One of the biggest issues facing Bitcoin is scalability and speed.
Bitcoin’s underlying technology isn’t particularly fast and cannot process many transactions simultaneously.
That’s a problem for the world’s most popular cryptocurrency.
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What Is a Sidechain?
It enables the mainnet to grow its ecosystem by processing some transactions securely and faster.
In this case, the Bitcoin blockchain is Layer-1, and the Bitcoin Liquid sidechain is Layer-2.
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There are otherdifferences between Layer-1 and Layer-2 blockchains, too.
So how does the two-way peg work?
This creates a direct bridge between the two, allowing for interoperability.
Essentially, no “transfer” actually happens.
This means the “validators” involved in the operation are assumed to be acting honestly.
Smart Contract
The whole idea behind blockchain technology is to make it trustless.
Smart contractsvalidate that the digital assets locked in and released on either blockchain correspond to each other in value.
Essentially, when a transaction occurs on the sidechain, a smart contract notifies the mainnet about the event.
The transaction information is then sent to another smart contract on the sidechain to verify the transaction.
This process can take place in both directions.
What Is the Bitcoin Liquid Sidechain?
These assets allow the internet to support Confidential Transactions, resulting in more privacy.
This allows for faster trading and settlement of assets on the internet.
Who Controls the Bitcoin Liquid Sidechain?
These functionaries provide the validation and management infrastructure for the connection.
How Does the Bitcoin Liquid Sidechain Work?
They include
Overall, Bitcoin Liquid functions well as a load-reliever for the Bitcoin blockchain.
Nevertheless, despite its effectiveness, it also has a number of disadvantages.
Drawbacks of Bitcoin Liquid Sidechain
The structural design of the Bitcoin liquid sidechain presents several issues.
It means more people can make transactions without having to suffer slow speeds.
Sidechains have a big role to play in improving cryptocurrency usage and adoption.
