Liquid Network

The Liquid Network is a bitcoin sidechain operated by a federation of exchanges, brokers, and infrastructure companies, launched by Blockstream in October 2018. It issues L-BTC, a token pegged one-to-one to bitcoin, and produces blocks every 60 seconds, compared with roughly 10 minutes on the main chain.

Why it matters

Liquid targets a different problem than Lightning. Rather than small instant payments, it serves traders and institutions moving large amounts between venues, offering fast final settlement, confidential transactions that hide amounts and asset types from outside observers, and the ability to issue other assets such as stablecoins and securities on the same chain.

The price is trust. Where bitcoin's main chain is secured by open proof of work, Liquid is secured by its federation, so users must trust that a supermajority of federation members remains honest and available. That makes it a consciously different security model, not a replacement for the base layer.

How it works

Users peg in by sending bitcoin to a multisignature address controlled by the federation's functionaries, which credits them with L-BTC on the sidechain. Blocks are signed by the functionaries under a multisignature threshold, historically 11 of 15, rather than mined. Pegging out, converting L-BTC back to bitcoin on the main chain, is likewise executed by the federation, which is why the peg's integrity depends on its members.