Lightning vs Liquid – Two Off-Chain Solutions That Compete With Each Other


In the Lightning network, the number of public capacities is growing more clearly. However, the number of bitcoins stored in Blockstream’s liquid network is increasing faster. The two off-chain solutions compete with each other. Another issue is privacy. Lightning is more private in itself – but as two scientific papers show, there are still many attacks against privacy in the network.

The Lightning Network has been quiet for the past few months. The hoped-for mass acceptance does not materialize for the time being, and the off-chain network does not seem to have helped Bitcoin as a means of payment as sometimes expected. After all, the large Vietnamese travel provider recently accepted Lightning in addition to other crypto payments. The payment service provider Neutronpay helped.

The statistics on the Lightning network now seem rather optimistic. After both the number of payment channels and the publicly visible capacity of the network peaked in April of last year, the values ​​fell continuously for around half a year. Now a trend reversal is in sight. At the beginning of November, there were only around 811 bitcoins in the Lightning network, the number has now risen again to more than 950. If this trend continues, Lightning should top its previous high in a few months.

Lightning capacity - Lightning vs Liquid - Two Off-Chain Solutions That Compete With Each Other
Capacity in public Lightning channels according to Bitcoin Visuals. The orange line represents the capacity in Bitcoin, the blue one in dollars.

Another off-chain solution, however, is rising significantly faster: Blockstream’s Liquid sidechain. Back in March, the sidechain had just overtaken Lightning’s capacity. In April it rose again drastically and is more than twice as high with over 2,000 bitcoins on the sidechain – the so-called L-BTC. Most blocks on the sidechain are still rather empty. But the demand from stock exchanges and other companies seems to be increasing. Blockstream announced at the end of March that ten more partners will join the Liquid Federation. Most are relatively unknown, but the hardware manufacturer Ledger and the P2P exchange Hodl Hodl are quite big names. A total of 42 companies have joined the exclusive sidechain club. With 166 “assets” – which presumably means tokens – Liquid would also like to compete with Ethereum, which of course has around 100 or 1000 times more tokens.

lbtc - Lightning vs Liquid - Two Off-Chain Solutions That Compete With Each Other
Number of existing Liquid BTC according to

This means that two off-chain solutions are now in competition with each other. Lightning is more decentralized, more community-oriented and solves the scaling problem by simply bypassing its core – the blockchain. Liquid, on the other hand, is more centralized, removes the exemptions from the system and simply shifts the scaling problem to another blockchain. However, Lightning is more difficult to use and cannot compete with liquid, especially with larger amounts. Comparing privacy is difficult. Liquid is an openly viewable blockchain, which, however, allows the number of bitcoins transferred in a transaction to be concealed by “confidential transactions”. Lightning is much more private in itself because there is no blockchain anymore,

However, two papers have shown that privacy is still vulnerable to Lightning. The first paper was published at the end of March with the title ” An Empirical Analysis of Privacy in the Lightning Network “. It reveals multiple attacks to gain information that should be kept secret on the Lightning network. The researchers first tested this attack in a simulation and then in a real network. Two of the attacks are aimed at finding out the individual balances of payment channels instead of just the publicly visible total balances. Further attacks reveal the path of payments as well as senders and receivers. None of the attacks work 100 percent, but many with a chance of success of more than 50 percent.

The second paper appeared in early April. This explains in detail how an attacker can find out the individual balances of payment channels. The result is that these balances cannot be considered private. They suggest methods to prevent such attacks. Together, the two papers show that Lightning is not as private as it is sometimes said – but also that it is possible to prevent attacks. Because when the Lightning network reveals information that should actually be private, it’s not an inherent, systemic problem – it’s one of implementation. However, this shows once again that the network for off-chain payments is still in alpha or beta mode: it is so new and introduces so many new concepts and methods that it will take a long time until everything is understood and developed.

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spinner - Lightning vs Liquid - Two Off-Chain Solutions That Compete With Each Other

About Author

Ethan Hunt

Bitcoin Maximalist and Toxic to our banking and monetary system. Separation of money and state is necessary just like the separation of religion and state in the past. Also, pro-local, pro-global and anti-national.

Disclaimer: All content found on is only for informational purposes and should not be considered as financial advice. Do your own research before making any investment. Use information at your own risk.

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