Liquidity.Network is the first off-chain payment solution to initiate an MVP that provides bidirectional payments. Introduced by Arthur Gervais, a lecturer at the Imperial College of London, and Rami Khalil, the creator of the REVIVE protocol, Liquidity.Network was launched in November 2017 and has been gaining attention ever since.
When Bitcoin arrived, the main aim was to disrupt the traditional payment methods. This was obtained by decentralising the governance – no one would be in charge, simply because everyone would be in charge. In time, both Bitcoin’s and Ethereum’s popularity increased, placing them in the top two positions of all cryptocurrencies.
Along with this popularity however, several side-effects rose to the surface, the most significant being their inability to scale. Back in 2009, Bitcoin’s developers were unable to predict the complications that would occur during high network congestions. Transaction times became significantly slower and users incentivised miners to process their payment faster in exchange for a higher fee.
Built on an Ethereum virtual machine, the Liquidity.Network aims to enable the mainstream adoption of blockchain in micropayments. Furthermore, its goal is to become the prevalent off-chain payments ecosystem by addressing all the limitations that the Lightning and Raiden Networks are facing.
Lightning and Raiden networks
Bitcoin and Ethereum developers’ answer to scalability problems are the much-anticipated Lightning and Raiden networks, respectively.
While still under development, the concept behind both upgrades is the same – to take the transactions off-chain. To obtain this, users will be able to open 2-way payment channels in a parallel network on which they will able to transact directly for as long as the channel remains open. To open a payment channel an equal amount of ETH in Raiden, or BTC in the Lightning Network, from each participant must be locked and used as collateral.
Moreover, two payment channels can be connected to each other, creating a payment channel network. This way, off-chain transactions can be executed across two indirectly connected parties. Given miners don’t have any role in this process; payments will be processed with smaller fees. Additionally, transactions will be instant as the network’s consensus is unnecessary.
How the Liquidity.Network Scales Raiden
Unlike other off-chain networks, the Liquidity.Network implements a unique n-party payment hub protocol. The need to lock rigid funds as collateral for opening a payment channel is eliminated.
Instead, funds can be transferred directly to any participant in the hub, while the network preserves its trustless nature. Overall, the requirement for collateral on a Liquidity.Network hub is significantly lower than the equivalent on Raiden.
Raiden Network was introduced as a method to relieve the Ethereum blockchain traffic. Payment channels in Raiden, however, require the opening of new smart contracts on the Ethereum blockchain. It is therefore ambiguous that the Blockchain will be freed from congestion as Raiden Network grows.
The Liquidity.Network is more convenient as users are able to make deposits in Liquid Ether directly from their off-chain wallet, without the requirement for opening an on-chain smart contract.
Notably, transactions in the Liquidity.Network are free for regular users. Likewise, refunding open payment channels is also being conducted off-chain. By using the REVIVE protocol, Liquidity.Network offers Blockchain greater scalability – payment channels aren’t degraded by rebalancing with costly on-chain transactions.
One of the most important downsides of Lightning and Raiden Networks is their routing complexity. Liquidity.Network’s structure is simplified, as it requires significantly less routing and hub refunding. Hubs can be interconnected while still benefiting from decentralisation with redundancy.
Using the “Reverse Dutch Auction” method, Liquidity.Network managed to raise 10,496.59 ETH in their public presale, and is set to launch their ICO on the 14th June this summer. Among those who invested in the public presale were several venture capitals, like DHVC, zk Capital, ZMT Capital and YouBi Capital.
The official Liquidity.Network is set to deploy during the second quarter of 2018. Later this year, the team’s plans include the launch of the first off-chain crypto exchange as well.
Initially, the Liquidity.Network will support the Ethereum Blockchain, but support for more blockchains like Bitcoin, Dfinity, NEO, Nimiq and others will likely follow.