Blockstream’s Samson Mow announced the official launch of the Liquid Network in a blog post yesterday. The Bitcoin sidechain project, several years in the making, has actually been live since Sept. 27. It is designed to decrease transaction times to nearly instant for partner traders and exchanges. This allows for increased arbitrage opportunities, reduced balances held across multiple exchanges, improved liquidity, and improved privacy and reliability in transactions. Ultimately, it removes transactions from the mainchain, improving Bitcoin scalability.

There are some comparisons to the Lightning Network. The benefits for users are similar, but unlike the Lightning Network, Liquid is not for public usage, and it’s not really for small, everyday transactions. It is more for active and institutional traders and exchanges. In fact, the first partners demonstrate that focus:

Altonomy, Atlantic Financial, Bitbank, Bitfinex, Bitmax, BitMEX, Bitso, BTCBOX, BTSE, Buull Exchange, DGroup, Coinone, Crypto Garage, GOPAX (operated by Streami), Korbit, L2B Global, OKCoin, The Rock Trading, SIX Digital Exchange, Unocoin, Xapo, XBTO, and Zaif.

These entities combined represent more than 50% of Bitcoin trading volume and were chosen to represent a geographically diverse network to maximize transaction speed and provide no single point of failure.

Bitcoin can be committed to the sidechain and exchanged 1 for 1 with LBTC which is two-way pegged to the value of Bitcoin. Thus, transactions can be quickly completed on the sidechain between exchanges as needed and later redeemed again for Bitcoin.

Decentralization purists will note that this project is centralized. It is a federated sidechain and therefore inherently more centralized than Bitcoin. This is for private access. Decentralization is not its intended purpose.

The importance of this project should not be overlooked. Blockstream claims that it is the “world’s first production Bitcoin sidechain.” The Liquid Network also contains the future capability to support other cryptocurrencies or to issue tokens on the platform to represent assets.

As a live, active, functioning sidechain interacting with Bitcoin at scale, Liquid Network bodes well for other sidechain projects still in development. For example, Rootstock, a smart contract-enabled Bitcoin sidechain, promises to make Bitcoin a platform for ICO’s and assets with even more functionality than Liquid.

These are the kinds of projects that we find most satisfying. There are too many still trying to out-Bitcoin Bitcoin when the functionality of Bitcoin is still not fully explored. These projects will contribute most to the long-term health and success of the cryptoasset ecosystem, and in the short-term, address the scalability problems that hamper mainstream adoption.