What is the point of "Bitcoin Lightning" and "Bitcoin Liquid"?
The lightning-network (LN) is an instant payment system built on top of Bitcoin. Its relationship to Bitcoin is akin to that of Visa card payments and the US banking system. The LN is a convenient and efficient way to pay directly from one user to another, especially for smaller amounts. Under the hood, the Lightning Network works by spanning payment channels between users and providing cryptographic guarantees to prevent abuse. Compared to on-chain payments, the LN trades off different privacy properties, lower transactions fees, and manifold increased transaction throughput with different security assumptions and the opportunity-cost of staging funds in payment channels.
The liquid sidechain is an alternative blockchain protocol whose native currency is &quot;Liquid Bitcoin&quot; (L-BTC). Users may convert Bitcoin to L-BTC 1:1 by paying into the custody of the federated peg or withdraw BTC by returning L-BTC back to the peg on Liquid. The Liquid sidechain operates with different consensus rules that give it better privacy (via confidential-transactions), greater throughput, and the ability to issue other assets. This comes at the cost of trusting that the majority of the Federation remains honest. Being closely related to Bitcoin, Liquid has its own Lightning Network.
LN and Liquid are sufficiently separate from Bitcoin's protocol development that they are not covered by the Bitcoin Improvement Proposal process even though LN is widely considered to be part of Bitcoin, while Liquid is more distinct. LN and Liquid solve different problems and are optional.