On a recent occasion, we were able to have an interview with the world famous Blockchain developing company Blockstream. We did the interview with Allen Piscitello and he talks about his thoughts about sidechains, the Liquid Network, Decentralization and much more. Please have a look.
Allen Piscitello (Vice President of Product Management at Blockstream )
Allen Piscitello : Getting into Bitcoin and Blockstream
I got into Bitcoin back in 2011. I read about it from a poker website. I was poker player back then, and one of the big problems we had especially in the US was sending money to these sites to play. They shut down a lot of the banking for this, and someone mentioned this thing about Bitcoin digital currency. I couldn’t believe these coins were selling for 0.75 cent, and thought that it was ridiculous. So I started researching and reading a lot about it. Then the famous Mt. Gox incident in Japan happened.
At that time, that was like the only place to trade, however there was this big run-up and the whole market crashed. I thought this whole thing is crazy which was held up by this one guy in Japan. So I got out and sold everything. Later, I get back in because I was really interested in prediction market.
However, once again I got scared of the forking that was about to happen and sold everything again. Nevertheless, in the meantime I was still very involved. I just had my doubt about some of the centralization of mining. I stayed in touch, I wrote a lot about Bitcoin, and also had the chance to meet many of the people from Blockstream and eventually was hired by Blockstream as Product Manager.
Structure of Sidechains
The way I like to explain sidechains is “a way to move one digital currency from one network to another network and back”. This is so you can have different properties and features that you wouldn’t have on the main blockchain. So Blockstream was founded upon this idea of sidechains 5 ~ 6 years ago now. There is a lot of interesting things that can be built on Bitcoin, however Bitcoin moves at a slow and steady pace. More experimental features could be tested off on a another branch which only the people who choose to go to that branch would be subjected to. Thus, if there are any problems, this will not risk the main chain. There are a couple these today, such as the Liquid Network, which is focused heavily towards trading applications and assets, Rootstock is another one which is focused on features that Ethereum has but with Bitcoin as the native coin. So sidechains have different rules and features that you have which you cannot get on the main chain.
One feature that Liquid has is a “ Federated Block System”. This means that there is a group of people who are creating blocks and are validating them. With mining in Bitcoin, it is great way to secure the network, however it is very unreliable as it is very lock-based. There is a distribution when a block will be found, it could be found in 10 seconds or it might take 3 hours. For trading applications, this is really bad. If I am trying to move my money from one exchange to another, and I don’t know if it is going to take 1 minute or 3 hours, that is really bad. Liquid gives reliability of getting blocks verified every minute. But you get a trade off, so whereas you have with mining, everything is decentralized based on miners, you have a federated group. So, a trade off maybe is not a big deal if your doing something like a trading application or if you are already holding your money out of an exchange.
Main chain transactions and Sidechain transaction
The transactions themselves on Liquid are somewhat similar to bitcoin, but there is a couple of differences. The two main differences allow for asset transactions. The common use case here is something like a stable coin or a security token. Besides just sending Bitcoin, you can send any of other assets and don’t have to create a smart contract either.
Another thing that we have at Liquid is Confidential transactions. This is a way to obscure the amount and the asset type of the transaction from the general public. So if you are just looking at a block explorer on the Bitcoin network, not only you can see if I was sending you some Bitcoin, but you would be able to see how much change I am paying myself (we also have a block explorer called Blockstream.Info). In such cases, if I have quite some Bitcoin, that might reveal a lot of information about me. That’s something potentially very dangerous if that information gets out. Also, If I would move my money to an exchange, everyone can see that that money is being moved to that exchange before I can have the chance to trade, so I am going to be front-runned in that case.
In the other hand, Liquid hides all that information except from the people who need to know the sender and the receiver, and any third party that the sender and the receiver decide to share the information with. Hence, the anonymity is higher on sidechain and you’re shielding all that private information. However, in the meantime everyone can still validate that I am not creating money out of thin air. They will know that what I am sending you is real but not revealing the amount.
Draw the line of Privacy
I think we try to balance with Blockstream. We want things to be verifiable, but we also want it to be confidential. We view privacy as something where you are not hiding everything but you choose who to share that information with. There are people you need to share that information with. Maybe there is a regulator or an auditor that you need to share that information with, and you can do that. But you don’t want to share this with you competitor and someone who is harmful to you, so you definitely want to keep this hidden. So this is something that is actually really important to some of the institutional trainers and financial institutions. They have to protect these informations for their users. So I think this is a very important part of our system.
Interviewer , Editor : Lina Kamada
The Article published on this our Homepage are only for the purpose of providing information. This is not intended as a solicitation for cryptocurrency trading. Also, this article is the author’s personal opinions, and this does not represent opinion for the Company BTCBOX co.,Ltd.