At Consensus 2017 last week, we shared an update on Liquid, the world’s first federated sidechain. We also shared a live demonstration of Liquid’s capabilities, showing how coins can be pegged in from the bitcoin main chain and transferred between participating Liquid exchanges confidentially within seconds. We also demonstrated how tokenized fiat currency can be sent confidentially between two mobile wallet apps. Here, for a broader audience, we recap the demo.
Several commercial exchanges have integrated with Liquid Beta, moving live bitcoin rapidly across the liquid network from exchange to exchange. For the purpose of this demonstration, we have integrated two dummy exchanges with the live Liquid beta network. These dummy exchanges are FooEx and BarEx.
An active trader (Ben) has accounts on both exchanges and seeks arbitrage opportunities.
Sending Bitcoin Across the Liquid Sidechain
Initially, Ben’s account on exchange FooEx shows a balance of 11.22893 mBTC:
While his account on exchange BarEx shows a balance of 1.90791 mBTC:
Prior to the demonstration, 2 mBTC from the main chain were pegged into exchange FooEx:
These transactions may be seen on the bitcoin main chain here and here. Additional bitcoin was pegged into other Liquid nodes and sent to the accounts used in this demonstration, which is why the total amount of bitcoin seen in the demo (~13 mBTC) is greater than just the 2 mBTC pegged in by those two transactions.
First, we will demonstrate a normal transaction on the Liquid sidechain. Generating and copying an “unconfidential” address from BarEx:
Pasting that address into FooEx, we prepare to send 3.1415 mBTC:
Clicking “Send Transaction”, 3.1415 mBTC is immediately deducted from Ben’s balance on FooEx together with a small fee that is recycled to pay bitcoin fees incurred by the Liquid network:
The transaction flows through the onion-routed Liquid functionaries to BarEx, where 3.1415 mBTC is credited to Ben’s balance. This occurs within a few seconds:
Within 10-20 seconds, the transaction is confirmed by other functionaries:
And, within a minute, the transaction has been fully confirmed:
Confidentially Sending Bitcoin Across the Liquid Sidechain
Repeating this process, 2.7182 mBTC is sent from FooEx to BarEx. This time, however, the transaction is sent across Liquid as a Confidential Transaction, where the amounts are blinded from all other participants in the Liquid federation.
Inspecting Liquid Transactions with the Block Explorer
Using a custom block explorer we have built for Liquid, let’s explore the two transactions just sent. First, we inspect the first transaction
Scrolling down, we can see that the second output contains the unblinded value 3.1415 mBTC. The first output corresponds to the fee, which is blinded and whose value is shown as “hidden with CT”:
Clicking through to the block explorer for the second transaction
We scroll down to inspect the transaction outputs and see that both the transaction amount and the fee are hidden by CT:
Tokenized Assets and Mobile Wallet
Finally, we demonstrate tokenized fiat (GBP) moving across a sidechain between two mobile wallets. This demonstration was also live, but transactions moved across a different sidechain. This functionality, including the consumer wallet app for tokenized Liquid assets, will be coming to Liquid.
The receiving wallet is displayed on the screen:
Adam Back approaches the screen with his phone, capturing the QR code and preparing to send £50,000:
In less than a minute, the funds are received!
In conclusion, we have demonstrated live transactions across Liquid, the world’s first federated sidechain. We showed how coins can be pegged in from the bitcoin main chain and transferred between participating Liquid exchanges confidentially within seconds. We also demonstrated a preview of Liquid’s future, showing how tokenized fiat can be sent confidentially across a sidechain between two mobile wallet apps. Attendees were excited about Liquid and its roadmap. Stay tuned for more.