This issue of Layer-2 Report explores some of the most exciting projects on Liquid and their teams' plans for 2023.
Despite a slowdown in the industry, Liquid has made significant progress in ecosystem growth. This is mainly due to the maturity of projects that were in development. In this post, we will cover some of these developments and also provide updates on the network's more established projects and their objectives for 2023. For a comprehensive list of Liquid's announcements and updates, readers can visit the official Liquid blog or join the Telegram channel.
- Bitcoin Reserve
As the technical provider for Liquid, Blockstream has been hard at work, building upon the Dynamic Federations (DynaFed) release with two additional updates to the Peg-out Authorization Keys (PAK) and Blocksigners in 2022. DynaFed was a major upgrade to the network, allowing Liquid functionaries to be added or removed more easily, ultimately leading to a more robust sidechain.
Also released was Elements v22.0.2, which brought Liquid's codebase up to date with Bitcoin Core 22.0 and incorporated several performance optimizations and improvements to DynaFed parameters. The team is currently reviewing Elements v22.1-rc1, with a full version 22.1 release, fully supportive of Liquid Testnet, planned for release next month. Concurrently, they are also working on the ports to Bitcoin Core 24.0, which is expected later in the year.
In October 2022, Blockstream authored and published the whitepaper "Non-Custodial Options using Elements," which delves into new scripting and opcodes capable of facilitating a wide range of financial products on Liquid, such as non-custodial limit orders and fully-collateralized options contracts. The team plans to release a reference implementation for the new options contracts in the near future.
Another Blockstream-led Liquid initiative, Build On L2 (BOL2), is currently in development and will soon be available to the public. BOL2 is an all-in-one community platform that will host developer and business documentation, online hackathons, masterclasses, and other events for Bitcoiners interested in building on Core Lightning and Liquid. BOL2 is slated for launch later this quarter.
Late last year at Baltic Honeybadger 2022, Blockstream announced its partnership on XDEX, the world's first decentralized security token exchange. Users can expect the mobile app to go to market sometime in 2023, with Blockstream continuing to provide technology support for XDEX's Liquid and Blockstream AMP integrations.
Bitcoin Reserve is a Bitcoin-only brokerage and member of the Liquid Federation that added an L-BTC buying option to its platform last year. Clients can buy L-BTC in increments as small as €10 up to €10M+ via bank transfer and self-custody off-platform in any Liquid wallet of their choice.
Since the announcement, Bitcoin Reserve has added an L-BTC sell option and expanded its offering to Liquid USDt for all of its services.
Bitmatrix is a covenant-based AMM protocol built on Liquid that released its mainnet beta in Q4 2022, enabling trustless liquidity provision and custom LP fees across L-BTC, stablecoins, and other assets.
According to lead Bitmatrix engineer Burak, several updates are scheduled for the first half of 2023, including a more advanced pricing and analysis chart for users featuring TVL, fees, earnings, and other metrics. An info dashboard for asset pairs is also in the pipeline, set to resemble "a kind of CoinMarketCap for Liquid assets," he said.
Looking further out, Bitmatrix plans to optimize the web app with Simplicity by 2024, reducing transaction size and costs and enabling multi-party pools. Currently, each pair needs to deploy a separate pool. For example, there must be a direct pool between X<> Y when trading X for Y. Under the multi-party pool design, you can indirectly trade X for Y; there only needs to be X<>LBTC and Y<>LBTC pools.
Readers can learn more about Simplicity programs and their extensibility in a recent write-up from Blockstream Research.
DIGTL Markets (DIGTL) provides capital markets infrastructure, giving issuers the ability to manage their digital securities and compliantly reach global retail investors.
After becoming a Liquid Federation member in early 2022, DIGTL went on to provide BMN investor onboarding technology as well as exchange listing and trading services for MERJ Exchange, helping to bring lower entry prices and trading denominations to BMN investors worldwide. DIGTL will continue to expand its network of securities exchanges and engage with large asset issuers, including over a $1 billion carbon offset opportunity that will use Liquid as the registry, according to Kyle Fry, Co-Founder and CEO at DIGTL.
DIGTL is also a founding member of 1transfer — an SEC-registered transfer agent — to support issuers on Liquid with the additional regulatory infrastructure needed as part of its comprehensive platform.
Fuji Money is a non-custodial Bitcoin-only lending platform that lets users borrow stablecoins and synthetic assets and trade them peer-to-peer. Since its announcement, Fuji has given early closed beta access to the first 100 subscribers on their waitlist and successfully integrated Lightning submarine swaps.
FUJI USD (FUSD), a bitcoin-backed stablecoin pegged to the US dollar, will be the first Fuji synthetic asset available on the platform. Users borrow FUSD by depositing bitcoin inside a Liquid smart contract (i.e., a covenant address) using a Lightning submarine swap or directly with L-BTC.
In the near term, Fuji anticipates releasing its Multiply UI, which lets users long their L-BTC collateral in one click. According to the Fuji Telegram channel discussion, the mainnet release is planned for late Q1 2023.
Read our deep dive for more details about Fuji and how it utilizes layer-2 technologies to collateralize contracts.
In 2022, Raretoshi brought new functionality to the platform, like the ability to tip artists directly, toggle between currencies, and leave comments on a particular art piece. One of the most extensive updates was an encrypted messaging system, which leverages the Nostr protocol based on cryptographic keys.
The team will continue to update and maintain the marketplace going into the new year through feedback from the community. If you have suggestions, patrons and artists can join the Raretoshi Discord or Telegram channels to speak directly with developers.
SideSwap is a non-custodial wallet and decentralized trading venue that allows users to peg-in and out of Liquid and perform instant, trustless swaps between L-BTC, USDt, and EURx. Assets like security tokens and voucher tokens, which are not available to atomically swap, can be traded on decentralized order books. SideSwap is one of the easiest ways for newcomers to obtain L-BTC and quickly get exposure to Liquid's benefits.
Amid regular UI updates featuring new price charts and asset listings in 2022, SideSwap tokenized a selective number of shares of equity through a secondary market listing. Fifty thousand shares were reserved for the first users who signed up with PEGx, their registration agent — some of which are still available now. Last quarter, SideSwap also announced offline swaps support by default in its wallet and order books, representing a major improvement to trading on the platform. Offline swaps were made possible by the new LiquiDEX protocol courtesy of Blockstream engineer Leonardo Comandini.
Founder of SideSwap, Scott Millar, has ambitious plans going into 2023, including adding Fuji's bitcoin-backed FUSD stablecoin and synthetic assets (currently available on testnet) and integrating hardware wallets, such as the Blockstream Jade, so that users can execute swaps directly from their signing devices.
STOKR is an investment marketplace for alternative assets. Licensed in the European Union, asset managers and founders are able to conduct their primary offering of securities on the platform via Liquid. From business entrepreneurs to asset managers, STOKR provides a full suite of technical deployment, investment structuring, payment gateways, and support for the issuance of compliant digital securities.
Over $60M worth of assets have been tokenized on STOKR to date. In the past, STOKR has facilitated offerings for the Exordium EXO token and the Blockstream Mining Note (BMN) while vetting issuers and providing investors with due diligence.
Last quarter, STOKR became the only digital securities issuance platform to be registered as a Virtual Asset Service Provider (VASP) by an EU member state. The distinction, given by Luxembourg's financial regulator CSSF, puts the company on a solid regulatory footing in Europe.
Heading into 2023, STOKR Co-Founder Arnab Naskar said the company would continue its focus on building capital markets infrastructure and providing SMEs with fundraising and tokenization solutions.
"We will be building even more cutting-edge capital market tools on the Liquid Network in 2023. Our focus will be on providing solutions to established asset managers and fund managers struggling with liquidity issues in today's market. Get ready for a game-changing year ahead!"
One upcoming securities token offering on Liquid is Angelpreneur, a Swiss entity that invests in early-stage companies to help them scale and develop successful franchise models.
Zaprite is a platform that offers a suite of self-custody merchant tools such as invoicing, accounting, and bookkeeping. Currently in the MVP stage, the web app allows users to connect their own nodes or wallets to get paid in Bitcoin, Lightning, and Liquid.
In 2022, Zaprite officially became a Liquid Federation member and added Liquid payments to its invoicing system. Going into the new year, John, Founder and CEO at Zaprite, explained the team would soon migrate its codebase ahead of a new release that integrates Liquid into its Checkouts feature.
Checkouts are highly customizable, branded pages hosted by Zaprite, allowing users to accept payments with unique flows and information requests. Checkouts can be connected to users' own websites to create instant e-commerce solutions.
Zaprite will also build out new hosted services such as point-of-sale, product stores, donation pages, and ticket sales. These can all be connected to existing Checkouts for a feature-rich Bitcoin and Liquid payment processing experience for merchants.
Join the Liquid Community and Start Building
The above is only a snapshot of Liquid's growing ecosystem, which now comprises more than 60 Federation members and an even greater number of integrations and projects available to users.
If you are curious how finance markets on Liquid operate or would like to discuss building on Liquid with like-minded individuals, join the official Telegram channel and sign up for the much-anticipated Build On L2 community platform, slated for launch later this quarter.
You can also subscribe below for future issues of the Layer-2 Report and the latest news from Blockstream’s engineering, research, and mining teams.