What SideSwap is, how it works and how to use it

SideSwap is one of the simplest gateways to the Liquid Network. It works as a wallet for Liquid Bitcoin (L-BTC) and stablecoins, but also offers ways to exchange your cryptoassets quickly.

SideSwap's goal is to build a financial system based on the infrastructure around Bitcoin. It does this by offering:

1. An L-BTC wallet, USDT (dollar stablecoin), EURx (euro stablecoin), DePix (real stablecoin) and other assets that run on Liquid;
2. An L-BTC Peg-In and Peg-Out service (input and output of bitcoins on the Liquid network);
3. A swaps market (a concept very similar to decentralized exchanges).

UpdateAfter the video was published, SideSwap changed its fee model. Now, in Swap Markets, instead of charging 0.1% on both sides of trades, it charges 0.2% on active orders and 0% on passive orders. In other words taker paid 100.2% (1.002x) of the value, and the maker you receive exactly the amount you requested.

Why use SideSwap

In short, it is an application for receiving and sending bitcoin liquid, stablecoins and other tokens, and making exchanges no need to trust the counterparty. 

If that's complicated, imagine if Binance, instead of holding your coins, only offered the technological infrastructure for you to make your transactions and trades with total privacy. That's SideSwap.

Finally, its main difference to more common wallets is the fact that its coins are not in Bitcoin's base layer, but in the Liquid network, a second layer solution developed by Blockstream.

What is the Liquid network?

Liquid is a parallel network to Bitcoin that enables fast, cheap and confidential transactions. In addition to being confirmed within 2 minutes, transactions on Liquid only cost around 0.1 satoshi per byte and are private by default.

This means that L-BTC transactions are at least 90% cheaper, 5 times faster, compared to BTC, and nobody knows how much you're moving. 

Bitcoins are moved from the base layer to Liquid by means of Peg-In, and returned via Peg-Out. There are two ways of doing this, one more technical and the other simpler.

The most difficult way involves sending bitcoin to a multi-signature wallet that will be held by the Liquid Federation, a group involving dozens of companies in the Bitcoin market.

These bitcoins are then locked up and you receive the equivalent value of L-BTC to trade on Liquid. At peg-out, the process is reversed: the L-BTC are burned and the federation releases the BTC back into the main network.

The easy way is to make an exchange with someone who already has both currencies. This is the service offered by SideSwap for a fee of 0.1%.

How the SideSwap exchange works

The second service offered by SideSwap is Swap Market and Instant Swap. It is very similar to a traditional cryptocurrency exchange, but with the practical difference that users do not give up custody at any time.

The atomic swaps ensures that each exchange takes place at the same time on both sides. Delivery and payment are settled in the same transaction. This solves the problem of the buyer having to trust the seller and vice versa, without the need for a broker to hold the assets on both sides.

But in practice - and visually - SideSwap is very similar to an ordinary exchange. It has an order book organized by price, a reference price for each market, a quote graph and your trading history.

The rate is 0.2% for borrowers (takers), with a minimum of 500 L-sat (0.00000500 L-BTC), and 0% for those who create passive orders in the order book (makers).

Step by step on how to use SideSwap

Step 1 - Create a portfolio

• Install the app or use web/desktop.
  
• Create seed and write down your 12-word backup, just like you would with a traditional Bitcoin wallet.
  
• Choose a password that will be used both to open the wallet and to make trades. If you use the mobile app, you can also activate biometric protection.

Step 2 - Send funds

• You can deposit L-BTC, USDT, EURx, DePix or any other token that SideSwap supports. Important: don't forget that you need to send from the Liquid network.

To receive coins on SideSwap, simply click on “Receive”, “Generate” “Normal Wallet” address and copy your address. This address can be used to receive L-BTC, USDT, EURx or DePix.

• Peg-in BTC → L-BTC. If you already have bitcoin, you can load your wallet by selecting the “Peg-In” option and entering your password. You will then receive a bitcoin address to make the deposit and receive 99.9% of the amount in L-BTC. Important: in addition to the 0.1% fee, pay attention to the minimum amount.

If you don't have any of the above currencies, you can either buy directly from a p2p seller and pay in reais or use the SideShift or Bitfinex exchanges to deposit another cryptocurrency and withdraw in L-BTC or L-USDT.

Step 3 - Make an Instant Swap or use the Swap Market

• For the easiest way to swap one asset for another on SideSwap, simply select the Instant Swap option, select the asset you are going to deliver, the asset you are going to receive and click on “Swap”. Important: in this mode the rate is 0.6%.
• Alternatively, you can use the swap markets and create active orders to buy or sell assets. In this way, you will pay a fee of 0.2% or 500 satoshis, whichever is greater.
• If you are willing to wait for another trader to accept your offer, you can create a passive order at the price you want. This way you provide liquidity to SideSwap and pay no fees.

For active orders: select the currency pair; buy or sell; market order; the currency you want to buy or sell; the amount and click on “Continue”.

For passive orders: select limit order; the amount and price and click on “Continue”.

In the limit order, there are additional options: you can set an expiry time, leave the order private (it can be a way of trading directly with an acquaintance using atomic swap), or even track the price of the index.

Following the price of the index means that you may, for example, only want to sell a certain amount of bitcoin when someone is willing to pay 1% above the current rate, regardless of what it is at the time.

Step 4 - Withdraw

• To withdraw money from SideSwap, simply click on “Send”, paste a Liquid address, select a currency that you have a balance of and finish.
• Or perform a Peg-out (L-BTC → BTC). Here you only need a bitcoin address from the base layer to exchange your Liquid BTC for BTC.

Conclusion

SideSwap has more layers than first meets the eye. There are a few features not explored in this article, but knowing the basics, you can already extract almost all of the platform's main value: moving your coins quickly, paying very low fees and making secure exchanges without giving up self-custody.

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