Liquid Network on Bitcoin | Made by Blockstream

Blockstream is a prominent Bitcoin company with the stated purpose of reducing the number of on-chain transactions. Through their products, they hope to make it less critical how many transactions per second Bitcoin can handle.

Although there has been a considerable controversy surrounding the company, Blockstream is committed to Bitcoin’s success. If their initiatives end up being widely adopted, they could solve the Bitcoin scaling problem for good. In addition, several talented Bitcoin developers work at Blockstream, which has given them the ability to create quite a few exciting products. In this article, we’ll look at a few of them.

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Liquid sidechain

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Liquid is a federated sidechain on the Bitcoin network. It is a permissioned network and is mainly designed to be used by exchanges, brokers, and market makers. Unlike Bitcoin, which uses proof of work to achieve consensus, Liquid has its proprietary consensus mechanism. Several permissioned nodes secure the network, and a new block is produced every minute. This increases the speed of transactions significantly. To ensure security, each entity using the Liquid network can only control a single node. Also, for a node to be updated or a new node to be added, all of the nodes in the network must approve it.

To use the Liquid network, a participant must own Bitcoin. Once they have it, they can freeze it to the Liquid sidechain via a regular on-chain transaction. After the transaction is confirmed, Liquid Bitcoin (L-BTC) is produced. That L-BTC can now be used in the Liquid network. At any time, it can be redeemed for the real Bitcoin frozen on-chain.

While the Liquid network still isn’t perfect, there are several advantages to using it. The first is speed: transactions clear in a minute, not twenty or more. Another is anonymity; participants in the liquid network can see that a transaction is taking place, but they can’t tell how much is being sent. Only the two parties involved in the transaction can see that. That’s a significant advantage over Bitcoin, where all transaction data is broadcast on-chain publicly.

The downside of the Liquid network is that it’s not free. To use it, participants must pay a subscription fee to Blockstream. Also, as Liquid is designed for exchanges and trading desks, regular Bitcoin users do not have access. Nonetheless, it is a sound system, and under the right conditions, it can help save money, reduce confirmation times and tighten price spreads for Bitcoin.

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Lighting network

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The Lightning network is Blockstream’s most famous product. It’s an off-chain network designed to help scale Bitcoin and allow it to do the number of daily transactions required of a truly global payment network. The network works by having users open and fund channels via a transaction on-chain. Once a user funds their payment channel, they can transact on the Lightning network without ever doing another on-chain transaction. It’s only when a person wants to cash out their Bitcoin that they need to do on-chain marketing.

Lightning has several critical advantages over traditional on-chain transactions. The first is that it’s fast; transactions typically clear within several seconds, and a wait time of fifteen seconds would be considered long. Another advantage is anonymity. Unlike on-chain transactions, those taking place on Lightning cannot be publicly seen. Only the transaction participants know how much is being sent. This solves a significant problem as there is a severe worry about the fungibility of the Bitcoin network and the difficulties inherent in having money that can be traced.

The disadvantage of the Lightning network is that it’s still being developed, and it remains relatively untested. It’s a complex system, and there may be bugs inherent in it that have yet to be discovered. Also, as there are only a small number of payment channels open now, it’s difficult, if not impossible, to send more significant amounts of money. Lightning might work OK for buying coffee, but it cannot, for example, be used to pay for a car in its current form. Whether the Lightning network overcomes these challenges and becomes one of the cornerstone systems in the cryptocurrency space remains to be seen.

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Green Wallet 

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With a mind towards developing the Bitcoin ecosystem, Blockstream has also created the Green wallet. Primarily designed for mobile use, its primary selling point is security. The Green wallet has a unique setup whereby there are two sets of private keys. The user controls one location, and Blockstream rules the other. This allows them to institute two-factor authentication for transactions, thereby making it significantly more difficult for a hacker to drain a wallet of its funds.

In addition, there is also full support for hardware wallets, including Ledger and Trezor. This is great as it allows users to keep their funds safe on a hardware wallet while still easily spending their Bitcoin whenever they want. The wallet also allows users to choose the fees that they’re willing to pay. This is helpful as priority transactions can be fast-tracked by agreeing to pay more. Without this feature, the transaction could get stuck during periods of high traffic.

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Block Explorer

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Finally, Blockstream has also created its block explorer. This is helpful as the block explorer has a good UI layout, and it integrates nicely into the overall Blockstream suite of products. In addition, the block explorer is free to use and is one of the more popular Bitcoin block explorers in the cryptocurrency space.

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Conclusion

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Overall, Blockstream is a company heavily invested in Bitcoin, and it’s an ongoing success. At the same time, there may be controversy surrounding the company. However, they are actively building on Bitcoin and constantly seeking new ways to make the network more valuable. That’s no small feat, and their work is having a direct impact on cryptocurrency adoption.