Bitcoin startup Blockstream’s first sidechain, dubbed Liquid, is now launching in beta.
The release marks the first time that the sidechain (announced in late 2015) will move out of the testing sphere and onto the real bitcoin network. Blockstream is demoing the sidechain at CoinDesk’s Consensus 2017 conference this week.
Liquid is a private blockchain. This means that, similar to other private blockchains being built today, there is some control over who can send transactions. This sets it apart from open systems, such as bitcoin or ethereum, that any user can join.
However, instead of being a self-contained system like some other private blockchains, Liquid is designed as a layer that sits on top of the bitcoin blockchain. The movement of bitcoin is basically on another layer within the sidechain, but users and companies have control over their funds since they’re tied to the bitcoin asset.
The main idea behind Liquid is to help companies, such as exchanges, move big sums of bitcoin around – and quickly. More than 10 companies, including major bitcoin exchanges, have been testing the technology in production since April.
Blockstream CSO Samson Mow told CoinDesk:
“With our updated roadmap, I think the value proposition to exchanges is immense: instant transactions, improved privacy, and the ability allow their users to hold Liquid funds off exchange.”
He added that Blockstream is talking with other bitcoin exchanges that are interested in signing up.
Further, some amount of privacy is built into Liquid by the use of ‘confidential transactions’ – another technique pioneered by Blockstream developers. In this case, balances are shielded from non-participants in a transaction.
Of course, most bitcoin users are more interested in the trustless version of the technology, where users can send their bitcoin to another sidechain without any third party overseeing the swap.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Blockstream.
Water image via Shutterstock