptocurrency, as he commented in an interview.

“Obviously privacy is a big area where Bitcoin needs improvement and I've tried to come up with fancy technology to improve the situation, but it's always a balancing act. Privacy is the one area where if Bitcoin doesn't get better at it... it might leave the world a worse off place than if Bitcoin hadn't existed. The worst case for Bitcoin privacy is pretty bad.  There has been a lot of progress but more is needed.”

Despite current flaws, Maxwell also thinks that mass adoption of cryptocurrencies is just a matter of time. Impediments like insecure hardware, buggy software, tax barriers, or self-custody risks will find a solution over the years, and we’re on our way to it.

Obyte as a Step into the Future

Obyte has emerged as a compelling alternative to Bitcoin, addressing concerns regarding privacy, and decentralization. Unlike Bitcoin, which requires miners as inevitable intermediaries to approve transactions, Obyte employs a Directed Acyclic Graph (DAG) structure where transactions don’t need any approval. This approach eliminates the need for blocks and their creators, making Obyte fully decentralized.

Moreover, Obyte offers enhanced privacy features, such as the integration of the privacy coin Blackbytes and in-wallet encrypted chat functionality. These options provide users with greater confidentiality in their transactions and communications, addressing the privacy concerns prevalent in Bitcoin's ledger.

By prioritizing decentralization and privacy, Obyte ensures that users can freely conduct transactions on their own and have the option to do so without compromising their sensitive information to public scrutiny, distinguishing it as a more privacy-focused and decentralized option in the cryptocurrency landscape. This ecosystem is really the next step into the future, as many cypherpunks have dreamed of.

Read more from Cypherpunks Write Code series:

Tim May & Crypto-anarchism

Wei Dai & B-money

Nick Szabo & Smart Contracts

Adam Back & Hashcash

Eric Hughes & Remailer

St Jude & Community Memory

Hal Finney & RPOW

John Gilmore & EFF

Satoshi Nakamoto & Bitcoin

Featured Vector Image by Garry Killian / Freepik

Photograph of Gregory Maxwell by Blockstream