Trading L-BTC

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This is a draft.

About L-BTC

L-BTC, or Liquid Bitcoin, is a Confidential Asset fully verifiable 1:1 backed BTC token created by Liquid, a federated sidechain pegged to the Bitcoin blockchain. Liquid is an implementation of Elements, an open source, sidechain-capable blockchain platform based on the Bitcoin codebase created by Blockstream.

A sidechan is a mechanism that allows tokens from one blockchain to be used securely in an independent blockchain which runs in parallel and uses a different set of rules, performance requirements, and security mechanisms. On a sidechain, one can move tokens back to the original chain through a two-way peg. Sidechains enable new functionality that may have security trade-offs or as a way to test new features that may not be ready for use on the parent blockchain. These are the new functionalities that Liquid enables:

  • Confidential Transactions: Hides the amount from the information displayed at the blockchain, it's the most important feature for Bisq users.
  • Issued Assets: Allows issuing tokenized fiat, securities, altcoins or digital collectibles.
  • Federated consensus mechanism: allows 2 or 3 minute settlement times in normal conditions.
  • In development: Schnorr signatures, which will improve network privacy and capacity.

P2P swaps

All addresses in Liquid are blinded by default using Confidential Transactions. The asset and amount of a transaction is hidden to those watching the Liquid sidechain. Bisq users can mix their coins with all of Liquid federation BTC holdings just trading both assets.

Trading L-BTC

Buy L-BTC is very similar to buying other privacy coins. The user needs to generate a proof of payment to be delivered in case of dispute. Otherwise, Confidential Transactions makes it impossible for a third party to verify if a payment was made. Next section provides detailed information on how to provide the blinding key to moderator or refund agent. L-BTC buyer should know know this requirements, as failing to provide the blinding key will result in losing the mediation case.

Sell L-BTC is like buying any other altcoin. It just requires a wallet capable of receive L-BTC, like Greenwallet, and create this a new Bisq account for this payment method.

Generate blinding key

Greenwallet or custodial wallets can't generate blinding keys. To provide blinding keys, you need to install an Elements Core full node (it's not necessary to connect Elements node to a Bitcoin full node) and follow these steps:

  • Find the L-BTC address in the Bisq trade details.
  • Open the GUI console window of your Elements Core full node, or use 'elements-cli'.
  • Type the following command: dumpblindingkey <address>

The elements node console will return the blinding key in hex. This blinding key will be required and used in case of dispute to verify if a L-BTC payment was done.