Mark Engelberg

Lately there's been a lot of discussion around L2s like Liquid, Ark, and Spark, and the deciding factor for preference seems to have become unilateral exit: the ability to exit to the mainchain on your own initiative, even if the operator is malicious, censoring you, or has vanished entirely. Ironically, as people are discovering, only one Spark wallet actually supports unilateral exit (the others say it's coming later), which is a bit comical, because that's often the very reason the more hardcore Bitcoiners dismiss Liquid. At @JAN3com, we're building on @Liquid_BTC because I firmly believe it offers the best set of tradeoffs. After Liquid, my next choice would be Ark, and personally I would avoid Spark because of how centralized it is. It's all about the substrate. We're all trying to solve for the best L2 substrate, which can also include ecash mints or even databases (like the original WoS). Here's what I believe are the key criteria, in priority order. 1️⃣ Privacy. Both operator-side (are they logging you?) and on-chain (are amounts/assets confidential?) 2️⃣ Operator model. Single operator or federation? Can they steal funds, and can they censor you? 3️⃣ Liquidity. How deep and accessible is it? 4️⃣ Time in production. How long has it been live, and has it held up under real-world conditions? 5️⃣ Data availability. Can you get the data to prove what you own, without relying on the operator? 6️⃣ Economically viable exit. Is that exit actually affordable, or does fee/congestion cost make it theoretical? 7️⃣ Unilateral exit. Can you exit to the mainchain on your own initiative, even if the operator is malicious, censoring you, or gone? 8️⃣ Liveness requirements. Do you have to come online periodically or risk losing funds? (relevant for Ark) How does Liquid stack up for these criteria? Really well. 1️⃣ Privacy. Confidential Transactions by default hide both the transaction amount and the asset type from all observers, including functionaries. Functionaries can't see amounts or asset types, so there's nothing to even log if they wanted to. 2️⃣ Operator model. 15 functionaries, 11-of-15 multisig, HSM-secured, tolerating up to 4 offline. Functionary code is open-source. 3️⃣ Liquidity. $5B TVL, including $4B+ in tokenized securities and ~$97M native USDT. 4️⃣ Time in production. Live since October 2018 as Bitcoin's first production sidechain (~7.5 years). 5️⃣ Data availability. Anyone can run a full node and trustlessly self-validate the chain, with L-BTC always verifiably 1:1 with BTC locked on mainchain. 6️⃣ Economically viable exit. 0.1 sat/vB average fee. For most users the primary exit is an atomic swap of L-BTC for BTC, which is permissionless and doesn't require federation membership. 7️⃣ Unilateral exit. Not there for regular users yet, but coming via a BitVM-style 1-of-n bridge on the roadmap. And as a business, you can join as a federation member today and peg out directly, no third party needed. 8️⃣ Liveness requirements. No online-or-lose mechanic; L-BTC sits indefinitely. Notice that economically viable exit sits above unilateral exit on my list. That's deliberate. Let's dig in. It's important to remember that L2 substrates are exactly that: substrates. None of them can compete with the trustless, permissionless properties of the Bitcoin mainchain. Anything you're holding long-term belongs on mainchain, in your own custody. You're using the substrate for spending (small amounts) or cost-effective UTXO aggregation, so unilateral exit isn't that important outside of an ideological insistence on having it. What you actually want is privacy, durability, liquidity, and economically viable exits. Remember how many Muun wallet users were caught off guard when mainchain fees spiked? When fees climb again, what you thought was a unilateral exit turns out to be no exit at all. Once network fees hit around 5-10 Sats/vB (or higher), unilaterally exiting small Ark VTXOs or Spark leaves stops being worth it. Let's take an example of 10 small balances adding up to 100k sats. At those fee levels, pulling each one out on-chain can eat 40–100% (or more) of what it's worth. You'd burn most or all of the value just to move it. At that point, it's effectively dust. This is because of the tree/branch/leaf structure of Ark and Spark. 5-10 Sats/vB isn't even expensive for a normal BTC transaction: at $100k, that's just $0.71 to $1.41. The cost blows up only because a unilateral exit means unrolling that structure on-chain, not broadcasting one clean transaction. Ark and Spark are really optimized for cooperative exits and if you're expecting cooperation anyway, then rationally you should expect that same cooperation for a Liquid peg-out. So with Liquid you get both: a cooperative exit via peg-out, and the primary atomic-swap model into a pool that's (pun intended) deep and liquid. @Liquid_BTC is perfect for the average person and that's why we're building @AquaBitcoin on it. TL;DR: Unilateral exit is oversold, especially when it's too expensive to actually use. For everyday spending amounts, exiting small Ark/Spark balances becomes uneconomical the moment fees rise, so it's an exit on paper only. Privacy, liquidity, durability, and a cheap real-world exit matter more, and Liquid wins on those. Hold long-term on mainchain; use the substrate for spending/aggregation.

@thepaulosophy @RadarChat @BlitzWalletApp One seed phrase to rule them all 🤩