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If you are going to work on software using Liquid, the sidechain of Bitcoin, there are several concepts you need to be familiar with. This article aims at developers and is based on a presentation I held for the Pixelmatic team. Disclaimer: this is an introduction, and it does not cover everything, obviously. And I simplified some explanations on purpose. As a prerequisite, if you are not familiar with Bitcoin, you should read my introduction to Bitcoin here. Special thanks to Sosthene for proofreading my article and for his feedback! Follow him on Twitter. Let's start now! And to discuss Liquid, we need to first discuss: . Elements What Is Elements? It is a fork of Bitcoin extended to be a sidechain platform with these features: Confidential Transactions Issued Assets Federated 2-Way Pegs Signed Blocks Additional opcodes Source: https://elementsproject.org/ OK, whatever, but what’s Liquid? Well, Liquid is . Set as and maintained by Blockstream. Also: an instance of Elements a sidechain of Bitcoin It is managed by a static federation of 15 members, but soon dynamic. It is configured to have a block time of 1 minute. And its main currency is L-BTC (Liquid Bitcoin), the result of the pegging of Bitcoin. Source: liquid.net What Are the Features of Liquid? Let’s see a bit more details on the different features of Liquid/Elements. 📌 2-way pegging of Bitcoin Peg-in BTC into the Liquid Sidechain Pegging in BTC from the Bitcoin main net into the Liquid sidechain consists of depositing BTC into the Liquid Bitcoin wallet that is managed by the Federation. 102 confirmations on the Bitcoin mainnet are then required for you to claim your amount of L-BTC due, and the functionaries then grant you the corresponding amount on the Liquid sidechain. Peg-out BTC from the Liquid Sidechain Pegging out BTC from the Liquid sidechain back into the Bitcoin main net consists of receiving the BTC from an anonymous functionary from his wallet after being granted the amount by the federation. <br> 2 confirmations on Liquid are required for the operation to be allowed. Then the Federation will co-sign a transaction out of their 11 of 15 multisig wallets that are sending out the amount requested to one of the functionaries described anonymously. Finally, the functionary processes the transaction that will grant the BTC to the requester of the peg-out. 🙈 Confidential Transactions Amounts and assets are blinded using a blinding key, but UTXOs are visible There is a master blinding key that is generated from the wallet seed and derived as needed for each address: blinding_private_key := HMAC_SHA256(key=master_blinding_key, msg=script_pubkey) where corresponds to a specific non-confidential public address you want to make confidential script_pubkey That means that a Liquid wallet consists of two things: an extended private key and a master blinding key. Also, every confidential address is a non-confidential address blinded using the master blinding key. So the confidentiality is essentially a layer built on the top of classical HD wallets. Note that you can dump a specific blinding key to allow a tier to unblind it using the RPC . And once in possession of the blinding key, any transaction happening with that specific address will be visible to the tier. unblindrawtransaction FYI Blockstream Green has a feature to open esplora with the blinding keys to allow a tier to see a confidential transaction unblinded on the web. White Paper: Blockstream Specifications: Satoshi Labs 💰 Issued Assets One asset on Liquid/Elements has these attributes (all saved in the blockchain): An asset ID (generated by Liquid) A total supply An optional reissuance key An optional contract hash Reissuance keys are also an asset that comes with at least a total supply of 1 sat L-BTC is also an asset, a special one that can be pegged in and out: Details The bare minimum to issue an asset: elements-cli issueasset 0.00000100 0 The above issues a confidential asset with a total supply of 100 Satoshis and no reissuance key. The contract defines metadata about the asset like its name, ticker, domain owner, precision, etc. : Example the EXOeu token {
 "entity": {
  "domain": "exordium.co"
 },
 "issuer_pubkey": "030cff26f9c0d365f090e24917277e23269d7ef5d7f06dec9f09de9255b8950208",
 "name": "EXO Token Europe",
 "precision": 0,
 "ticker": "EXOeu",
 "version": 0
} Reissuance To be able to reissue, you need only one token (satoshi) of the reissuance asset. If you have issued more than one reissuance asset, it means you can share that asset to others person. Then everybody who has one can reissue the asset. Though be cautious with that use-case because reissuance can be confidential, then it's nearly impossible to verify how much of the asset is in circulation. Registration By default, assets are not registered on the Liquid Asset Registry. That gives you a chance to reissue another asset if you made a mistake before registering it. But once registered, it is irreversible and the tuple domain + ticker will be occupied forever. Details of the asset registration: https://docs.blockstream.com/liquid/developer-guide/proof-of-issuance.html 🪢 Federation The federation is composed of 15 functionaries They can propose blocks to be added to the blockchain in a round-robin fashion They co-sign blocks, a block needs 11 of 15 signatures to be valid They process peg-outs. When the federation will become dynamic, the total number of functionaries may vary dynamically 📃 Liquid RPC interface Being a fork of Bitcoin, we find the same RPCs as its parent, plus some new ones like , , and more: issueasset blindrawtransaction <div class="container h-sm pb-1"> <iframe src=" " class="w-full h-full"> </iframe> </div> https://elementsproject.org/en/doc/0.21.0.0/rpc/ Source: elementsproject.org 🧰 The Liquid Ecosystem For Users White paper Liquid: https://blockstream.com/assets/downloads/pdf/liquid-whitepaper.pdf Compatible Wallets Green: https://blockstream.com/green/ Aqua: https://blockstream.com/aqua/ SideSwap: https://sideswap.io/ Coinos: https://coinos.io/ Specter: https://specter.solutions/ Marina: https://vulpem.com/marina.html Centralized Exchanges Bitfinex: https://www.bitfinex.com/ BTSE: https://www.btse.com/ The Rock Trading: https://www.therocktrading.com/en/ ... DEX/Swap Sideshift<span>.</span>ai: https://sideshift.ai/ SideSwap: https://sideswap.io/ Bisq: https://bisq.network/ coinos: https://coinos.io/ TDEX: tdex.network Bitmatrix: beta.bitmatrix.app Explorers blockstream<span>.</span>info: https://blockstream.info/liquid/ liquid.network: https://liquid.network/ For Developers Documentation About Elements: https://elementsproject.org/ About Liquid Testnet: https://liquidtestnet.com/ About Liquid: https://docs.blockstream.com/liquid/technical_overview.html Node Elements: https://github.com/ElementsProject/elements Cached API/Backend Blockstream ElectRS: https://github.com/Blockstream/electrs Explorer Esplora: https://github.com/Blockstream/esplora Blockstream Registry: https://blockstream.info/liquid/assets Libraries Vulpem Go Elements: https://github.com/vulpemventures/go-elements Vulpem LiquidJS: https://github.com/vulpemventures/liquidjs-lib Vulpem LDK: https://github.com/vulpemventures/ldk Blockstream GDK: https://github.com/Blockstream/gdk/ LibWally: https://github.com/ElementsProject/libwally-core Wallet Tools Mnemonic Code Converter: https://iancoleman.io/bip39/ BIP32 Generator: http://bip32.org/ Environment stack Nigiri: https://github.com/vulpemventures/nigiri Liquid Sidechain Available Environments Alike Bitcoin, Liquid has multiple environments at your disposal. You can set up in your elements.conf the you want to use. chain ( ) Liquid Regtest chain=liquidregtest I am lying to you, actually. You can input any not known chain, and it will create an Elements environment, with the parameters of your choices. So is not a known chain, it will start a chain named with this name. But you could name it differently like andrewschain, ethereum, or whatever. Details: liquidregtest https://github.com/ElementsProject/elements#modes Regtest stands for regression test mode. It's a mode you use to do local development. When initializing your node, you can specify the number of free coins you will create and that will serve as your main currency (your own test Bitcoins). There are no pegging, mining, or federations in place. But you can generate blocks on demand. To simulate a production environment, you can set up a cron task to generate a block every minute. Everything you do stays local in your node. ( ) Liquid Testnet chain=liquidtestnet It was recently deployed. There is no pegging, so if you need coins you can use the official faucet here: . https://liquidtestnet.com/faucet Like in production, the block time is 1 minute. To configure your Elements node for it, here are the instructions: https://docs.blockstream.com/liquid/node_setup.html#connecting-to-liquid-testnet It has an official explorer: https://blockstream.info/liquidtestnet/ Unlike regtest, with testnet is public hence be aware of that. Also, testnet has an official asset registry as well: https://blockstream.info/liquidtestnet/assets That can be helpful to debug issuance and registration of assets, a thing you cannot do with regtest. ( ) Liquid Mainnet chain=liquidv1 The production environment of Liquid. As mentioned before, the block time is 1 minute, and mainnet Bitcoin can be pegged in and out of it. 🎇 Conclusion: The Introduction to Liquid for Developers With this knowledge, you should have enough to get started to work on Liquid. To sum up, here are my advice, if you are willing to: , look at BTCPay and WooCommerce with the Liquid+ plugin: add payment in L-BTC or another Liquid asset on your e-commerce website https://github.com/ndeet/liquid-assets-for-woocommerce , you can either look at the made in JS so good for web apps, or made in C++ and Rust good for desktop or native apps, create a Liquid wallet LDK GDK (either NFT or fungible tokens too), you can look at either or build a custom solution with or issue an asset Blockstream AMP liquidjs go-elements , you can fork off create an NFT trading platform Raretoshi , look at coinos open source projects: . create a SWAP/DEFI platform https://github.com/coinos/ And to go deeper down the rabbit hole, you can start searching on these subjects: Multisignature wallets Taproot Partially signed transactions Atomic swap Have fun! Also published here.

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