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Update docs/liquid/liquid-part3.md

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@ -163,29 +163,46 @@ You can see that it is *much cheaper* to use L-BTC. In fact its so cheap that it
Each part of the Bitcoin ecosystem has its strengths and weaknesses, and often they overlap in rather confusing ways. I think it would be helpful to compare the various major initiatives. This is NOT about proclaiming *one is better than the other*, as you can see they each have their own strengths:
## Comparing eCash / Lightning / Liquid / BTC
|| eCash | Lightning | Liquid | BTC |
|| Fedimint / 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 (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)|
|Fees:| No fees | Negligible fees (msat) | "Low" fees (~200 sats) | High fees (~12,500 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 |
|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 theoretically unlimited | Typical is < 25,000,000 sat | Unlimited | Unlimited |
| TXN Value Size: | Tied to LN size, but theoretically unlimited | Typical is < 25,000,000 sat | Unlimited | Unlimited |
| Ideal Exposure Time: | days | weeks | months | years (forever) |
|Likely Threat:| Debasement or Mint rug | Loss of funds while offline | Federation censorship | Losing keys / non-spendable UTXO for fees
|Maturity: | 2023-2024 | 2018 | 2018 | 2009
## Building Your Own Federation
One of the biggest issues facing Liquid users is needing to trust the Federation members[^7]. One of the reasons why projects like Fedimint has gained in popularity is the idea of community-run mints. What if such a thing were possible with Liquid?
Well it is. Its entirely possible to use Elements in a way that connects to your own sidechain - and to configure with your own Peg-in script.
A brief sidebar about the name: **Elements** is the name node software and **Liquid** is the name of the chain. I mention this because its clear that Blockstream envisions a separation between the specific network and the software that runs it. Point being, you could create your own sidechain using Elements (maybe Plasma, in keeping with the elemental names?)
The basic process for creating your own sidechain would be:
* Install elements
* Wipe out sidechain data files
* Decide on node discovery ports and search methods (modify )
*
* Set your own n-of-m block signing method and set this config files [^8]
* Set your own n-of-m Peg-in script and set this in config file [^9]
[^1]: BlockStream Green, AQUA, Anser (web wallet), Specter, Marina (web wallet)
[^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!)
[^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 comanies in the ecosystem.
[^8]: [https://elementsproject.org/elements-code-tutorial/block-creation](https://elementsproject.org/elements-code-tutorial/block-creation)
[^9]: [https://elementsproject.org/elements-code-tutorial/sidechain](https://elementsproject.org/elements-code-tutorial/sidechain)