Arbitrage traders will soon be able to close the gap between the BitMEX and Bitfinex exchanges with the impending implementation of Blockstream’s Liquid Network.
The BTC-pegged sidechain will allow for fast and confidential transactions to take place between any of the Liquid Network’s participating members. The network has also welcomed 14 additional members including exchange giant Huobi.
We are thrilled to present the integration of the @Blockstream Liquid Network, paving the way for fast and private Bitcoin transactions for traders on Bitfinex.
Learn more about today’s integration here: https://t.co/MS1ldtOcyg pic.twitter.com/Up2VyZEPTA
— Bitfinex (@bitfinex) May 9, 2019
Now live on Bitfinex
L-BTC deposits and withdrawals are now live on the Bitfinex exchange with a settlement time of around 2-3 minutes according to Blockstream’s CEO Adam Back.
Back has stated that the Liquid Network releases blocks every minute and that “transactions are final within two confirms (and ready to trade!) vs average 30 minutes +/- for mainchain transactions” on the layer-one BTC network.
Apart from just being fast, the Blockstream CEO also mentioned that “because of the Confidential Transactions, you can’t see the amount” or the type of asset being transferred via the BTC-pegged sidechain.
At the moment, the sidechain is only active between Bitfinex and The Rock Trading exchange, but with BitMEX and others like Huobi looking to support the Liquid Network too, sending funds across exchanges for arbitrage plays (without other traders seeing large cross-exchange transfers) will be easier than ever before.
Tether to launch on Liquid soon
Bitfinex CTO Paolo Ardoino has also mentioned that “USDT (Tether) will be on Liquid too, and once it is arbitrage will be much faster”.
Ardoino went on to say in blog post that “Issuing Bitcoin, stablecoins, and various other digital assets under one blockchain platform makes a lot of sense. It reduces the integration burden for an exchange like ourselves, and traders can manage all their assets from a single wallet application.”
Tokens and ICOs coming to Bitcoin?
I think the technology in Liquid is awesome, but when you're talking about assets other than L-BTC, it really doesn't have anything to do with Bitcoin.
— Pieter Wuille (@pwuille) May 8, 2019
According to popular BTC analyst Tuur Demeester, the sidechain’s ability to now issue assets may bring in a new wave of “Tokens/ ICOs coming to Bitcoin”.
However, Blockstream founder and Bitcoin core contributor Pieter Wuille commented back by saying that although the technology in Liquid is great, “when you’re talking about assets other than L-BTC, it really doesn’t have anything to do with Bitcoin”.
This makes sense as with L-BTC, you have an asset that has a direct 1:1 peg for Bitcoin, whereas assets on the platform can be created either out of “thin air” or potentially backed by an auditable amount of BTC locked inside the issuing smart contract.
What is locked into the L-BTC network now?
Looking at the Liquid sidechain statistics hosted on liquid.horse, we can see that the network currently has 53 BTC locked into the ‘Liquid Federation Wallet’.
Representing just over $300,000, this doesn’t seem like too much at the moment, but as the network looks to expand with additional exchanges announcing support, this open source project may play a key role in enabling better liquidity and tighter spreads across a number of exchanges.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.