Blockstream, a bitcoin start-up, on Monday announced its first production sidechain “Liquid”, in collaboration with an initial set of launch partners including Bitfinex, BTCC, Kraken, Unocoin, and Xapo.
Sidechain is a technology seeks on improving on the blockchain. Sidechains are blockchains that are interoperable with each other and with Bitcoin, avoiding liquidity shortages, market fluctuations, fragmentation, security breaches and outright fraud associated with alternative crypto-currencies.
Liquid is an interoperable sidechain that extends the Bitcoin blockchain while adding auditable, cryptographically-strong commercial privacy. It leverages the reliability and security of the Bitcoin network without trusting a centralized third party and establishes a better security profile as compare to the existing methods of rapid transfer and settlement, thereby improving capital efficiency and market liquidity, Blockstream CEO Austin Hill explained in a blog post.
Hill estimates that Liquid will reduce the time it takes funds to move between exchanges from 60 minutes to seconds. He suggested that the effort is the first of what could be many commercial sidechains offerings, both from Blockstream and users of its open-source software, CoinDesk reported.
"Bitcoin introduced global, secure, reliable settlement within hours — about a hundred times faster than legacy financial networks that settle within days. Kraken looks forward to global settlement in minutes with Blockstream and the rest of the Liquid sidechain”, said Jesse Powell, CEO, Kraken.
Using sidechain technology, Liquid reduces Interchange Settlement Lag (ISL) - delays when moving bitcoin between accounts in different locations, by facilitating rapid transfers between accounts held by the various participants in a separate, high-volume and low-fee cryptographic system that preserves many of the security benefits of the Bitcoin network.
"By providing users a way to securely and instantly move funds across exchanges, Liquid allows participants to take advantage of trade opportunities like never before, minimizing spreads and increasing liquidity. Blockstream's innovative solutions are definitely a game changer for the Bitcoin industry”, said Zane Tackett, Director of Product Development, Bitfinex.
