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Update docs/liquid/liquid-part3.md

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@ -132,18 +132,42 @@ What if you have no desire to create tokens, securities, etc...can you still mak
Yes, probably one of the best ways to do that is to use it as a *staging area* for opening Lightning channels. In fact, both Blockstream Green and the newly announced (more user friendly) AQUA both do that under-the-hood[^5].
A brief overview of pain points in setting up LN channels.
* High fees to open / close
* High fees then force larger minimums for open / close
* Higher channel sizes then increases risk
* Ultimately must fund following to get outbound-inbound channel setup:
- Fee for channel open
- Buy in-bound liquidity
- Fee for in-bound liquidity open
- Fee(s) for channel close
* Channel partners impose large for inbound minimums (ie LNBig 200,000 sats minimum)
If we ignore inbound liquidity issues for the moment, currently opening an outbound LN channel would require approx 7500 sats to complete (right now fee rate is quite low at 30vb/sat, this figure could easily double or triple!). This implies a cost basis of 7.5% to open a 100,000 sat channel.
Therefore as mentioned above, we are incentivized to open larger channels to minimize the fee cost. As fees go higher, this pushes minimum channel sizes ever higher. Ultimately this leads us taking on more risk than we would like to.
There is a way to use Liquid to mitigate these problems. Essentially you can use Liquid as an *intermediate staging* area for your BTC. Then from L-BTC you can open LN channels much cheaper. In fact, its so much cheaper to open LN channels from Liquid that you can open *much smaller* channels *much more frequently*...thus minimizing hot-wallet risk.
As an example, opening a 15,000 sat LN channel from Liquid would currently cost approx 163 sats in fee -- thats only a 1% cost basis (over 7x cheaper than doing it on mainchain *and a much smaller channel*). If we equalized this to our above BTC mainchain example: A 100,000 sat LN open from Liquid would cost 248 sats -- a 0.25% cost basis!
Let's take a concrete example. Assume that someone has 100,000,000 sats on-chain as their main savings. They could move 500,000 sats to L-BTC (paying approx 7500 sat in fees to do so), and wind up with ~490,000 sats in L-BTC. From there, they could every few weeks open a 50,000 sat LN channel and pay only 198 sats in fees for each open.
### Comparing eCash / Lightning / Liquid / BTC
|| eCash | Lightning | Liquid | BTC |
|-| ------| -------- | -------- | ---- |
|UTXO Model:| No UTXO. Bearer token | Your UTXO is in a multisig. | You own UTXO in sidechain | You own UTXO in mainchain |
|Redemption:| Depends on mint | No dependency (might require fee) | Depends on Federation | No dependency |
|Redemption:| Depends on mint | No dependency (but requires fee) | Depends on 3rd party | No dependency |
|Longevity: | Mint must survive | Channels will close at some point | Federation must survive | UTXO forever |
|Online:| Must be online to verify eCash token | You must be online to receive. You must stay online (or hire watchtower) to secure channel state | Offline receive | Offline receive |
|TXN Time:| Instant transactions | Instant transactions | Fixed 2 min transactions | Variable ~10 min transactions |
|Fees:| No fees | Negligible fees (msat) | "Low" fees (~200 sats) | High fees (~15,000 sats)|
|Liquidity:| No liquidity management | Must manage liquidity (in/out) | No liquidity management | No liquidity management|
|Privacy:| Mints can aggregate and assemble transaction data | Nodes could aggregate and assemble transaction data | Confidential transactions | Public ledger |
|Federation: | Must vet each Mint | You choose channel partner | Known federation members | Sovereign |
|Counter-Party Risk: | Must vet each Mint | You choose channel partner | Known federation members | Sovereign |
| Frac Reserve Possible: | Yes | No | Verifiable Issues | No |
| Custody Options: | eCash wallet | Single Sig / Hot Wallet | Single Sig / Multi Sig / Hot Wallet / Cold Wallet / Hardware Wallet | Single Sig / Multi Sig / Hot Wallet / Cold Wallet / Hardware Wallet |
| TX Value Size: | Tied to LN size, but theorhetically unlimited | Typical is < 25,000,000 sat | Unlimited | Unlimited |