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What is the Liquid Network Sidechain?




Liquid Network goes Live

The Lightning Network has some new competition in the Bitcoin space as of September 27, 2018, at 1:29 UTC. This time is the exact moment that Blockstream launched their new Liquid Network sidechain. The protocol shares the same goals as the Lightning Network. One main difference between the two protocols is that the Liquid network focuses more on enterprise level blockchain users.

Despite the fact that some of the largest blockchain firms participated in the launch of the Liquid network, the news went under the radar for most crypto enthusiasts. The list of participants in the protocols launch include Atlantic Financial, Bitbank, Bitfinex, BitMEX, OKCoin, Coinone, and the list goes on. The attendees showcase the anticipation surrounding this Lightning Network alternative.

Liquid via Blockstream Homepage

Liquid via Blockstream Homepage

How Does Liquid Work?

Liquid utilizes a federated sidechain to accomplish the task of reducing Bitcoin congestion issues such as high fees and delayed transaction times. The Liquid sidechain is two way pegged to the Bitcoin sidechain. In this way, all transactions reference real digital assets.

Liquid's protocol is based on the Elements code-base. The platform also incorporates Blockstream's Federation Technology. This Fintech facilitates cross chain transfers of Bitcoin and is at the core of the platform’s functionality. According to Blockstream's blog posts, Liquid will provide four main upgrades to corporate Bitcoin users.

  1. The protocol enables near-instant transfers between exchanges. This feature provides traders with more opportunity by eliminating delays between trades.
  2. The platform enables users to better manage their digital assets across multiple exchanges. API protocols allow for real-time monitoring of your portfolio.
  3. The incorporation of Privacy features such as confidential transactions is standard in the Liquid protocol. Many analysts believe that the cryptospace has a demand for more Bitcoin anonymity.
  4. Liquid utilizes a signed block consensus mechanism that ensures new blocks are added in one-minute This predetermined time set helps improve the reliability of the entire Liquid platform.

Liquid's primary customer base is crypto exchanges. These platforms can easily send Bitcoin between each other without delays by using this protocol. The added features such as Confidential Transactions make the Liquid sidechain an attractive alternative to large corporations looking to enter the blockchain sector.

Lightning Network vs Liquid

First, it is important to mention that both of these off-chain protocols cater to different parts of the cryptocommunity. The Liquid network is purpose-built for use by exchanges, brokers, and traders. The advantage of this design is that the amounts sent between parties avoid channel capacity restrictions. Liquid also reduces delays resulting from one party’s lack of cooperation.

The Lightning Network's design is well suited for personal and business usage. The Lighting Network incorporates private payment channels to reduce congestion on the Bitcoin blockchain. Users can send and receive infinite payments through these portals. The data is added to the blockchain upon the closing of the channel.

As both of these revolutionary protocols see increased adoption in the crypto space, it will be interesting to watch the Liquid network’s effects on the market in the coming months. One thing is for sure, they chose their clientele with care.