Liquid Network

The Liquid Network is a federated Bitcoin sidechain developed by Blockstream and operating since September 2018. It offers faster settlements (~1-minute blocks vs Bitcoin's ~10-minute), confidential transactions (amounts and asset types are hidden from chain observers), and a native asset-issuance framework. Pegged BTC on Liquid is called L-BTC.

How Liquid works in practice:

• The Liquid Federation - a consortium of around 65 entities (exchanges, OTC desks, financial firms, Blockstream itself) - runs the sidechain. Block production rotates among federation members.
• Peg-in sends BTC to a federation-controlled multisig on mainnet; L-BTC is issued on Liquid 1:1.
• Peg-out burns L-BTC on Liquid; federation releases BTC from mainnet back to the user.
• Confidential Transactions use cryptographic commitments (homomorphic Pedersen commitments) to hide amounts while letting nodes verify no inflation occurred.
• Issued Assets. Liquid supports issuing arbitrary assets (used by Tether USD on Liquid, gold-backed tokens like PAXG, securities tokens, etc.) alongside L-BTC.

What Liquid is used for in 2026:

• Inter-exchange settlement. Major Bitcoin exchanges use Liquid for fast moves between each other, avoiding the 60-minute confirmation lag of mainnet transfers.
• OTC desks. Confidential transactions matter for large block trades where amounts being moved would otherwise be visible to chain analysts.
• Stablecoin issuance. USDT-Liquid is one of the meaningful stablecoin networks for Bitcoin-native settlement.
• Security token experiments. Several issuers have launched tokenized securities on Liquid.

What Liquid is not:

• Not trustless like mainnet. The federation can technically collude. If a majority of federation members signed a malicious peg-out, they could in principle steal pegged BTC. This is a trust assumption (one held by reasonable people) but materially different from Bitcoin's proof-of-work security model.
• Not Bitcoin's main scaling solution. Liquid serves a specific niche (institutional fast settlement, confidential transactions). Lightning is the general-purpose layer-2.

See Liquid Federation for the federation structure and Sidechain for the broader category.