🌿 Alternef Digital Garden

Liquid Network

3 min read

Edit on GitHub

Liquid Network

Bitcoin federated sidechain and layer-2 solution enabling fast, confidential transactions and digital asset issuance.

Bitcoin’s leading sidechain, enabling fast, confidential transactions, and the issuance of assets. — Blockstream

Overview

The Liquid Network is an open-source federated bitcoin sidechain developed by Blockstream that serves as a layer-2 solution interoperable with the lightning-network. It enables faster, more confidential Bitcoin transactions while supporting the issuance and exchange of digital assets including stablecoins, tokenized securities, and bonds.

Key Milestone (2025)

As of 2025, the Liquid Network has achieved over $3.27 billion in Total Value Locked (TVL), marking significant growth in real-world asset tokenization adoption.

Core Features

🔒 Confidential Transactions

  • Privacy by Default: Transaction amounts and asset types are hidden from third parties
  • Selective Disclosure: Users can voluntarily reveal transaction details when needed
  • Cryptographic Verification: Maintains mathematical proof of transaction validity without exposing sensitive data
  • Confidential Addresses: Include base address and public blinding key for enhanced privacy

⚡ Performance Benefits

  • 1-Minute Block Times: Consistent, non-variable block generation
  • 2-Block Finality: Transactions settle in 2-3 minutes under normal conditions
  • High Throughput: Handles larger transaction volumes than Bitcoin mainnet
  • Lower Fees: Reduced transaction costs compared to mainnet

🏦 Digital Asset Issuance

  • Issued Assets: Create new tokens representing fiat, securities, or digital assets
  • Stablecoins: USD-T (Tether), USDC, and other pegged assets
  • Tokenized Securities: Real-world asset (RWA) tokenization
  • Utility Tokens: Custom tokens for specific use cases
  • NFTs: Non-fungible token support

Technical Architecture

Federated Consensus

  • Functionaries: Network of trusted validators managing the sidechain
  • Multi-signature Security: Requires majority consensus for block production
  • Bitcoin Interoperability: Two-way peg with Bitcoin mainnet
  • Elements Platform: Built on Elements, Blockstream’s extensible blockchain platform

Asset Framework

  • L-BTC: Liquid Bitcoin (1:1 peg with BTC)
  • Asset Registry: On-chain asset identification and metadata
  • Atomic Swaps: Direct asset-to-asset exchanges
  • Multi-asset Support: Handle multiple asset types in single transactions

Use Cases

Financial Markets

  • Trading: High-frequency trading with confidential amounts
  • Settlement: Faster settlement for institutional transactions
  • Cross-border Payments: International transfers with enhanced privacy
  • Arbitrage: Efficient arbitrage between exchanges

Asset Tokenization

  • Securities Tokenization: Digital representation of traditional securities
  • Real Estate: Property tokenization and fractional ownership
  • Commodities: Digital gold, oil, and other commodity tokens
  • Corporate Shares: Like SideSwap’s pioneering share tokenization

Development & Testing

  • Regtest Environment: Local development using tools like Nigiri
  • Testnet: Public testing network for developers
  • API Integration: REST and WebSocket APIs for application development

Bitcoin Ecosystem

Development Tools

  • Elements - Blockchain platform powering Liquid
  • Marina Wallet - Browser extension for Liquid assets
  • SideSwap - Decentralized exchange for Liquid assets
  • Green Wallet - Blockstream’s multi-platform wallet

Asset Standards

  • BRC-20 - Bitcoin token standard (mainnet)
  • Issued Assets - Liquid’s native asset framework
  • Confidential Assets - Privacy-preserving asset transfers

Development Resources

Getting Started

# Start Liquid development environment with Nigiri
nigiri start --liquid
 
# Fund Liquid address for testing
nigiri faucet --liquid <liquid_address>
 
# Issue custom Liquid asset
nigiri mint <liquid_address> 1000 MyToken MTK

Key APIs

  • Elements RPC: Full node API for Liquid operations
  • Esplora API: Block explorer API for transaction data
  • Asset Registry API: Asset metadata and information
  • Electrum Protocol: Lightweight client support

Ecosystem Growth

The Liquid Network has experienced significant growth in 2025, driven by:

  • Institutional Adoption: Major financial institutions exploring asset tokenization
  • Regulatory Clarity: Improved regulatory frameworks for digital assets
  • DeFi Integration: Growing decentralized finance applications
  • Real-World Assets: Increasing tokenization of traditional assets

Graph View