You may have heard people talking about layer two bitcoin technologies like the Lightning Network, and the Liquid Network before. Both of these networks add capabilities and functionality that bitcoin does not natively have on the base layer.
What is the liquid network?
Liquid is an implementation of Elements, an open source sidechain-capable blockchain platform, based on the Bitcoin codebase.
The Liquid Network operates as a sidechain to the Bitcoin network, and is built using an open source blockchain platform called ‘Elements’. The Liquid Network uses ‘Liquid Bitcoin’ (L-BTC) as its main token, which is pegged one-to-one, with bitcoin.
Being open source, the Liquid Network is operated by the participants which are large exchanges and financial institutions in the crypto space. Right now there are over 50 Federation members, which consist of large Exchanges, Trading desks, Brokerage firms, as well as Infrastructure and wallet provider companies.
There is no single entity in control of the Liquid network, and even Blockstream as the technology provider, does not control the network.
Instead of having miners and Proof of Work, which is very expensive, the Liquid Network uses a federation of companies / nodes to validate transactions and create blocks.
There are 15 participants known as ‘Functionaries’ that sign the transactions and create the blocks. This group of participants are mutually distrusting, and 11 of the 15 need to agree and sign each block to make it valid, and add it to a new block on the blockchain. Dont Trust, Verify!
Liquid Federation Members
Why use the Liquid Network?
This is where it gets really interesting!
Some of the biggest ‘complaints’ that people have about bitcoin vs other cryptocurrencies, is that it is slow, or expensive fees, or that it is not private. Well, Liquid Bitcoin on the Liquid Network fixes this!
Bitcoin traders, holders and exchanges can now take advantage of a range of powerful features such as:
- Fast transactions: Liquid Bitcoin (L-BTC) transactions have full and final settlement in two minutes, as opposed to an average of 10min on the bitcoin blockchain.
- Cheap transactions: Since the Liquid Network is not congested, and the blocks are faster, there is plenty of space available in each block, making the cost to send extremely cheap compared to an on-chain bitcoin transaction.
- Private transactions: On the Liquid Network, all transactions of Liquid Bitcoin, and any other token using the network are confidential. The amount and type of asset sent are hidden by default, which keeps all users financial data safe.
- Create your own tokens: It is possible to create new digital assets on the Liquid Network to represent a fiat currency, security, or any digital asset.
- Interoperability: Liquid Bitcoin as well as all tokens on the Liquid Network are based on the same standard, this allows users to take advantage of features such as atomic swaps and Bitcoin-style multisig.
By swapping out your bitcoin for liquid bitcoin, you are breaking the trail of your transactions linked to your identity on the bitcoin blockchain. You are able to benefit from confidential, fast, and cheap transactions.
What wallet can you use for Liquid Bitcoin?
Right now, the best wallet to use for the average home user is the Blockstream Green wallet. This wallet can be used for bitcoin as well as Liquid Bitcoin, or any other Liquid Assets that are issued.
Blockstream Green wallet is a well known bitcoin wallet and has amazing security features, it is compatible with hardware wallets, and also allows you to custom set your sending fees.
Green wallet is available as an App for your phone, or as software for your desktop computer. You can download the wallet here: https://blockstream.com/green
An option for advanced users, is to run a Liquid Network full node (The Elements software), which is very similar to the bitcoin QT software. Elements will download the full Liquid Network blockchain, and can be used as a wallet, and also to issue new assets on the Liquid network.
How to swap bitcoin for Liquid Bitcoin?
There are some participating exchanges that allow you to do deposits and withdrawals in bitcoin or liquid bitcoin, and some of them have facility for you to simply convert bitcoin to liquid bitcoin.
For a great ‘no KYC’ option, we highly recommend using the services of Liquiditi website, which provides an easy to use interface to can swap Bitcoin, Liquid Bitcoin (L-BTC) and Liquid Tether (USDt). The fees to swap are only 1% for amounts greater than 0.01BTC in size, below that amount are free.
Steps to get Liquid bitcoin from Liquiditi:
- Download and install Blockstream Green Wallet
- Once installed, go to the Liquid Assets area on Blockstream Green Wallet and click the button to Receive assets. Now Copy the Receive Address from the wallet. (This is the address that Liquiditi will send your L-BTC to)
- Open the Liquiditi website and paste the address you copied into the address field, and press the “Start” button.
On the next screen, you will be given an address to pay bitcoin that you would like swapped to Liquid Bitcoin to. You will see on the bitcoin side the minimum and maximum amount of bitcoin that you can swap at that particular time.- Scan the bitcoin QR code or copy the bitcoin address and send bitcoin that you want to swap for Liquid Bitcoin. You have 24hrs to send bitcoin, and you can see the clock counting down at the top. On the right you will see the liquid bitcoin address that you provided in step one.
When you have sent bitcoin, the screen will change, and now you will see on the left the amount of bitcoin confirmations that have passed.On the right it will show you how much L-BTC will be sent to your Liquid wallet after fees once there has been 2 confirmations on the bitcoin network.
That’s it! Just check your balance on Blockstream Green and your L-BTC will be there within 2 min.
On the next screen, you will be given an address to pay bitcoin that you would like swapped to Liquid Bitcoin to. You will see on the bitcoin side the minimum and maximum amount of bitcoin that you can swap at that particular time.
When you have sent bitcoin, the screen will change, and now you will see on the left the amount of bitcoin confirmations that have passed.On the right it will show you how much L-BTC will be sent to your Liquid wallet after fees once there has been 2 confirmations on the bitcoin network.
That’s it! Just check your balance on Blockstream Green and your L-BTC will be there within 2 min.Other places to get Liquid Bitcoin
For a list of some of the exchanges and platforms, you can visit https://docs.blockstream.com/liquid/liquid-integrations.html
For more advanced users out there, you can also run your own Liquid Bitcoin node (Blockstream Elements) and do the peg-in of your bitcoin to liquid bitcoin yourself.
The downside to doing things yourself is that you will need to wait for 102 confirmations on the bitcoin network before you get your liquid bitcoin. If you use one of the existing exchanges or platforms, they will simply swap it out within a couple of confirmations so you will have your L-BTC within an hour.
