Blockstream, in collaboration with an initial set of launch partners, is excited to announce Liquid, our first production sidechain. Liquid will improve capital efficiency and market liquidity by facilitating rapid and secure transfers between accounts held at any participating exchange or brokerage.
Blockstream is excited to include a number of forward-looking exchanges and brokerages from around the globe in this effort. These initial launch partners include Bitfinex, BTCC, Kraken, Unocoin, and Xapo, and discussions are underway with another dozen major institutional traders and licensed exchanges. We’re collaborating to address some key technical and business challenges while preserving Bitcoin’s core ethos of decentralization, innovation, and security.
Liquid is an interoperable sidechain that extends the Bitcoin blockchain while adding auditable, cryptographically-strong commercial privacy. Using this arrangement, Liquid leverages the reliability and security of the Bitcoin network without trusting a centralized third party. This new construction establishes a security profile inherently superior to existing methods of rapid transfer and settlement, and is directly applicable for use cases being explored by existing financial institutions.
Today, key players in the Bitcoin market, including exchanges, payment processors, traders, and remitters, experience delays when moving bitcoin between accounts in different locations. We refer to this as Interchange Settlement Lag (ISL) – a host of liquidity inefficiencies including latency and confirmation times that hinder the overall prospects of the Bitcoin ecosystem. Dealing with these issues requires market participants to maintain multiple balances and accounts across the market to avoid ISL, increasing overall capital requirements and exposure to the possibility of counterparty risk.
Using sidechain technology, Liquid reduces ISL by allowing for rapid transfers between accounts held by the varied participants in a separate, high-volume and low-fee cryptographic system that preserves many of the security benefits of the Bitcoin network. This, in addition to increasing the security of funds normally subject to explicit counterparty risk, fosters conditions that increase market liquidity and reduce capital requirements for on-blockchain business models.
As a Bitcoin-centric company, we are excited to be delivering a real-world solution that moves the ecosystem forward. We hope that by maintaining the decentralized security profile requisite of a secure settlement and capital transfer system, we set the bar for how these systems should be built. We further hope that this inspires others to build on these and future improvements to the Bitcoin codebase and encourage others to take advantage of our work in both the original sidechain white paper and the implementation in Elements Project open source releases.
Following publication of our sidechain whitepaper almost one year ago, and the accompanying open source sidechain release in June, we set out to explore where our protocol-level technology could address real-world problems. Liquid makes use of capabilities we released earlier this year and proves the effectiveness of the underlying technology.
We are currently focused on integration, testing, and deployment of this service with a launch date of early next year. Additional documentation (including a white paper) will be published soon, and we expect to be able to provide further updates on additional participants joining the sidechain.
Quotes from our partnering companies:
“By providing users a way to securely and instantly move funds across exchanges, Liquid allows participants to take advantage of arbitrage opportunities like never before, minimizing spreads and increasing liquidity. Blockstream’s innovative solution is definitely a game changer for the bitcoin industry.”
— Zane Tackett, Director of Product Development, Bitfinex
“BTCC is very excited to be working together with Blockstream to roll-out this innovative application of sidechain technology. Liquid is both a practical application of sidechains that allows us to provide nearly instantaneous global interexchange transfers for our users, as well as a major technical milestone that showcases the adaptability of Bitcoin.”
— Samson Mow, Chief Operating Officer, BTCC (formerly BTCChina)
“Bitcoin introduced global, secure, reliable settlement within hours—about a hundred times faster than legacy financial networks that settle in days. Kraken looks forward to global settlement in minutes with Blockstream and the rest of the Liquid sidechain.”
— Jesse Powell, CEO, Kraken
“We are enthusiastic about supporting Blockstream, which has one of the strongest development teams in the fintech industry, and their bitcoin-based approach to financial innovation. Xapo works with some of the largest exchanges in the Bitcoin space and we believe that, by implementing Liquid, we can help solve several of their main pain points.”
— Federico Murrone, Chief Operating Officer, Xapo
“Among other things, Blockstream is solving a critical liquidity issue which is paramount to tackling global remittance markets. Bitcoin is well suited to meet the needs of Asia, the largest inbound remittance market in the world. By leveraging Liquid, we accelerate our business path towards faster & more efficient international money transfers.”
— Sunny Ray, President & Co-Founder, Unocoin