Micropayments are the biggest headache for Bitcoin and Ethereum at the moment, a fact that the Liquidity.Network aims to change. The Liquidity.Network is the off-chain payment solution that aims to become the trustless version of Paypal.
As both Bitcoin and Ethereum have reached their maximum capacity, transaction fees have increased significantly. During high congestion periods it is common that the fees involved in a payment can be higher than the amount of the payment itself.
Merchants are hesitant to accept cryptocurrencies as a means of payment due to their price volatility – it can be possible that the price of Bitcoin drops by few hundreds of dollars from the time of payment request until its completion.
Preserving all of the benefits of the Ethereum Blockchain, Liquidity.Network makes micropayments attractive to regular users and merchants. Its creators have a solid background in technologies – Arthur Gervais is an assistant professor at the Imperial College of London and Rami Khalil, founder of REVIVE (the first off-chain rebalancing scheme for payment channels), holds a masters degree from ETH Zurich.
Scalability – Problem solved by the Liquidity.Network
Recently scalability has been the main point of concentration for developers. With Bitcoin, there have been many disputes about whether an increase in block size (Bitcoin Cash) would address the issue, or whether they need to implement a parallel network which settles the transactions off-chain (ie Lightning Network).
Bitcoin Core’s team believes that the Lightning Network is a long-term solution for micropayments. Bitcoin Cash’s proponents say that merchants would rather shift to another cryptocurrency rather than choosing Lightning Network’s complexity.
The Liquidity.Network team believes that their project is complementary to Lightning and Raiden and that both networks will benefit from its novelty in the future.
The fact is that the Lighting and Raiden Networks’ structure is complicated. While payments are executed instantaneously, there are several disadvantages involved. Both networks utilize bidirectional payment channels. Yet, these channels require locked funds to be used as collateral from each party, and a huge number of equal contracts need to operate on the Blockchain.
This complexity is leveraged when executing cross-channel payments, as there must always be sufficient funds on every payment channel of the route. Collateral management becomes a challenge and rebalancing a payment channel can only be done on-chain.
Meanwhile, transactions in the Liquidity.Network are completely free for regular users – they can instantly register and open a payment channel offline. Merchants are also able to enjoy value-added services, as hub operators will provide them with advanced Service Level Agreements (SLA) and API Services to securely facilitate e-commerce operations.
Liquidity.Network is an enhanced version of Lightning and Raiden that successfully addresses the three-fold problem of the existing off-chain protocols.
It introduces a unique architecture of payment hubs, enabling hub members to transact with each other off-chain. The Liquidity.Network has been designed in such a way that a payment channel’s operability doesn’t require rigid fund-locking.
Moreover, bidirectional payments are now enabled across millions of users as multiple payment hubs are interconnected. When comparing Liquidity.Network to Lightning and Raiden, Liquidity.Network’s routing is more simplified which results in a requirement for less channel refunding.
Another novelty the Liquidity.Network brings is the off-chain rebalancing of the payment channels through the REVIVE protocol. Already implemented and peer-reviewed by a Tier 1 academic conference, REVIVE prevents the degradation of payment channels.
Monitoring the off-chain network will be performed by other nodes. Merchants will be free to hire a third-party service, or alternatively the Liquidity.Network will offer an auditing service as value-added service. All functions in the Liquidity.Network ecosystem will be fueled by the LQD token.
Liquidity.Network’s milestones and roadmap
As a member of the Financial Services Standards Association (VQF) in Switzerland, the Liquidity.Network eliminates every regulatory uncertainty. It is fully compliant with regulatory frameworks and aims to become a key player in the financial services sector.
The Liquidity.Network team released their MVP in March 2018, while their “reversed Dutch auction” pre-sale collected 10,496.59 ETH and had the support venture capitals like DHVC, zk Capital, ZMT Capital and YouBi Capital.
Launching its main sale ICO on the 14th June, the official version of the Liquidity.Network main-net is set to launch in Q2 and the creation of a robust off-chain cryptocurrency exchange later in 2018.
With technologies such as Liquidity Network just around the corner, and with cryptocurrency making its way into the mainstream, there are already a number of UK businesses already accepting cryptocurrency as a valid form of payment and the number looks set to rise. It could be just a matter of time before we see cryptocurrency being used in our daily lives.