What is the point of "Bitcoin Lightning" and "Bitcoin Liquid"? Even having been &quot;into&quot; Bitcoin since almost since the start, I constantly find new weird things mentioned which are just apparently taken for granted and exist suddenly and somehow have tons of support and users.
Today I learned about the existence of &quot;Bitcoin Liquid&quot;. I had not heard of it ever until today (2021-01-21). Apparently, it's the same thing as &quot;Bitcoin Lightning&quot;, in that it's not a separate &quot;altcoin&quot;, but somehow &quot;attached to&quot; Bitcoin yet not using the Bitcoin blockchain. This makes no sense to me.
I do know that &quot;Lightning&quot; was touted as a solution when the Bitcoin network was all clogged up with waiting times for transactions a few years ago, but since then, I've not heard one peep of it. Never heard it mentioned at all. I assumed that it was dead. But apparently it still exists, and now &quot;Liquid&quot; also exists. Are they competing against each other?
I find it utterly impossible to figure anything out by reading their official websites, because they always use bombastic wording and list how many groups support them and they are the future and blablabla... Useless information. I want to know neutral, real information. I can't find it anywhere.
What exactly are &quot;Bitcoin Lightning&quot; and &quot;Bitcoin Liquid&quot;? Why do they exist? Why aren't these &quot;BIP&quot;s put into Bitcoin itself? How can they be attached to Bitcoin yet be separate? Is one of them objectively better than the other? Do they solve different problems? Is one of them dead now? Should I be using/bothering with them? Are they an attempt to take over Bitcoin slowly by not being an &quot;altcoin&quot; upfront, but slowly turning away from Bitcoin?
I swear, I could probably sit there and spend my entire life doing nothing but trying to read up on Bitcoin-related stuff and still never have any clue what's going on. It seems like not one day passes without some &quot;revolutionary&quot; and &quot;fantastic&quot; new invention which seems to be little more than a slick website with nonsensical sales talk on it.
I'm looking to get a grasp of the state of Bitcoin and its development. I have no idea how these weird &quot;sidechains&quot; fit into that or why I should pay any attention to them. Maybe it's the best thing ever and makes perfect sense?
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.