It is evident the Bitcoin network still has quite a few technological marvels left to be explored. One of those marvels comes in the form of the Liquid network. This concept was unveiled during the Blockchain Association of Canada’s Government Forum this week. It is another measure to ensure Bitcoin can scale over time, but what does the Liquid network even entail exactly?
A Closer Look at Scaling Bitcoin With the Liquid Network
Considering how this solution was presented by a member of Paycase and a Blockstream member, there will immediately be people who will become skeptical of the concept altogether. However, Blockstream’s Samson Mow and Paycase’s Joseph Weinberg feel the Liquid network could play a big role in the future of Bitcoin.
To be more specific, the Liquid network is a federated sidechain to provide new features to exchanges, users and companies using Bitcoin. The concept uses a sidechain to process transactions more quickly – and efficiently – compared to the main Bitcoin block chain. As we all know, the Bitcoin blockchain can process relatively very few transactions per block as of right now. Solving this problem has been quite the topic of controversy so far.
There are quite a few benefits to using a sidechain such as the Liquid network. Not only because it can process more transactions more quickly, but also because of its real-time auditing capabilities. Moreover, the protocol would be both secure and open, similar to how Bitcoin works right now. On-chain scaling with a block size increase is one way to process more transactions, but a sidechains could do the same “trick” in a more efficient way. Off-chain scaling seems to be the right way to go at this time.
The technology of sidechains has been thoroughly tested and proven to be a viable solution. It allows the Bitcoin network to not squabble over on-chain scaling solutions while still benefit from new innovations. In the end, Liquid network can provide all of that and still clear transaction more efficiently at the same time. Taking the pressure off the main Bitcoin blockchain is a viable way to solve the current scaling debate, yet it does not appear too many people are leaning toward such a solution.
Moreover, Liquid can help improve the Bitcoin interchange liquidity. This can result in much faster trading and improved security for a growing percentage of BTC trading. Liquid should be seen as a point-to-point sidechain focusing on a nearly instantaneous secure transfer of assets. Initially, the focus will be on Bitcoin, but it is possible to add additional assets to the fray as well. Interoperability – including atomic swaps – will eventually become a part of Bitcoin in one way or another.
As one would expect, the Liquid network will not operate with trust from multiple parties. Rules will need to be adhered to, and the network of participants must be able to come to some degree of consensus. So far, several companies are in the process of beta testing Liquid, including BTCC, Bitfinex, Paycase, Unocoin, and Zaif. It will be interesting to see if the Liquid network will be embraced by the overall Bitcoin community in the end. It is certainly an intriguing concept to take note of.
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