What is the Liquid Network and what does it offer?
Liquid is a co-managed parallel blockchain with advanced capabilities and different features to the Bitcoin blockchain. It also has several advantages.
The Liquid Network was created to meet the specific needs of users trading on Bitcoin and cryptocurrency exchanges. It provides solutions to the delays caused by Bitcoin’s slow approval process, allowing users to make fast, confidential and secure transfers between each other.
Liquid’s parallel network is based on the Elements Code and uses Blockstream’s Strong Federation technology to enable the one-to-one exchange of Bitcoin across the two chains.
What are the advantages of Liquid?
Fast trading — Almost instantaneous Bitcoin transfers between exchanges, offering users the opportunity to seize arbitrage opportunities they would have missed out on otherwise
Increased efficiency — Market makers can increase their principal efficiency by reducing the balances they need to hold on exchanges
Better privacy — Liquid supports Confidential Transfers which hides Bitcoin volumes within transactions and prevents user balances from being exposed
Superior reliability — Built on the Bitcoin code, which is one of the most secure in the blockchain space, Liquid software is very secure. Also, because Liquid uses signed blocks instead of mining, it can provide one-minute block times rather than Bitcoin’s average 10-minute block time
Who are the Liquid Network members?
The Liquid network consists of a group of Bitcoin and cryptocurrency exchanges, financial institutions and users from nine countries across four continents. Liquid currently has 45 members: Altonomy, Aquanow, Bitbank, BTCBox, BtcTurk/BTCTrader, Bitfinex, BitMEX, BTSE, Bitso, Bull Bitcoin, Cobo, Coincheck, Coinone, Coinut, Crypto Garage, DDM Bitcoin, DV Chain, Gopax, Hodl Hodl, Huobi, L2B Global, Ledger, ListedReserve, MerklePro, OKCoin, OpenNode, Paradox Fund, Point95 Global, Poolin, Posidon, Prycto, RenrenBit, RIDDLE&CODE, Sideshift, Six Digital Exchange, STOKR, Taotao, The Rock Trading, Wiz, Wyre, Xapo, XBTO, Unocoin and Zaif
BtcTurk CTO Ozan Yurtseven and BtcTurk Business Development Manager Salim Karaman also belong to Liquid’s management board.
How can users benefit from the Liquid Network?
Users can take advantage of fast Bitcoin transfers thanks to LBTC tokens transferred between Liquid Network member exchanges. End users can also withdraw LBTC from their exchange accounts to LBTC-supporting wallets such as GreenAddress or to Liquid Network member exchange wallets. Liquid Network wallet integration is expected to expand in the near future.
How do exchanges use Liquid to quickly transfer users’ funds?
Exchanges hold LBTC tokens and convert Bitcoin deposited by users into them. This allows users to quickly trade between cryptocurrency exchanges using Liquid. Liquid member exchanges can accept LBTC from users and update their account balances within minutes, rather than waiting for the Bitcoin blockchain to confirm the transaction.
How can users reduce capital risks with Liquid?
Regular Bitcoin and cryptocurrency exchange users often have to keep a balance on the exchange in order to execute a trade at a moment’s notice. Liquid allows users to transfer their funds from their own wallets to any Liquid member exchange in a very short time compared to a regular Bitcoin transaction. This provides users with a multi-signature trust model rather than relying solely on a cryptocurrency exchange to store their crypto assets.
What are Issued Assets?
Liquid is built using the Elements blockchain platform and has built-in Hidden Assets multi-asset generation capability. This gives Liquid members the ability to generate cryptocurrency assets such as service tokens, certified assets and digital collectible assets for different purposes.
What are Confidential Transfers?
Liquid was created to be auditable, and in addition to offering privacy between those who transact between each other; however the network is open to participants. Liquid transactions are visible to anyone on the network, but Confidential Transfers allow only the transactors themselves to view the transfer amounts. Confidential Transfers prevent the parties from showing up in blockchain analysis.
Confidential Transfers provide privacy to all users who need it. The use of this high level of transactional privacy will become more pronounced as the cryptocurrency ecosystem matures and major market makers and financial institutions begin trading Bitcoin across exchanges. These organisations will not want to publicly share the amounts they have transferred as this would reveal their trading strategies and would allow potential competitors to know their fund size.
With Confidential Transfers, it is also possible for account holders to make transactions by proving that reserves are sufficient instead of showing their entire balance. For example, to get the total value of all assets, user account balances can be revealed without showing individual quantities, or even what the sum of all assets is. The number of parties involved in the transfer is also kept confidential.
Liquid facilitates compliance while ensuring privacy of transfers, which would not be possible without the Confidential Transfers option.
Why is Liquid a parallel chain?
The Bitcoin blockchain is far superior to its competitors in offering transfer of value as it does not require permission or trust and it is resistant to censorship. However, these can only be accomplished by paying the price of a complex transfer flow and mining infrastructure. The Liquid parallel network allows privacy and enables fast transfers, on condition of trusting on authorised members of the permitted network.
Supplementing the Bitcoin protocol with a parallel network ensures that the main network remains secure, strong, and private, while its infrastructure supports the smooth operation of the parallel network.
While Bitcoin is kept safe with its Proof-of-Work consensus mechanism, assets on the Liquid blockchain are secured by the strong partnership between authorised members. This allows transactions on Liquid to be completed much faster and more efficiently than transactions on the Bitcoin blockchain.
How does conversions between BTC and LBTC happen?
Liquid members send BTC to addresses managed by the Liquid Federation. When the transactions made by these members, receive 102 approvals on the Bitcoin blockchain, the same amount of LBTC is transferred to the members’ accounts in return. A high confirmation threshold is required to ensure that the network is secure in the event of a possible attack on the Bitcoin network.
Liquid members are required to keep some of their balances as LBTC in line with their LBTC requirement. If a user wishes to return to BTC, Liquid members must perform a BTC exit transfer (peg-out) on Liquid for authorised members to send BTC to their addresses. Only members of the Liquid network can make a BTC exit transfer with LBTC. End users cannot directly convert LBTC to BTC. However, anyone can convert BTC to LBTC through a Liquid Network member exchange.
Can I run Liquid full node?
Currently, only Liquid network members can run full nodes. In the future, users will also be able to run full nodes to confirm transactions on the network. The Liquid network may eventually need more system resources than Bitcoin, and will be necessary to run a Bitcoin node along with the Liquid node to validate BTC entries (peg-ins).
If Liquid Network shuts down, what happens to Bitcoin that the partnership has stored?
If the network is down for a certain period of time, emergency keys are created to access the Bitcoin held in the network. Efforts will be made to get the network up and running again before using these keys, but if this is not successful, the emergency keys will allow the Bitcoin in the Liquid Network to be transferred to the last people owned it. Generated assets can be transferred to another cryptocurrency exchange or to a Liquid-compatible blockchain, subject to rules preset by the owner.
What is the difference between the Lightning Network and Liquid?
The Bitcoin Lightning Network needs connections between the parties before a transfer can occur. This makes the Lightning Network perfect for micro payments, but it makes the large payments between random parties that are not connected to each other complicated. Liquid allows parties to transfer between each other at any time. Liquid also supports multiple assets, which can also be useful for single-transaction atomic swaps that don’t require any setup. Integration of the Lightning Network is also expected to enable faster transfers in the Liquid network.
Who can join to Liquid Network?
Liquid is designed for cryptocurrency exchanges, financial institutions, very high-volume users, and OTC units. Lower volume users and end users can use Liquid through Liquid wallets and member exchanges.
Who manages Liquid?
Liquid is managed by its members. Blockstream has no control over the network and only serves as a technology provider to Liquid members. Liquid will continue to operate independently even if Blockstream leaves the network or its members do not want to receive services from Blockstream.
Do you know?
You can use the BtcTurk | PRO website or mobile application to transfer or receive Liquid Bitcoin and Liquid Tether. There are no conversion rates and you can withdraw your Bitcoin balance as LBTC as well as Tether balance as LUSDT. If you are not a BtcTurk member yet, you can become one instantly on the desktop or mobile applications and buy and get trading quickly.
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