Liquid assets are tokens issued on the Liquid Network. Liquid assets include Liquid Bitcoin (LBTC) and Issued Assets. While there are subtle differences in the security models for LBTC and Issued Assets, for the most part, all assets on Liquid look and function the same.
The Liquid Network is a sidechain implementation of the Elements blockchain platform, which itself is based on the Bitcoin codebase, so any users familiar with Bitcoin will feel right at home when sending and receiving Liquid assets.
Liquid Bitcoin (LBTC)
LBTC is special as an asset on Liquid in that it is verifiably backed 1-to-1 with bitcoin (BTC) on the Bitcoin mainchain. LBTC can only be issued on Liquid through a peg-in, which involves sending BTC on the mainchain to a multisig wallet secured by the Liquid Federation.
Bitcoin on the mainchain can be released through a peg-out, which involves destroying the LBTC on Liquid and sending an equal quantity of mainchain BTC to a mainchain address owned by a single member of the federation.
Aside from its uses in trading, you also need LBTC to pay for transaction fees for any asset transfers on the Liquid sidechain.
Issued Assets
Anyone can issue their own tokens on Liquid, known as Issued Assets. You can use Issued Assets for various applications, including stablecoins (e.g. Tether USDT), security tokens, digital collectibles, reward points, and vouchers.
Unlike LBTC, any obligations with regards to Issued Assets (e.g. redeemability) are the responsibility of the issuer. Although Liquid verifies and enforces the total number of units issued of each asset, users cannot verify the existence or maintenance of any underlying assets.
Liquid Asset Features
All Liquid assets share the same base features:
- Speed: Non-variable, one-minute block times, and two-block transaction finality.
- Confidentiality: Transaction amounts and asset types are hidden from third parties on the blockchain.
- Trust-minimized swaps: Exchange any two Liquid assets without the need for an intermediary using the Liquid Swap Tool.
- Bitcoin-style smart contracts: Support for battle-tested multisig and timelocks.
Issuing New Assets
Anyone can issue a new asset on Liquid, although this is recommended for advanced users only. Blockstream Explorer contains a Liquid Asset Registry to refer to.
Storing Liquid Assets
You can store Liquid assets on the Blockstream app (recommended for most users) and Elements Core.