Blockstream Launches Bitcoin ‘Liquid’ Network And Exchange Ecosystem To Become Bitcoin’s First Sidechain


Blockstream announced in a blog post on October 10, 2018, that its Liquid Network was live. This latest development comes after three years of development and is considered as the most advanced implementation of sidechain on the Bitcoin network. The network officially went live on September 27, 2018, the day which it produced its first block (genesis block).

The Liquid Network is, in simple terms, an ecosystem for participating crypto exchanges and businesses to transfer Bitcoin between members rapidly, consistently and more privately than they could by directly using the Bitcoin network.

23 members already part of the Liquid ecosystem

The company described in its blog post that the Liquid network as the first production of a Bitcoin sidechain. It provides fast, secure, and confidential transactions to address the needs of exchanges, brokers, market makers, and financial institutions all over the globe.

Liquid developed by Blockstream wasn’t what it was initially established to research and develop. Blockstream developed a federated sidechain instead of a sidechain that enables users to swap bitcoins for sidechain coins with any exchange, broker, etc.

The federated sidechain is reliant on big companies, which is now made up of 23 companies put together by Blockstream. These companies work together to manage the sidechain and this has led to some criticism from crypto enthusiasts.

The post added that 23 cryptocurrency companies including big names like Bitfinex, BitMEX, OKCoin, Xapo, and others participated in the launch.

These companies make up the Liquid network and they ensure that users’ assets are protected through a geographically diverse network with no single point of failure.

They added that the network is an innovative sidechain built on the Bitcoin network. It facilitates faster bitcoin transactions between businesses and individuals while the functionality can also be extended.

Features of Liquid by Blockstream

Native token – Liquid Bitcoin (L-BTC)

The network has several features. The first one is the native Liquid Bitcoin (L-BTC) asset, which is backed by a two-way peg to Bitcoin (BTC).

The crypto asset can be redeemed at any time, thus providing institutions and users a secure and fast way to transfer BTC between members. This whole process can take place within two minutes, the post added.

Tokenizing traditional assets the same way Ethereum does

The second feature of the network is that it would bring Bitcoin-like features to traditional assets. They include fiat, digital reward points, and attested assets (e.g. gold coins), removing the need for dedicated blockchains or wallet software.

Increasing privacy for Bitcoin transactions

The third feature is the Blockstream’s Confidential Transaction technology which would help in ensuring that the amount and asset type transferred are known only to the transacting parties. This increases the privacy of both L-BTC and Issued Asset transactions.

More updates to come to the network

Asides these features, Blockstream is set to release a wallet that has been designed purposely for transactions involving Liquid. Asides the company’s GreenAddress supporting the Liquid, Ledger, and Trezor would soon be adopting the technology soon.

The post by Blockstream concluded that the launch of the Liquid Network marks the start of a new era of digital asset issuance and transacting. It would achieve this by enabling the tokenization of fiat, gold, securities, and even other new crypto assets.

Excitement around the launch of Liquid

Paolo Ardoino, CTO of Bitfinex, is excited about the launch, stating that Liquid’s instant settlements will allow their traders to achieve faster bitcoin deposits and withdrawals, more efficient arbitrage, and even better pricing through tighter spreads.

Bitcoin subreddit moderator ThePiachu tagged the technology as not innovative, adding that even though Liquid sounds interesting, it is not what the Bitcoin community is after.

It is, however, a welcome development for the big companies as it solves some of the problems that have been plaguing them for a while now.

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