Oddbean

Anyone out there willing to explain Lightening vs Liquid for me? They are both layer two solutions, correct? In which case they are basically competing against each other to be the main layer two solution for fast-cheap bitcoin transactions? Or are the complementary in some way? Thanks https://liquid.net/

Liquid is a federated Blockchain that runs alongside Bitcoin. Lock your Bitcoin to get liquid, burn liquid to get Bitcoin back. Lightning is a network of Bitcoin payment channels (imagine joint accounts) between Bitcoin nodes.

Liquid is a federated and mostly automated trusted third party (Blockstream and their federation partners in this case). Lets pretend they are me. Give me your bitcoin on the main chain or through lightning. Me and the federation will keep it safe. We'll give you our asset (liquid) in exchange. It has cheap tx fees and is faster than the BTC main chain. You will own your keys and assets will be in your control... on our chain and within our federation/partners. Oh, we have other assets on the Liquid network you can trade for as well with very low fees. We're a lot like a shitcoin exchange in that way except don't think of that. We like to call it investing, "in companies you believe in without relying on a broker or bank." We'll preserve your privacy. You can't spend your Liquid assets in as many places as BTC or lightning but we're working on that. Not saying it's a bad idea. Just describing it in simple terms. Lightning? Run your own node, process your own payments. But, manage your channels yourself to keep liquidity balanced enough to spend and receive. Or, trust another third party (lightning service provider LSP) to keep good liquidity for you at a small fee by running a giant routing node that'll get your BTC anywhere quickly. In short they are complementary in some ways and competing in others.

Liquid is custodial. Lightning is not. Federated, just means custody is shared. But it's still custodial. Liquid is no different to the Mutiny wallet federated severs, or CashU federated mints. Liquid custody is done by a bunch of exchanges that I wouldn't trust with my Bitcoin anyway. I've put five bucks worth of Bitcoin into CashU mints which is more than I trust with Liquid. My major concern with Liquid is the way they pretend they aren't custodial. At least CashU mints don't pretend to be non-custodial.