Demonstration of Liquid Beta
by Ben Gorlick Ben Teitelbaum

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:

Initial State of FooEx
Initial State of FooEx


While his account on exchange BarEx shows a balance of 1.90791 mBTC:

Initial State of BarEx
Initial State of BarEx


Prior to the demonstration, 2 mBTC from the main chain were pegged into exchange FooEx:

Bitcoin Pegged-In to FooEx
Bitcoin Pegged-In to 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:

Preparing to Receive an Unconfidential Transaction on BarEx
Preparing to Receive an Unconfidential Transaction on BarEx


Pasting that address into FooEx, we prepare to send 3.1415 mBTC:

Sending 3.1415 mBTC from FooEx to BarEx
Sending 3.1415 mBTC from FooEx to BarEx


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:

3.1415 mBTC Sent
3.1415 mBTC Sent


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:

3.1415 mBTC Received, but Unconfirmed
3.1415 mBTC Received, but Unconfirmed


Within 10-20 seconds, the transaction is confirmed by other functionaries:

Transaction Awaiting One Additional Confirmation
Transaction Awaiting One Additional Confirmation


And, within a minute, the transaction has been fully confirmed:

Transaction Fully Confirmed
Transaction 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.

Transaction Fully Confirmed
Transaction Fully Confirmed


Preparing to Receive a Confidential Transaction on BarEx
Preparing to Receive a Confidential Transaction on BarEx


Sending 2.7182 mBTC from FooEx to BarEx Confidentially
Sending 2.7182 mBTC from FooEx to BarEx Confidentially


2.7182 mBTC Received Confidentially, but Unconfirmed
2.7182 mBTC Received Confidentially, but Unconfirmed


Confidential Transaction Confirmed by One Member of the Liquid Federation
Confidential Transaction Confirmed by One Member of the Liquid Federation


Confidential Transaction Fully Confirmed
Confidential Transaction Fully Confirmed


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 12fff7a6585067c8cacfe85a7c26672428a63d16348d7cf6d7fdc777b8ac6fe9:

Block Explorer for tx 12fff7a6585067c8cacfe85a7c26672428a63d16348d7cf6d7fdc777b8ac6fe9
Block Explorer for tx 12fff7a6585067c8cacfe85a7c26672428a63d16348d7cf6d7fdc777b8ac6fe9


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”:

Block Explorer Showing Blinded Value Hidden by CT
Block Explorer Showing Blinded Value Hidden by CT


Clicking through to the block explorer for the second transaction 4a34fd87dcc2fa1a575f69870f73fbbdfbdc6fa5f2e1f4f28262b5c91ef13460:

Block Explorer for tx 4a34fd87dcc2fa1a575f69870f73fbbdfbdc6fa5f2e1f4f28262b5c91ef13460
Block Explorer for tx 4a34fd87dcc2fa1a575f69870f73fbbdfbdc6fa5f2e1f4f28262b5c91ef13460


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:

Preparing to Receive Tokenized GBP
Preparing to Receive Tokenized GBP


Adam Back approaches the screen with his phone, capturing the QR code and preparing to send £50,000:

Sending Tokenized GBP
Sending Tokenized GBP


In less than a minute, the funds are received!

Activity Log Showing Receipt of Tokenized GBP
Activity Log Showing Receipt of Tokenized GBP


Conclusion

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.



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