Bitcoin-focused NFTs

It has been over one year since we launched our bitcoin-focused NFTs using Liquid assets. In this article, we are going to address behavioral differences & similarities as well as technical properties of our infrastructure.

Technical overview

Liquid is a sidechain of Bitcoin that allows users of the Liquid Network to move Bitcoin between the two networks with a two-way peg.

A sidechain is a mechanism that allows tokens from one blockchain to be used securely in an independent blockchain which runs in parallel and uses a different set of rules, performance requirements, and security mechanisms.

On a sidechain, one can move tokens back to the original chain through a two-way peg. Sidechains enable new functionality that may have security trade-offs or as a way to test new features that may not be ready for use on the parent blockchain.

We are using IPFS for (a) public immutable storage and (b) delivery gateway of the visual graphics for our bitcoin-based NFTs. Then we insert the CID (Content IDentifier) hash from IPFS into the liquid asset's contract object to complete a healthy tokenization process.

These visual graphics, which can be any in-game skin, picture, gif, unity model file, etc., will remain statically immutable to any variation or change.

Once the asset has been successfully tokenized & uploaded to the cryptographic Blockstream registry, any user can verify the integrity of these asset properties, which include:

• Public key: Identity asymmetric key from the entity node that tokenize the asset.
• Domain: Node that tokenizes the asset as full control over the web domain associated with the tokenization process.
• Ipfs: CID hash of the visual graphic tokenized.
• Ticker: Asset symbol used to denominate the amounts in a recognizable unit.
• Name: Extended name to give a human readable name to the liquid asset.
• Precision:  Decimal precision for asset. Eg: 2 places of decimal precision would mean that 199 satoshi of the Issued Asset should be interpreted as 1.99 units of the asset. It is default to 0 to achieve NFT slice unit behavior.

How can I verify the visual graphic integrity of a bitcoin-based NFT?

All our bitcoin-based NFTs have a Liquid id to find the asset properties on any Liquid explorer. Once we access the explorer's asset properties within the contract body, we will find all the properties references above. Bitcoin-based NFTs can discover the visual graphics from the tokenized asset at the IPFS hash.

As mentioned at the beginning of this article, IPFS is used for storage & delivery gateway. So, if you copy the IPFS hash that contains the visual graphics of the bitcoin-based NFT and paste it into any IPFS client, you can assess the visual aspect of your asset.

Alternatively, IPFS provides a public gateway to load IPFS hashed files through HTTP protocol, if you type https://ipfs.io/ipfs/<YOUR_NFT_IPFS_HASH_HERE> then you are also able to see the visual graphics from your bitcoin-based NFT.

At Elixir Marketplace we are implementing for the next release quick access tools to allow users to verify the integrity of the NFT media files right away from the asset page, as displayed in the image below.

Reference

The Trezor Detective NFT from Light Nite game  has been successfully tokenized using Liquid Network & contains the media files protected using the IPFS storage & gateway delivery layer.

The following link from the IPFS stored metadata serves the content as a gateway and provides the protected immutable media files.

ipfs.io/ipfs/QmaFQzPjJq4PZhtPNQjFZ68yvaKZFJuPVpqV2oihXHeNsm

This gateway is formulated using the prefix https://ipfs.io/ipfs/ + CID

Bitcoin-focused approach

Our NFTs live on top of the bitcoin's Liquid sidechain. Liquid is a sidechain-based settlement network for traders and exchanges, enabling faster, more confidential Bitcoin transactions and the issuance of digital assets.

We make our bitcoin-based NFTs radically usable by connecting them through the Lightning Network for transactions along with Elixir. Typically, when you interact with any liquid asset, you must pay transaction fees using L-BTC (Liquid bitcoin).

However, we make the Lightning Network for delivering the transaction fees possible within Elixir.

We keep working on connecting our bitcoin-based NFTs to the Lightning Network by using Lightning to cover fees and creating L-SAT tokens for:

• Swapping mechanisms: Sybil-resistant swapping mechanisms based on conditional caveats from L-SATs.
• NFT delegation systems: Encode delegation processes for fragmentable access through macaroons.
• Cryptographic ownership: Keep track of the list of NFT owners associated the ownership field of the macaroon anatomy.

We will release an article only about how L-SAT tokens work on our bitcoin-based NFTs. L-SATs tokens (currently in testing) most interesting features for bitcoin-focused NFTs are an authenticated delegation swapping mechanism among the NFT owners.

By using them,we extend the cryptographic capabilities from our NFTs, keeping track of a verifiable ownership record from the asset, co-ownership & other provable events.

We are implementing this experimental technology over our NFTs in Elixir Marketplace. By default users have those settings disabled, they can go to settings to enable them as displayed in the picture above.

What are the differences between an Ethereum & Bitcoin-based NFT?

First let's stand out the actual relevance of an NFT, to  analyze why is critical to have a robust infrastructural technology behind it. Below I quote a tweet that explains it straight to the point.

We are used to see NFTs along other blockchain initiatives, but until now there was not much bitcoin-focused in production. Let's overview what are the main differences.

Secure Trading

Each asset on Liquid can be swapped for any other asset using the open source Liquid Swaps Tool. By minimizing counterparty risk, you can confidently work with more trading partners.

Confidential Transactions

Asset types and amounts are hidden by default on the Liquid sidechain, keeping traders’ sensitive financial data secure from third parties, and preventing the front-running of large orders.

Rapid Transfers

Bitcoin transfers on Liquid are fully settled within two minutes, allowing traders to move funds rapidly between exchanges and their own wallets without facing long, uncertain confirmation times.

Interoperability

All NFTs are based on the same standard, allowing users to take advantage of features such as atomic swaps and Bitcoin-style multisign.

Lower Fees

Liquid transaction fees have been lowered to 0.1 satoshi per vbyte this makes the network dramatically lower to use for trades, making them between $0.1-$0.15  per transaction.

Conclusion

It is evident that NFTs are here to stay for several reasons, but mostly because they bring security & liquidity to digital experiences, including gaming. Hence, it is critical to proceed forward with a standard that provides NFTs behavior to collectibles using a bitcoin-focused approach.