How Does the Liquid Network Work?

By Blockstream Engineering · Last updated June 2026

What Is the Liquid Network?

The Liquid Network is a layer-2 sidechain that runs alongside Bitcoin. It processes transactions on its own blockchain while remaining anchored to Bitcoin through a two-way peg mechanism. When users send bitcoin into Liquid, they receive LBTC at a 1:1 ratio. When they want bitcoin back on the mainchain, they convert LBTC back to bitcoin.

Liquid was designed to solve specific problems that Bitcoin's base layer, by design, does not prioritize: transaction speed, transaction privacy, and programmable asset issuance. Bitcoin's base layer optimizes for decentralization and security above all else. Those properties make it the most reliable monetary network in existence, but they also mean ~10-minute block times, publicly visible transaction amounts, and no native support for issuing other digital assets.

Liquid accepts different tradeoffs. It replaces Bitcoin's proof-of-work mining with a federation of known participants who sign blocks on a fixed schedule. This produces faster, more predictable block times and enables features like Confidential Transactions, but it introduces a trust assumption: users trust that the federation operates honestly.

The Liquid Network launched in October 2018 after years of development by Blockstream, the company that published the original sidechain whitepaper in 2014. It was the first production federated sidechain on Bitcoin and remains the most widely used.

Sidechains Explained

A sidechain is an independent blockchain that is connected to a parent blockchain (in this case, Bitcoin) through a two-way peg. The sidechain has its own consensus rules, its own block production mechanism, and its own feature set. Assets can move between the parent chain and the sidechain, but the two chains operate independently.

The concept was formalized in a 2014 whitepaper titled "Enabling Blockchain Innovations with Pegged Sidechains", authored by a team that included several Blockstream co-founders. The paper argued that Bitcoin's conservative approach to protocol changes was a feature, not a bug, and that sidechains could provide a way to experiment with new features without risking Bitcoin's base layer stability.

Extending Bitcoin does not require changing Bitcoin. A sidechain can offer faster block times, different scripting capabilities, or privacy features, and users can choose to move bitcoin onto that sidechain when they need those features. Bitcoin itself stays the same.

How Sidechains Differ From Other Layer-2 Solutions

A sidechain is a full blockchain with its own block production, its own transaction history, and its own consensus mechanism. This distinguishes it from other layer-2 approaches:

• Payment channels (like Lightning) are off-chain protocols where transactions happen directly between participants. There is no separate blockchain; the Lightning Network is a network of bilateral channels that settle back to Bitcoin's base layer.
• Rollups bundle transactions together and post compressed proofs or data back to a base layer. They inherit the security of the base layer by anchoring their state to it.
• Sidechains are independent blockchains with their own consensus. They connect to Bitcoin through a peg mechanism but produce their own blocks independently. Liquid is a federated sidechain, meaning its consensus is driven by a known set of participants rather than by open proof-of-work mining.

Each approach makes different tradeoffs between speed, privacy, trust assumptions, and complexity. Sidechains like Liquid trade some decentralization for speed, privacy, and programmability.

The Federated Security Model

Liquid's consensus is built on a federated model. Instead of anonymous miners competing to produce blocks through proof-of-work, a set of known entities called Liquid functionaries cooperate to sign blocks and manage the bitcoin held in the peg. This group of operators is collectively known as the Liquid Federation.

The federation currently consists of more than 85 member entities (as of April 2026), including major Bitcoin exchanges, financial institutions, and infrastructure companies. A subset of these members, the 15 functionary operators, run the hardware that signs blocks and manages the peg via 11-of-15 multisig. The broader federation participates in governance and oversight. The federation is geographically distributed, with members spanning multiple jurisdictions and time zones.

Functionaries: Block Signers and Watchmen

Each functionary serves two roles:

1. Block signer: Participates in the round-robin block signing process that produces new Liquid blocks approximately every minute.
2. Watchman: Monitors the Bitcoin mainchain for peg-in transactions and manages the multisig wallet that holds the bitcoin backing all LBTC in circulation.

These roles run on dedicated hardware modules operated by each federation member. The block signing keys and watchman keys are kept on separate hardware security modules (HSMs) to limit the impact of any single compromise. The federation consensus logic is implemented in Elements Core, Blockstream's open-source sidechain framework forked from Bitcoin Core. Elements extends Bitcoin's codebase with federation-specific RPC calls, Confidential Transaction support, and asset issuance primitives.

How This Differs From Mining

In Bitcoin's proof-of-work system, anyone can become a miner by committing computational power. Miners are anonymous, interchangeable, and economically incentivized through block rewards and transaction fees. No single miner or group of miners can easily be compelled to censor transactions because the mining pool is open and globally distributed.

In Liquid's federated model, block producers are known entities with public reputations. They do not compete; they cooperate on a fixed schedule. This means block production is predictable (no variance in block times) and energy-efficient (no proof-of-work computation), but it also means the set of block producers is permissioned. A supermajority of federation members must be honest and operational for the network to function correctly.

This is a deliberate tradeoff. Liquid is not trying to replicate Bitcoin's security model. It exists for use cases where Bitcoin's base layer properties are not sufficient: fast settlement, confidential transfers, and asset issuance.

Block Signing: How Liquid Produces Blocks

Liquid produces a new block approximately every minute. This is not an average; it is a target enforced by the block signing protocol. Unlike Bitcoin, where block times follow a probabilistic distribution around a ten-minute average (any individual block could take one minute or 60 minutes), Liquid blocks arrive on a predictable schedule.

The Round-Robin Signing Process

Block production in Liquid follows a round-robin schedule among the federation's block signers. At any given moment, one signer is designated as the block proposer. The process works like this:

1. The designated block signer collects pending transactions from the Liquid mempool.
2. The signer assembles a candidate block and signs it.
3. The signed block is distributed to other federation members for validation.
4. Once a threshold of signatures is reached (a supermajority of the federation), the block is considered final.
5. The next signer in the rotation becomes the block proposer for the following round.

If the designated signer fails to produce a block within the allotted time window (due to hardware failure, network issues, or any other reason), the protocol skips that signer and moves to the next one in the rotation. This means a few individual signers can go offline without disrupting block production. The network continues as long as a supermajority of signers remains operational.

Under the Hood: The Federation Signing Protocol

Liquid's block signing uses a threshold signature scheme over a rotating proposer model. The 15 active block signers operate an 11-of-15 multisig, meaning any 11 must co-sign a proposed block for it to be considered valid. The proposer rotation cycles through the 15 signers in a deterministic order, with each signer holding a fixed time window to propose. If the proposer's window expires without a valid proposal, the next signer in the rotation takes over.

Each block signer runs the Elements Core daemon alongside a proprietary functionary process that manages the HSM-backed signing key. The functionary validates the proposed block against Liquid's consensus rules (including Confidential Transaction verification, asset issuance validity, and peg transaction integrity) before producing its signature share. The resulting block header contains the aggregated threshold signature rather than a proof-of-work nonce, which is why Liquid blocks have deterministic timing rather than the probabilistic arrival pattern of Bitcoin blocks.

The watchman subsystem runs a parallel process that monitors the Bitcoin mainchain for peg-in deposits. Watchmen use a separate 11-of-15 multisig to control the federation's Bitcoin wallet. When a peg-in deposit reaches 102 confirmations, the watchmen collectively authorize the corresponding LBTC issuance on Liquid. For peg-outs, the watchmen construct and co-sign a Bitcoin mainchain transaction releasing bitcoin to the user's specified address.

One-Minute Finality

Because blocks are signed by a known federation rather than discovered through proof-of-work, Liquid transactions achieve practical finality much faster than Bitcoin transactions. After two confirmations on Liquid (about two minutes), a transaction is considered settled. Compare this to Bitcoin, where most recipients wait for six confirmations (approximately 60 minutes) before treating a transaction as final.

For trading desks moving bitcoin between exchanges, this difference matters. A Liquid transfer settles in minutes instead of an hour. For merchants accepting payments, one-minute confirmation is closer to the responsiveness of traditional payment networks.

The Peg-In Process: Bitcoin to Liquid

A peg-in is the process of moving bitcoin from the Bitcoin mainchain to the Liquid Network. The user locks bitcoin on the mainchain and receives an equal amount of LBTC on Liquid.

Step by Step

1. Generate a peg-in address. Using a Liquid-compatible wallet, the user generates a special peg-in address. This address is tied to the Liquid Federation's multisig wallet on the Bitcoin mainchain.
2. Send bitcoin to the peg-in address. The user sends bitcoin from any Bitcoin wallet to this peg-in address. This is a standard Bitcoin transaction.
3. Wait for confirmations. The Bitcoin transaction must receive 102 confirmations on the Bitcoin mainchain before LBTC is issued. At ~10 minutes per block, this takes approximately 17 hours. The 102-confirmation requirement ensures a very high degree of finality on the Bitcoin side, making reorganization attacks impractical.
4. Claim LBTC. After 102 confirmations, the federation's watchmen detect the deposit and the user can claim their LBTC on the Liquid Network. The LBTC appears in the user's Liquid wallet at a 1:1 ratio to the bitcoin deposited.

The 102-confirmation wait is a one-time cost when entering Liquid. Once bitcoin is on Liquid as LBTC, subsequent transactions settle in ~1 minute. For users who plan to transact frequently on Liquid, the initial peg-in wait is amortized across many fast transactions.

Why 102 Confirmations?

102 confirmations on Bitcoin makes a blockchain reorganization (reorg) that would undo the deposit economically impractical. A reorg of 102 or more blocks would require an attacker to control an enormous amount of hashrate for an extended period, at a cost that far exceeds any possible gain from defrauding the Liquid peg. The threshold is set conservatively because the security of all LBTC in circulation depends on the integrity of every peg-in.

The Peg-Out Process: Liquid to Bitcoin

A peg-out is the reverse: converting LBTC back to bitcoin on the Bitcoin mainchain. Direct peg-outs require federation authorization (a Peg-out Authorization Key), so in practice most users convert LBTC back to bitcoin through a federation member service, an exchange, or a swap service.

Step by Step

1. Initiate the peg-out. The user sends LBTC to a peg-out transaction in their Liquid wallet, specifying a Bitcoin mainchain address to receive the bitcoin.
2. Federation processes the request. The Liquid Federation's watchmen verify the peg-out request and construct a Bitcoin mainchain transaction that sends bitcoin from the federation's multisig wallet to the user's specified address.
3. Threshold signing. A supermajority of watchmen must co-sign the Bitcoin transaction. No single watchman or small group can unilaterally release bitcoin from the peg wallet.
4. Bitcoin arrives on mainchain. The signed Bitcoin transaction is broadcast to the Bitcoin network. The user receives bitcoin at their specified address after the transaction confirms on the mainchain.

Peg-outs are processed in batches by the federation. The total time from initiating a peg-out to receiving bitcoin on the mainchain is typically around 20 minutes to two hours, depending on the federation's processing cycle and Bitcoin mainchain confirmation times.

The Federation's Role in Peg-Outs

Peg-outs require active participation from the federation because the bitcoin backing LBTC is held in a multisig wallet controlled by the federation's watchmen. The user cannot unilaterally withdraw bitcoin from this wallet. This is the primary trust assumption in Liquid's design: users trust the federation to process peg-out requests honestly.

The federation has strong incentives to honor peg-outs. Its members are public companies whose reputations and businesses depend on Liquid functioning reliably. A federation that refused to process legitimate peg-outs would destroy the network's credibility and, with it, the business value that federation members derive from Liquid's existence.

LBTC: Liquid Bitcoin

LBTC is the native asset of the Liquid Network. Each LBTC represents exactly one bitcoin locked in the federation's multisig wallet on the Bitcoin mainchain. The total supply of LBTC is always equal to the total amount of bitcoin held in the peg wallet.

How the Peg Is Maintained

The 1:1 peg between LBTC and bitcoin is maintained through a straightforward mechanism:

• Peg-in: When bitcoin enters Liquid, it is locked in the federation's multisig wallet on the Bitcoin mainchain. An equal amount of LBTC is created on the Liquid Network.
• Peg-out: When LBTC leaves Liquid, it is destroyed on the Liquid Network. An equal amount of bitcoin is released from the federation's wallet on the mainchain.

LBTC cannot be created out of thin air. Every LBTC in circulation is backed by bitcoin in the federation's custody. The total amount of bitcoin held in the peg wallet is publicly verifiable on the Bitcoin mainchain using a block explorer.

What Backs LBTC

LBTC is backed by actual bitcoin, not by a promise, a reserve ratio, or a basket of assets. The backing is direct and auditable: the peg wallet address is public, and anyone can verify that the amount of bitcoin held in the wallet matches the total LBTC supply on Liquid.

This distinguishes LBTC from stablecoins or synthetic assets that may be backed by a mix of reserves, debt instruments, or algorithms. LBTC exists in a different form (on the Liquid sidechain instead of the Bitcoin mainchain), but the underlying value is identical.

Users who hold LBTC have exposure to bitcoin's price. Holding one LBTC is economically equivalent to holding one bitcoin, with the added properties of Liquid (fast settlement, Confidential Transactions) and the trust assumption of the federated peg.

Confidential Transactions on Liquid

Every transaction on the Liquid Network uses Confidential Transactions (CT) by default. CT is a cryptographic protocol, originally proposed by Adam Back in 2013 (before he co-founded Blockstream) and later developed by Gregory Maxwell, that hides both the transaction amount and the asset type from outside observers.

What CT Hides

On the Bitcoin mainchain, every transaction is fully public. Anyone can look at a Bitcoin transaction and see exactly how much bitcoin was sent, which addresses were involved, and which outputs remain unspent. This transparency is a feature for auditability, but it creates privacy problems. A business that pays suppliers on-chain reveals its payment amounts to everyone. A trader who moves bitcoin between exchanges reveals their trading patterns.

Confidential Transactions on Liquid hide two things:

1. Transaction amounts: Outside observers cannot see how much LBTC (or any other Liquid asset) was transferred. Only the sender and recipient know the amount.
2. Asset types: Since Liquid supports multiple asset types (LBTC, USDT, security tokens, and others), CT also hides which asset is being transferred. An outside observer cannot tell whether a given transaction moved LBTC, USDT, or a security token.

How It Works (Simplified)

CT uses a cryptographic technique called a Pedersen commitment to replace plaintext amounts with encrypted values. The commitment proves that the transaction is valid (inputs equal outputs, no assets created from nothing) without revealing the actual numbers. Range proofs accompany each commitment to prove that the hidden values are positive and within a valid range, preventing anyone from creating negative amounts as an exploit.

The mathematics behind CT are publicly documented and have been formally analyzed. The protocol does not rely on obscurity. Its security comes from well-studied cryptographic assumptions.

How Confidential Transactions Work on Liquid

At the cryptographic level, Confidential Transactions use Pedersen commitments to replace plaintext amounts. A Pedersen commitment to a value v takes the form C = v*G + r*H, where G and H are two independent generator points on the secp256k1 elliptic curve, and r is a randomly chosen blinding factor known only to the sender and receiver. The commitment C reveals nothing about the value v to anyone who does not possess r.

The key property that makes this work for transactions is additive homomorphism: the sum of commitments equals the commitment of the sum. For a valid transaction, the network verifies that C_input1 + C_input2 + ... = C_output1 + C_output2 + ... + C_fee. This equation holds if and only if the underlying values balance. The sender constructs the blinding factors to ensure this balance, and any attempt to create outputs exceeding the inputs causes the verification to fail.

Each output also carries a range proof, which demonstrates in zero knowledge that the committed value falls within the range [0, 2⁶⁴ - 1]. This prevents a sender from committing to negative values, which would otherwise allow inflation through wrapping arithmetic on the elliptic curve group. The Confidential Transactions protocol deployed on Liquid builds its range proofs on Borromean ring signatures. Blockstream Research is developing more compact range-proof schemes, including Bulletproofs and the newer Bulletproofs++, that could reduce proof sizes in a future upgrade, but those schemes are not yet activated on Liquid mainnet.

Who Can See Transaction Details

Only the transaction participants (sender and recipient) can see the full transaction details. However, Liquid provides a mechanism called "unblinding" that allows the sender or recipient to share a blinding key with a third party, selectively revealing transaction details. This is useful for auditing, tax compliance, or dispute resolution without making the transaction public to the entire network.

You can view Liquid transactions on Blockstream Explorer, where you will see that transaction amounts and asset types appear as "Confidential" unless you have the blinding key to reveal them. This is CT in action: the transaction is recorded on a public blockchain, but its economic details are private.

Asset Issuance on Liquid

Beyond LBTC, the Liquid Network supports the issuance of new digital assets. Any entity can issue its own assets on Liquid: stablecoins, security tokens, utility tokens, and collectibles. These assets inherit Liquid's properties: ~1-minute settlement, Confidential Transactions, and the ability to be traded atomically against LBTC or other Liquid assets.

How Asset Issuance Works

Issuing an asset on Liquid involves a special transaction that defines the asset's properties:

• Asset name and ticker: A human-readable identifier for the asset.
• Total supply: The number of units to create. Assets can be issued with a fixed supply or with reissuance tokens that allow the issuer to mint additional units later.
• Reissuance tokens: Optional tokens that grant the holder the ability to issue more of the asset in the future. If no reissuance tokens are created, the supply is permanently fixed at issuance.
• Precision: The number of decimal places the asset supports.

Once issued, the asset is native to Liquid. It can be sent and received, or traded against other assets, using the same infrastructure as LBTC. All Liquid assets benefit from Confidential Transactions, meaning outside observers cannot identify which asset type is being transferred in a given transaction. At the protocol level, each Issued Asset is identified by a unique 32-byte asset ID derived from the issuance transaction's input. Asset Surjection Proofs (cryptographic proofs embedded in each transaction) verify that outputs contain only asset types present in the inputs, preventing asset type forgery without revealing which specific assets are involved.

The Liquid Asset Registry

The Liquid Asset Registry is a public directory where asset issuers can register their assets with metadata: the asset name, ticker, issuer information, and a domain verification proof. Registration in the Asset Registry is voluntary but provides a way for wallet users to identify assets by name rather than by raw asset ID.

The registry does not grant any special status to registered assets. It is a convenience layer for discoverability and user experience, not a gatekeeping mechanism.

Types of Assets on Liquid

• Stablecoins: USDT (Tether) is the most prominent stablecoin issued on Liquid. Tether issues USDT natively on the Liquid Network, giving users access to dollar-denominated value with Liquid's speed and confidentiality properties.
• Security tokens: Tokenized securities, including equity, debt instruments, and other regulated financial products. Liquid's transfer-restricted asset features allow issuers to enforce compliance rules (such as KYC/AML requirements) at the protocol level.
• Utility and collectible tokens: General-purpose digital assets for rewards programs, gaming, or other applications.

Blockstream's AMP (Asset Management Platform) provides an API platform for issuers who need programmatic control over asset issuance, distribution, and management on Liquid. AMP handles the technical complexity of issuing assets, managing reissuance, and enforcing transfer restrictions.

Liquid vs. Other Layer-2 Solutions

Liquid is one of several layer-2 approaches built on Bitcoin. Each serves different use cases and makes different tradeoffs.

Liquid and Lightning: Complementary, Not Competing

Liquid and Lightning serve different segments of the Bitcoin transaction spectrum. Lightning excels at small, fast, high-frequency payments. Liquid excels at larger transfers, confidential transactions, and use cases involving digital assets beyond bitcoin.

The two networks are increasingly interoperable. The Blockstream app supports Bitcoin, Lightning, and Liquid in a single interface, and cross-layer swaps (Lightning ↔ Liquid) allow users to move value between the networks without going through the Bitcoin mainchain. A trader might hold LBTC on Liquid for privacy and fast settlement, then swap to Lightning when making a retail payment.

The Jade Plus hardware wallet provides native signing support for both Bitcoin and Liquid transactions, making it the only Bitcoin hardware wallet that can sign Liquid transactions directly. For users who operate across multiple layers, this eliminates the need for separate signing devices or software-only wallets for Liquid.

Liquid Network Security

Liquid's security model is different from Bitcoin's, and understanding those differences is important for anyone holding or transacting in LBTC.

The Trust Model

Liquid's security rests on the assumption that a supermajority of the federation acts honestly. Specifically:

• Block production uses an 11-of-15 multisig among block signers. If fewer than 11 signers are online, the network stalls but funds are not lost.
• Peg security also uses an 11-of-15 multisig among watchmen who co-sign peg-out transactions. The bitcoin in the peg wallet requires 11 of the 15 watchmen to cooperate to move funds.

Compromising the peg would require corrupting or coercing at least 11 of the 15 watchmen, who are distributed across multiple jurisdictions and operate independent infrastructure. The cost and coordination required for such an attack are prohibitive in practice, especially given that the attackers would be targeting publicly identified companies with legal and reputational exposure.

How the Federation Prevents Theft

The bitcoin backing LBTC is held in a multisig wallet that requires signatures from a supermajority of the federation's watchmen. No single watchman, and no small group of watchmen, can unilaterally move bitcoin from the peg wallet. Every peg-out transaction requires independent approval from enough watchmen to meet the threshold.

Federation members operate their watchman hardware in secure environments, and the signing keys are stored on HSMs that resist physical and remote extraction. The federation's operational security requirements are designed to make key compromise difficult even if an attacker gains physical access to a single member's infrastructure.

Emergency Recovery Mechanisms

Liquid includes an emergency recovery mechanism to protect funds in the event that the federation becomes unable to function. If the federation fails to produce blocks for an extended period, the mechanism activates on a time lock. This mechanism uses a separate set of emergency recovery keys that can move the bitcoin in the peg wallet to a pre-defined recovery address.

The emergency recovery mechanism is designed as a last resort. Its purpose is to ensure that a catastrophic federation failure does not result in permanent loss of the bitcoin backing LBTC. The time-lock ensures that the recovery mechanism cannot be triggered while the federation is operating normally.

Open-Source Transparency

Liquid is built on the open-source Elements platform. The codebase is publicly available for review, and the cryptographic protocols underpinning Confidential Transactions, block signing, and the peg mechanism have been subjected to independent security analysis. The consensus rules and the peg mechanism are implemented in the open-source Elements codebase and are open to public scrutiny.

The History and Evolution of Liquid

The idea behind Liquid predates the Liquid Network itself by several years.

The Sidechain Whitepaper (2014)

In October 2014, a group of researchers including Adam Back, Matt Corallo, Luke Dashjr, Mark Friedenbach, Gregory Maxwell, Andrew Miller, Andrew Poelstra, Jorge Timón, and Pieter Wuille published "Enabling Blockchain Innovations with Pegged Sidechains". This paper introduced the formal concept of a two-way pegged sidechain: an independent blockchain that could hold bitcoin transferred from the Bitcoin mainchain and return it on demand.

The whitepaper argued that sidechains could enable innovation in the Bitcoin ecosystem without requiring changes to Bitcoin itself. New features (faster blocks, different scripting languages, privacy protocols) could be tested and deployed on sidechains, and users could opt in by moving bitcoin to the sidechain that offered the features they needed.

Elements Platform (2015)

Blockstream released Elements, an open-source blockchain platform based on Bitcoin's codebase, as the foundation for building sidechains. Elements introduced several features that would later appear in Liquid, including Confidential Transactions and the federated peg mechanism. Elements allowed developers to create custom sidechains with different consensus rules and feature sets.

Liquid Launch (2018)

The Liquid Network launched in October 2018 as the first production implementation of a federated sidechain on Bitcoin. The initial federation consisted of 23 members, primarily Bitcoin exchanges and trading firms. The network launched with support for LBTC and basic asset issuance.

Growth and Expansion (2019-2022)

In the years following launch, Liquid expanded in several directions:

• USDT issuance: Tether began issuing USDT natively on Liquid, making it one of the first stablecoin deployments on a Bitcoin sidechain.
• Federation growth: The federation grew from 23 members at launch to more than 85 members (as of April 2026), which broadened its geographic distribution across more jurisdictions.
• Wallet support: Multiple wallets added Liquid support, including the Blockstream app, Aqua, TDEX, and SideSwap.
• Securities issuance: Companies began issuing regulated security tokens on Liquid using transfer-restricted and issuer-tracked asset types.

Simplicity Integration (2025)

In July 2025, the Simplicity programming language was activated on Liquid. Simplicity is a smart contract language designed for formal verification, allowing contract authors to mathematically prove that their code behaves as intended. This brought programmable logic to Liquid with a security posture that prioritizes correctness and auditability over flexibility. Liquid's scripting already extended Bitcoin Script with opcodes for Confidential Transactions, asset issuance, and covenant enforcement. Simplicity added a fundamentally different execution model: a typed functional language compiled to a Bit Machine, where every program has a static cost bound and can be formally verified using Coq proofs. Developers write contracts in SimplicityHL (the high-level syntax) and compile them using the simc toolchain.

Current State (2026)

The Liquid Network today processes thousands of transactions daily across LBTC, USDT, and other Issued Assets. The federation includes more than 85 members (as of April 2026). Liquid is supported by the Blockstream app, Jade Plus (the only hardware wallet with native Liquid support), and multiple third-party wallets and services. The Simplicity activation has opened new possibilities for high-assurance smart contracts on the network.

Using the Liquid Network Today

Getting started with Liquid requires a Liquid-compatible wallet and some bitcoin to peg in (or LBTC acquired through an exchange that supports Liquid withdrawals).

Wallets

The Blockstream app provides a single interface for Bitcoin, Lightning, and Liquid. Users can receive LBTC, send confidential transactions, and perform cross-layer swaps (Lightning ↔ Liquid and on-chain ↔ Liquid) without leaving the app. For users who hold bitcoin on the mainchain and want to try Liquid, the Blockstream app can move mainchain bitcoin into Liquid directly using built-in BTC-to-Liquid swaps.

For hardware wallet users, the Jade Plus is the only Bitcoin hardware wallet with native Liquid support. Jade Plus can sign Liquid transactions using air-gapped QR codes, keeping private keys fully offline even when transacting on Liquid. This makes it possible to use Liquid with hardware wallet security rather than relying on a software-only wallet.

Exchanges and On-Ramps

Many federation members are exchanges that support direct LBTC deposits and withdrawals. Users can acquire LBTC by withdrawing from an exchange that supports Liquid, bypassing the 102-confirmation peg-in wait entirely. This is often the fastest way to get started on Liquid.

Exploring Liquid Transactions

Blockstream Explorer provides a full view of the Liquid blockchain. Users can look up transactions, blocks, and addresses. Because Confidential Transactions hide amounts and asset types, most transaction details appear as "Confidential" on the explorer. Users with the blinding key for a specific transaction can use the explorer's unblinding feature to reveal the details.

Frequently Asked Questions

Is LBTC the same as bitcoin?

LBTC is pegged 1:1 to bitcoin and backed by actual bitcoin held in the Liquid Federation's multisig wallet on the Bitcoin mainchain. Holding one LBTC gives the holder exposure to the same value as holding one bitcoin. The difference is that LBTC exists on the Liquid sidechain, which offers faster settlement and Confidential Transactions, and carries the trust assumption of the federated peg model rather than Bitcoin's proof-of-work security.

Can the Liquid Federation steal the bitcoin in the peg?

Moving bitcoin from the peg wallet requires a supermajority of the federation's watchmen to cooperate. No single member or small group can unilaterally move funds. Specifically, the peg wallet uses an 11-of-15 multisig, meaning at least 11 independent watchmen must co-sign any withdrawal transaction. The federation members are publicly identified companies with legal and reputational exposure, creating strong disincentives against collusion. Liquid also includes an emergency recovery mechanism with a time-locked spending path that activates if the federation fails to operate for an extended period, ensuring funds can be recovered even in a catastrophic federation failure.

Why does a peg-in require 102 confirmations?

The 102-confirmation requirement ensures that the bitcoin deposited into the peg is protected against blockchain reorganizations. A reorg deep enough to undo 102 confirmations would be prohibitively expensive, requiring an attacker to command an enormous amount of hashrate for over 17 hours. The number 102 comes from Bitcoin's coinbase maturity rule (100 blocks) plus a two-block safety margin. Just as newly mined bitcoin cannot be spent for 100 blocks, peg-in deposits use a comparable threshold to achieve equivalent finality guarantees. The conservative threshold protects the integrity of all LBTC in circulation.

Are Liquid transactions private?

Confidential Transactions hide transaction amounts and asset types from outside observers using Pedersen commitments and range proofs. They are the default for every Liquid transaction, and standard Liquid wallets blind amounts and asset types automatically. The sender and recipient can see full details through the shared blinding factors, and either party can selectively reveal transaction information to third parties (such as auditors) using unblinding keys. The transaction graph (which addresses transacted with which) is still visible on the public blockchain, similar to Bitcoin.

What happens if the Liquid Federation goes offline?

If a minority of federation members go offline, the network continues to function normally. Block production and peg operations only require a supermajority, so the network can tolerate some members being unavailable. If enough members go offline that a supermajority is no longer available, block production halts. In a prolonged failure scenario, a time-locked emergency recovery mechanism activates to protect the bitcoin in the peg wallet.

Can I use Liquid with a hardware wallet?

Yes. Jade Plus is the only Bitcoin hardware wallet with native Liquid support. It can sign Liquid transactions using air-gapped QR codes, providing the same offline signing security for Liquid that hardware wallets provide for Bitcoin mainchain transactions. Jade Plus works with the Blockstream app as its companion wallet for Liquid operations.

How long does a peg-in to Liquid take?

A peg-in requires 102 confirmations on the Bitcoin mainchain before LBTC is issued, which takes approximately 17 hours at ~10 minutes per block. This is a one-time cost when entering Liquid; once bitcoin is on Liquid as LBTC, subsequent transactions settle in ~1 minute. Many users skip the peg-in wait entirely by withdrawing LBTC directly from an exchange that supports Liquid.

Is the Liquid Network decentralized?

Liquid uses a federated consensus model rather than open proof-of-work mining, so it is more accurately described as distributed than fully decentralized. Block production and the peg are controlled by a federation of more than 85 member entities (as of April 2026), with 15 functionary operators running an 11-of-15 multisig. The trust is distributed across known, publicly identified companies in multiple jurisdictions, which is a deliberate tradeoff for faster settlement, Confidential Transactions, and asset issuance.