tank on Nostr: Regarding definitions… A bitcoin layer 2 requires unilateral exit. And I agree ...
Regarding definitions…
A bitcoin layer 2 requires unilateral exit. And I agree Liquid does not meet that definition. However self-custody is a very nuanced topic in the context of mobile wallets. Mobile Lightning wallets today rely on trusted third parties in the form of watchtowers to not lose money. In many cases no watchtower is used and wallets rely on the trust and incentives of a single LSP. Relying on the trust and incentives of 11/15 Liquid functionaries that watch over each other is similar in some ways and arguable superior in others. Not the least of which is that there are more parties required to collude to steal user funds in a fully auditable blockchain. Another advantage that is underestimated is the lower complexity of Liquid wallets, which results in a smaller attack surface for users. There are many protocol level threats to consider in Lightning due to the protocol’s vast complexity. Liquid wallets are not exposed to these threats while the funds are being held offline. Furthermore these wallets can be held in cold storage and secured via geographically redundant multi-sig, something researchers are still attempting for Lightning in the context of the VLS project. That would however require consensus logic for channel-state among cosigners, further increasing client complexity.
As such I believe it is absolutely valid to label a Liquid wallet non-custodial in the context of the Liquid trust model. Just as a Lightning wallet can be considered non-custodial in the context of the LSP/watchtower trust model (nevermind that there are fully custodial elements for smaller amounts in Lightning wallets today to improve UX).
What does that mean for users? FWIW I personally feel more comfortable holding spending sats in a Liquid wallet than an ECash mint or even a self-custody Lightning wallet, especially for larger business transactions. Some users, especially those in areas with human rights violations might prefer ECash due its superior privacy. But every user should make that decision for themselves based on their needs. Security is about economics and there is no one size fits all.
I suspect the underlaying issue that people are trying to point out is that Liquid is a single federation and as such a potential point of centralization for bitcoin. A totally valid argument. While this is true today, I believe we will see multiple sidechains and other federations such as Fedimints, Cashu mints and Ark based wallets all competing with each other as fees go up and as demand for bitcoin as a medium of exchange increases. I suspect all these solutions will find their own market niches.
I am also hopeful for further decentralization of Boltz servers as multiple companies can now host the open source code and provide interoperable submarine swap apis for client apps using the various layers of bitcoin.
All these experiments are good for bitcoin and the cross pollination of ideas will further strengthen the network. Some of these experiments will fail, and I appreciate critical discussion. They keep us honest. And some people even have vested interests to see certain experiments fail. That’s fine. But we should be careful to not adopt cancel culture if we don’t like an experiment. Especially if that experiment does not require an action or a soft-fork from our part. If you down that path, you start acting like a little tyrant, making demands of others. If you were really in favor of freedom, you’d allow others to take responsibility based on their own needs, not yours.
Just my 2 sats worth. Thanks for reading ⚡️
A bitcoin layer 2 requires unilateral exit. And I agree Liquid does not meet that definition. However self-custody is a very nuanced topic in the context of mobile wallets. Mobile Lightning wallets today rely on trusted third parties in the form of watchtowers to not lose money. In many cases no watchtower is used and wallets rely on the trust and incentives of a single LSP. Relying on the trust and incentives of 11/15 Liquid functionaries that watch over each other is similar in some ways and arguable superior in others. Not the least of which is that there are more parties required to collude to steal user funds in a fully auditable blockchain. Another advantage that is underestimated is the lower complexity of Liquid wallets, which results in a smaller attack surface for users. There are many protocol level threats to consider in Lightning due to the protocol’s vast complexity. Liquid wallets are not exposed to these threats while the funds are being held offline. Furthermore these wallets can be held in cold storage and secured via geographically redundant multi-sig, something researchers are still attempting for Lightning in the context of the VLS project. That would however require consensus logic for channel-state among cosigners, further increasing client complexity.
As such I believe it is absolutely valid to label a Liquid wallet non-custodial in the context of the Liquid trust model. Just as a Lightning wallet can be considered non-custodial in the context of the LSP/watchtower trust model (nevermind that there are fully custodial elements for smaller amounts in Lightning wallets today to improve UX).
What does that mean for users? FWIW I personally feel more comfortable holding spending sats in a Liquid wallet than an ECash mint or even a self-custody Lightning wallet, especially for larger business transactions. Some users, especially those in areas with human rights violations might prefer ECash due its superior privacy. But every user should make that decision for themselves based on their needs. Security is about economics and there is no one size fits all.
I suspect the underlaying issue that people are trying to point out is that Liquid is a single federation and as such a potential point of centralization for bitcoin. A totally valid argument. While this is true today, I believe we will see multiple sidechains and other federations such as Fedimints, Cashu mints and Ark based wallets all competing with each other as fees go up and as demand for bitcoin as a medium of exchange increases. I suspect all these solutions will find their own market niches.
I am also hopeful for further decentralization of Boltz servers as multiple companies can now host the open source code and provide interoperable submarine swap apis for client apps using the various layers of bitcoin.
All these experiments are good for bitcoin and the cross pollination of ideas will further strengthen the network. Some of these experiments will fail, and I appreciate critical discussion. They keep us honest. And some people even have vested interests to see certain experiments fail. That’s fine. But we should be careful to not adopt cancel culture if we don’t like an experiment. Especially if that experiment does not require an action or a soft-fork from our part. If you down that path, you start acting like a little tyrant, making demands of others. If you were really in favor of freedom, you’d allow others to take responsibility based on their own needs, not yours.
Just my 2 sats worth. Thanks for reading ⚡️