There are tradeoffs, Blockstream’s Adam Back (pictured left) diplomatically said in regards to the Lightning Network (LN) with those “tradeoffs” being mostly negative in a way that turns out to be positive for Liquid (LQ).
“Easier to lose [bitcoin] via LN than LQ due to accidental close penalty,” Back said, further adding one of the risk might be you’re “offline during hostile close” of an LN channel in addition to “LN Hot-wallet risks.”
“LN retail freeze by LQ seems unlikely given small size,” he said with the above comments made in response to a statement by Matt Corallo (pictured right), a former Blockstream employee now working on LN. Corallo said:
“The trust model [of Liquid] is horrid for end users, and LN in BtcPayServer is better anyway.
If you want to move money between exchanges (that support it) use Liquid, if anyone tells you to use it for anything else, treat them like they’re trying to steal your Bitcoin.”
The above comments were made in response to an announcement by Blockstream that said “LiquidNetwork payments are now integrated in
BtcpayServer! Users and shops can now benefit from quick and confidential L-BTC and $USDt payments.”
Liquid as you might know is a federated semi-sidechain where instead of locking your bitcoin in code you give it to a consortium of mainly crypto exchanges and Blockstream that hold this bitcoin for you.
In return for the bitcoin they give you the Liquid token, LBTC, which now functions as a semi-centralized token in a fairly ordinary, but controlled, blockchain.
To get the bitcoin back you give the LBTC to the consortium that then sends you the bitcoin with other tokens able to run on Liquid too, like USDT.
You can now use Liquid USDT and LBTC to pay on a BitPay like merchants processing software, BTCPay, with the animosity here between Corallo and Back arising from the fact it is the Lightning Network that was meant to be used for payments, not Liquid.
As it happens the Lightning Network is kind of unusable due to it being flawed by design as it does not have a good solution to the double spending problem.
So Blockstream is now kind of throwing it under the bus, diplomatically, presumably because they do not make money from LN, but they do make money from Liquid.
They charge these “federated” exchanges and anyone who wants to have a real role in the Liquid network for the privilege of joining it, in addition to charging maintenance fees and what not as well as presumably if it catches on things like transaction fees and so on.
Maintaining bitcoin’s capacity at a very limited level was a vital goal of Blockstream as otherwise they would not have a business model because there would be no need for Liquid if bitcoin could handle the movement of its own asset at sufficient scale.
They went so far as to insert what can be called a bug from the scalability perspective in opening up a 2x potential attack vector in that for example bitcoin’s current realistic capacity is 2MB, but a 4MB attack block can be created by miners with Blockstream itself now entering the mining game.
To justify this they promised the Lightning Network would solve all the problems while probably knowing it is unworkable, with useful fools like Corallo parroting the people that have now turned against him back when he was taking paychecks from them.
To finish it off, Blockstream brought in numerous very experienced bitcoin devs under its own paycheck with these bitcoin devs now working primarily on Liquid where they hope to incorporate smart contracts and all sorts of fancy things.
They claim these features will then be ported to bitcoin potentially, but there’s an obvious conflict of interest here in that the better bitcoin is, the more useless Liquid becomes.
Thus bitcoin has fully stagnated at the protocol level with no real development as Blockstream has taken most of its devs and has lorried them to Liquid or to tokenized fiat or to all sorts of things that have little to do with bitcoin.
As all this became obvious, they’ve now basically taken the mask off after keep up the facade for so many years with this key test of bitcoin now still awaiting a response on whether it has passed or otherwise because this naked self-interest is perhaps becoming too much for the ecosystem which can at any point increase capacity.