What is Bitcoin Liquid | Good Morning Crypto

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What is Bitcoin Liquid Network

Welcome to this episode of Good Morning Crypto. In this episode you will learn about Bitcoin Liquid. Ivan Liljeqvist is a programmer with a great deal of blockchain knowledge that provides a video explanation of this common question.

Bitcoin Liquid Network Explained

Coming from Blockstream is the Bitcoin Liquid Network. It is a federated Bitcoin side-chain - a private Bitcoin side-chain. Liquid is for exchanges, OTC desks, market makers, and other institutional players in the Bitcoin market. It is federated because it is private in which not everyone can be a part of. It is like a streamlined version of Bitcoin that gets a new block each minute, faster transactions, and other benefits to the parties involved.

You cannot follow the transactions of 'liquid bitcoin' on the side-chain as you can follow the transactions of regular bitcoin on the main chain. Only the major players in the market who are handling large amounts of b=Bitcoin can be part of this network and act as a node to it. The parties must be one's that are trusted by the public though.

Pegging in and pegging out of liquid Bitcoin to on-chain main Bitcoin must go through the major players who act as nodes on the network.

Liquid Network User Experience

As a user you will be able to use 'Liquid Addresses' in the same way that you use a regular Bitcoin public address'. From a user perspective there will be no notable difference from a usability standpoint.

Risk Involved - Centralized Network

Liquid Bitcoin and equal to normal Bitcoin. The federation gives a lower risk level in the way that if one node goes down you will not lose the ability to transfer your liquid Bitcoin back into normal Bitcoin. You can use any of the nodes/members to transfer your Liquid Bitcoin back into normal Bitcoin. So there is a bit of risk and if for some reason the whole federation went away then you would lose your ability to transfer your Liquid Bitcoin back into Bitcoin.

Bitcoin Liquid vs Ripple XRP

XRP Ripple is a use case that fits into the normal monetary system and with a network such as Bitcoin Liquid there really is no need for XRP ripple in the crypto space. XRP is designed as a middle ground to bridge the fiat system with the crypto system. If the fiat system mainly goes away shortly down the road then there is no need for XRP. When networks in the crypto space provide liquidity through side-chains and easy user interfaces the need for something such as XRP is diminished.


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