Asset Security
Securing your assets on the Liquid Network
Securing Liquid Assets
Security is a critical consideration when working with digital assets on the Liquid Network. While Liquid inherits many security properties from Bitcoin, it also introduces unique security considerations due to its federated model and expanded feature set.
Understanding these security considerations is essential for both asset issuers and users of the Liquid Network.
Asset Issuance Security
Reissuance Tokens
When creating an asset on Liquid, the issuer can decide whether to allow future issuance by creating reissuance tokens. These tokens grant the ability to issue more of the asset in the future. Securing these tokens is critical, as anyone who obtains them can issue more of your asset.
Multisignature Controls
Best practice for asset issuers is to secure reissuance tokens using multisignature wallets, requiring multiple authorized parties to sign transactions. This prevents a single point of failure or compromise.
Revocation Impossible
Once assets are issued and transferred, they cannot be revoked or frozen by the issuer (unlike some centralized tokens). This means issuers must be careful about their initial distribution.
User Security Considerations
For users holding Liquid assets, several security practices are recommended:
- Hardware Wallets - Use hardware wallets when possible for storing significant amounts of Liquid assets. Several hardware wallets support Liquid.
- Asset Verification - Always verify asset IDs when receiving new assets through the Liquid Asset Registry to avoid accepting counterfeit assets.
- Confidential Addresses - Use confidential addresses for all transactions to benefit from the privacy features of Liquid.
- Backup Strategies - Maintain secure backups of your Liquid wallet, including seed phrases and any special recovery information specific to your wallet software.
A Note from Satoshi
Federation Security Model
The security of all assets on Liquid depends on the security of the Liquid Federation:
- The federation uses a 11-of-15 multisignature threshold, meaning at least 11 members must sign blocks
- Federation members use specialized hardware security modules (HSMs) to secure their signing keys
- The federation's two-way peg with Bitcoin secures the value of L-BTC
- If the federation were to be compromised, it could potentially impact all assets on the network
This federated security model offers different trade-offs compared to Bitcoin's proof-of-work system. It provides faster finality and more features but relies on the security of the federation members.