What is the Liquid Network and Why it Matters
Understand the Bitcoin sidechain enabling confidential transactions and digital asset issuance.
Introduction
The Liquid Network is a Bitcoin sidechain developed by Blockstream, designed to enable faster, more confidential transactions and the issuance of digital assets. Since its launch in 2018, Liquid has become a critical piece of infrastructure for traders, exchanges, and companies building on top of Bitcoin's security model.
Unlike the Bitcoin mainchain, where transactions are publicly visible and confirmations can take up to an hour, the Liquid Network offers two-minute block times and Confidential Transactions by default — meaning amounts and asset types are hidden from outside observers.
How the Liquid Network Works
Liquid operates as a federated sidechain. This means a group of functionally distributed entities — called functionaries — collectively manage the bridge between Bitcoin and Liquid. To move Bitcoin onto the Liquid Network, users perform a "peg-in": they send BTC to a special address controlled by the federation, and after 102 confirmations, the equivalent amount of L-BTC (Liquid Bitcoin) is minted on the Liquid sidechain.
Key Technical Features
Confidential Transactions (CT): All transfers on Liquid use CT by default. Transaction amounts and asset types are cryptographically blinded, visible only to the sender, receiver, and anyone they choose to share the "blinding key" with.
Issued Assets: Anyone can issue tokens on Liquid — stablecoins, security tokens, utility tokens, NFTs, and more. These assets inherit the same confidential transaction properties as L-BTC.
2-Minute Block Times: Liquid blocks are produced every two minutes by the federation, providing faster settlement than Bitcoin's 10-minute average.
Multi-Asset Support: A single Liquid transaction can move multiple asset types simultaneously, enabling atomic swaps and complex settlement flows.
Why Liquid Matters for the Financial Industry
Traditional financial rails — SWIFT, correspondent banking, even modern fintechs — often take days for international settlement and charge significant fees. Liquid offers a fundamentally different model:
Near-Instant Settlement: Two-minute blocks mean that trades and transfers can be settled in minutes, not days.
Privacy by Default: Confidential transactions protect sensitive business information. A company paying a supplier doesn't need to reveal the amount to the entire network.
Programmable Assets: Issued assets on Liquid can represent anything — from fiat-pegged stablecoins like L-BRL to tokenized securities. This opens the door to 24/7 markets and automated compliance.
Bitcoin Security Model: Liquid is anchored to Bitcoin. The federation model provides a pragmatic balance between decentralization and performance.
Liquid vs Other Sidechains and Layer 2s
The Lightning Network is often compared to Liquid, but they serve different purposes. Lightning excels at high-frequency, low-value payments (like buying coffee). Liquid is optimized for high-value settlement, asset issuance, and privacy — making it more suitable for institutional and B2B use cases.
Compared to Ethereum Layer 2 solutions (Arbitrum, Optimism, etc.), Liquid offers native privacy through Confidential Transactions and is built on the Bitcoin ecosystem rather than Ethereum. For organizations that prefer Bitcoin's security model and monetary policy, Liquid is the natural choice.
How Liqora Leverages the Liquid Network
At Liqora, we built our entire infrastructure on top of the Liquid Network. Our stablecoin, L-BRL, is issued as a Liquid Asset, inheriting all of Liquid's privacy and speed benefits. When partners settle payments through our platform, the underlying transfers happen on Liquid — meaning they're fast, private, and verifiable.
Our choice of Liquid was deliberate: we needed a network that could handle real-world financial operations with the privacy guarantees that businesses demand, while staying anchored to Bitcoin's proven security model.
Conclusion
The Liquid Network represents a mature, production-ready sidechain that bridges the gap between Bitcoin's security and the performance needs of modern financial applications. Whether you're an exchange looking for faster settlement, a company issuing tokenized assets, or a developer building privacy-preserving applications, Liquid offers a compelling platform.
As the digital asset ecosystem evolves, federated sidechains like Liquid will play an increasingly important role — providing the infrastructure layer that enables real-world financial innovation on top of Bitcoin.