BTC Layer 2 Research Report Series: Liquid Network Project Outlook in 2023

Preface

In this edition of the Layer 2 report, we take a deep dive into the key projects on Liquid and the plans their teams have for 2023.

Despite a slowdown across the industry, Liquid has made significant progress in expanding its ecosystem. This is mainly due to the gradual maturity of those projects under development. This article will highlight some of these projects and update the more mature projects on Liquid and their goals for 2023.

1. Blockstream

As the technical supporter of Liquid, Blockstream will carry out in-depth development based on DynaFed in 2022, and further update the Peg-out Authorization Key (PAK) and Blocksigners. DynaFed brings significant upgrades to the network, making Liquid’s functionality more flexible and easier to add or remove, resulting in a more stable sidechain system.

At the same time, the Elements v22.0.2 version has also been launched. This version ensures that Liquid’s code is synchronized with Bitcoin Core 22.0, and a series of optimizations and improvements have been made to DynaFed parameters. Currently, the team is evaluating Elements v22.1-rc1 and plans to release a complete version 22.1 next month (as of now, Elements has been updated to version 22.1.1), which will fully support Liquid Testnet. In addition, they are also preparing to migrate it to Bitcoin Core 24.0, which is expected to be completed later this year.

In October 2022, Blockstream wrote and published a white paper titled “Non-Custody Options Using Elements”. The post provides an in-depth look at the new scripts and opcodes that enable a variety of financial products on Liquid, such as non-custodial limit orders and fully collateralized options contracts. The team plans to release a reference implementation of these new options contracts in the near future.

Another Liquid project led by Blockstream - Build On L2 (BOL2). BOL2 is a one-stop community platform that will provide developer and business documentation, online hackathons, masterclasses and other events for Bitcoin enthusiasts interested in building applications on Core Lightning and Liquid. BOL2 is scheduled to launch later this quarter.

2. Bitcoin Reserve

Bitcoin Reserve is a Bitcoin-only brokerage and a member of the Liquid Alliance. Last year, it added an L-BTC purchase option to its platform. Customers can purchase L-BTC from as little as €10 to over €10 million via bank transfer and self-custody in any Liquid wallet of their choice.

Since the announcement, Bitcoin Reserve has added an L-BTC sell option and expanded its service to Liquid USDT.

3. Bitmatrix

Bitmatrix, an AMM protocol built on Liquid, released its mainnet beta version in the fourth quarter of 2022, supporting trustless liquidity provision and custom LP fees between L-BTC, stablecoins, and other assets.

According to Bitmatrix chief engineer Burak, multiple updates in the first half of 2023 will include providing users with more advanced price and analysis charts, showing TVL, fees, earnings and other indicators. He also said that an information panel for asset pairs is also planned, with a design that will resemble a “CoinMarketCap for Liquid assets.”

Going forward, Bitmatrix plans to use Simplicity to optimize network applications in 2024 to reduce transaction size and cost and enable multi-party pools. Currently, each pair of assets requires a separate pool to be deployed. For example, when trading X and Y, there must be a direct pool of XY. But under the multi-party pool design, you can trade X and Y indirectly; you only need to have a pool of X, LBTC and Y, LBTC.

4. DIGTL

DIGTL Markets (DIGTL) provides the infrastructure for capital markets, enabling issuers to manage their digital securities and reach retail investors around the world in a compliant manner.

After joining the Liquid Alliance in early 2022, DIGTL subsequently provided technical support for BMN investors to MERJ Exchange, and helped it to be listed and traded on the exchange, bringing more affordable prices and trading units to BMN investors around the world. According to Kyle Fry, co-founder and CEO of DIGTL, DIGTL plans to further expand its cooperation network with stock exchanges and cooperate with large asset issuers, including a carbon offset project worth more than US$1 billion, which will Choose Liquid as its registration platform.

Additionally, DIGTL is a founding member of 1transfer, an SEC-registered transfer agent designed to provide issuers on Liquid with the additional regulatory structure they need as part of their full-service platform.

5.Fuji Money

Fuji Money is a non-custodial, bitcoin-only lending platform that allows users to borrow stablecoins and synthetic assets and conduct peer-to-peer transactions. Since launch, Fuji has given access to an early closed beta to the first 100 subscribers on the waitlist, and has successfully integrated Lightning’s sub swap functionality.

FUJI USD (FUSD), a USD-pegged, Bitcoin-backed stablecoin, will be the first Fuji synthetic asset available on the platform. Users can borrow FUSD by depositing Bitcoin within the Liquid smart contract (i.e. the agreed address), which can be done through the Lightning sub exchange or directly using L-BTC.

**6.

Raretoshi is a physical and digital art marketplace built by Adam Soltys and his team using the open-source L-NFT protocol to connect patrons with their favorite Bitcoin artists.

In 2022, Raretoshi brings new features to the platform, such as tipping artists directly, switching between currencies, and leaving comments on specific artworks. One of the biggest updates is an encrypted messaging system that utilizes the Nostr protocol based on encryption keys.

7. SideSwap

SideSwap is a non-custodial wallet and decentralized exchange that allows users to enter and withdraw Liquid and make instant, trustless swaps between L-BTC, USDt, and EURx. Assets like security tokens and voucher tokens, which cannot be atomically swapped, can be traded on decentralized order books. SideSwap is one of the easiest ways for newbies to earn L-BTC and quickly experience the benefits of Liquid.

In a regular UI update in 2022, SideSwap tokenized a certain amount of equity in the secondary market. Fifty thousand shares were reserved for the first users to register on its registered agent PEGx, some of which are still available today. Last quarter, SideSwap also supported off-chain swaps by default in its wallet and order book, a major improvement over trading on the platform. The off-chain exchange is thanks to the new LiquiDEX protocol introduced by Blockstream engineer Leonardo Comandini.

SideSwap founder Scott Millar has ambitious plans for 2023, including adding Fuji’s Bitcoin-backed FUSD stablecoin and synthetic assets (currently available on testnet) and integrating hardware wallets, such as Blockstream Jade, so users can buy directly from Their signature device performs the exchange.

8. STOKR

STOKR is an investment marketplace for alternative assets. Asset managers and founders will be able to conduct initial offerings of securities on the platform through Liquid after obtaining a license in the EU. From business entrepreneurs to asset managers, STOKR provides a full suite of technology deployment, investment structures, payment gateways and support for compliant digital securities issuance.

To date, over $60 million in assets have been tokenized on STOKR. In the past, STOKR has provided issuance services for Exordium EXO tokens and Blockstream Mining Note (BMN), while vetting issuers and providing due diligence for investors.

STOKR becomes the only digital securities issuance platform registered as a Virtual Asset Service Provider (VASP) by an EU member state. This honor was awarded by Luxembourg’s financial regulator CSSF, giving the company a solid regulatory footing in Europe.

Looking ahead to 2023, Arnab Naskar, co-founder of STOKR, said that the company will continue to focus on building capital market infrastructure and providing financing and tokenization solutions for SMEs.

“We will be building more cutting-edge capital markets tools on Liquid Network in 2023. Our focus will be on providing solutions for sophisticated asset managers and fund managers who are facing liquidity issues in today’s market. Get ready for A game-changing year"

An upcoming security token offering on Liquid is Angelpreneur, a Swiss entity that invests in startups, helping them scale up and develop successful franchises.

9. Close

Zaprite is a platform that offers a range of self-hosted merchant tools, such as invoicing, accounting, and bookkeeping. The web application, currently in the MVP stage, allows users to connect their own nodes or wallets and get paid in Bitcoin, Lightning Network and Liquid.

In 2022, Zaprite officially becomes a member of the Liquid Alliance and adds the Liquid payment method to its invoicing system. Heading into the new year, Zaprite founder and CEO John explained that the team will soon be migrating its codebase to integrate Liquid into its Checkouts functionality in the new release.

Checkouts are highly customizable, branded pages hosted by Zaprite that allow users to accept payments with unique processes and information requests. Checkouts can connect to users’ own websites to create instant e-commerce solutions.

Zaprite will also develop new hosted services such as point of sale, product store, donation page and ticket sales. These can all be connected to existing Checkouts to provide merchants with a rich Bitcoin and Liquid payment processing experience.

references

1. Elements white paper article link:

2. Link to the original text: