From a4a022a442ccba1de8fad0d2e1aba493b195d7ac Mon Sep 17 00:00:00 2001 From: b0xxer Date: Wed, 7 Feb 2024 07:15:04 -0600 Subject: [PATCH] Update docs/liquid/liquid-part3.md --- docs/liquid/liquid-part3.md | 25 ++++++++++++++++--------- 1 file changed, 16 insertions(+), 9 deletions(-) diff --git a/docs/liquid/liquid-part3.md b/docs/liquid/liquid-part3.md index aa70fce..efa72e2 100644 --- a/docs/liquid/liquid-part3.md +++ b/docs/liquid/liquid-part3.md @@ -121,19 +121,21 @@ By using one of the above concepts, this means AMP can be used in the following A full demo of the security features would require their own DeepDive (hint hint). If you would like to read more or see tutorials you can visit [Liquid docs website](https://docs.liquid.net/docs/blockstream-amp-api-tutorial-in-python) ## Lightning Integration - -Integration of Liquid with BTC-LN is a hot topic these days. There are multiple different services using this approach as a way to reduce XXX -**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 AQUA both do that under-the-hood[^5]). +What if you have no interest in issuing assets on Liquid, can it still be useful? -Ignoring inbound liquidity issues, lets just look at current pain points in setting up outbound LN channels: +Yes. The integration of Liquid with Lightning is a hot topic these days. There are multiple different services using this approach as a way to reduce fees for channel opening and rebalancing. + +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 AQUA both do that under-the-hood[^5]). + +A summary of the pain points in setting up LN channels currently are: * High fees to open / close * High fees then force larger minimums for open / close - * Higher channel sizes then increases risk + * Higher channel sizes then increases risk in hot wallet Looking at this with regard to current fees illustrates the problem pretty clearly. -| | Channel Open Size | Total Fee (sats) | Effective Cost-Basis | +| | Channel Size | Total Fee (sats) | Effective Cost-Basis | |-|-------------------|------------------|----------------------| |BTC | 10,000 sat | ~ 12,500 sat | > 100% (NOT POSSIBLE) | | | 20,000 sat | ~ 12,500 sat | 62.5% | @@ -141,6 +143,11 @@ Looking at this with regard to current fees illustrates the problem pretty clear | | 100,000 sat | ~ 12,500 sat | 12.5% | | | 200,000 sat | ~ 12,500 sat | 6.25% | | | 500,000 sat | ~ 12,500 sat | 2.5% | + +By using Liquid we can reduce these fees drastically: + +| | Channel Size | Total Fee (sats) | Effective Cost-Basis | +|-|-------------------|------------------|----------------------| | L-BTC| 10,000 sat | ~ 158 sat | 1.5% | | | 20,000 sat | ~ 168 sat | 0.8% | | | 50,000 sat | ~ 198 sat | 0.4% | @@ -152,9 +159,9 @@ You can see that it is *much cheaper* to use L-BTC. In fact its so cheap that it The ability to open **small + cheap channels** really changes the game. You can choose to keep your funds safely in Liquid UTXOs and then deploy into LN as needed. -Something like this: +This approach encourages you to keep the bulk of your money in BTC and then commit a *staging portion* of funds in L-BTC. From that L-BTC, you can then cheaply open channels as small as 20k and pay less than 200 sats to do that (for reference, currently that would equate to paying .08 to open a $8.50 channel) -![](part3-liquidselfuse.png) +[BTCSessions did a great video/review](https://www.youtube.com/watch?v=5kNMJd-Ts2c) of how to use Liquid as a way to very cheaply onboard from fiat as cheap as possible. ## Pegging Out @@ -240,7 +247,7 @@ In theory, you should now have your own federation on your very own sidechain. [^2]: Atomic Swaps allow parties to exchange different tokens directly without the need for a 3rd party, eliminating most of the risk of fraud and counterparty default.In fact, Blockstream has a tool to simplify using it. [^3]: Please `git clone` the repo and don't rely on the pre-compiled downloads in repo (they are out of date from source) [^4]: You can specify to individual wallets in the swap-tool URL connect string by using the `http://user:password@localhost:7041/wallet/walletname` syntax -[^5]: They are using services like Boltz, which allows you to open Lightning Channels with L-BTC. NOTE: [BTCSessions did a great video/review](https://www.youtube.com/watch?v=5kNMJd-Ts2c) of how to use Liquid as a way to very cheaply onboard from fiat as cheap as possible. Summary is Fiat -> CEX -> BTC -> Liquid -> Boltz -> LN. Obviously if your CEX has a LN withdrawal option you don't need all these steps!) +[^5]: They are using services like Boltz, Sideswap.io, and PeerSwap technology, which allows you to open Lightning Channels with L-BTC. [^6]: Right now fee rate is quite low at 30vb/sat, this figure could easily double or triple! [^7]: Its worth noting that the Liquid Federation members - as a group - tends to be a collection the most pro-bitcoin focused companies in the ecosystem. [^8]: [https://github.com/ElementsProject/elements/blob/master/README.md](https://github.com/ElementsProject/elements/blob/master/README.md)