How Does Liquidium Ensure the Secuirty of Your Funds?

In the wild world of blockchain, where every click can lead to potential doom or glory, ensuring the safety of your funds is absolutely essential. Onchain activity isn’t just risky—it’s like a high-stakes game of poker, and you don’t want to be the one left holding the empty chips. 

So, how do we keep your funds safe? Let’s break it down.

The Risks of Onchain Activity

1. Centralized Custodial Risks: While many custodians are reputable, the potential for mismanagement or fraud is always lurking in the shadows.

2. Smart Contract Vulnerabilities: Bugs or vulnerabilities in smart contracts can be exploited, leading to unintended consequences that may compromise user funds.

Security Measures Implemented by Liquidium

To mitigate these risks, Liquidium has established several robust security mechanisms:

1. DLC (Discreet Log Contracts): Liquidium leverages Discreet Log Contracts to determine the outcome of loans. The DLC functions as a third-party oracle that verifies whether the borrower has repaid the loan or defaulted.

   • If the Borrower Repays: The DLC hands over a signature that unlocks the collateral, returning it to the borrower.

   • If the Borrower Defaults: The DLC signs off with the lender, allowing them to claim the collateral—no messy disputes, just fair play.

This system ensures that loans are executed fairly based on agreed-upon conditions, adding another layer of security and neutrality to the process.

2. Multisig Mechanism: Liquidium's 2-of-3 multisignature (multisig) escrow system is like a three-headed dragon—two heads need to agree before anything happens! Executed entirely on the Bitcoin blockchain, this ensures that collateral (like Ordinals or Runes) stays secure during the loan term.

   • Three Parties Involved:

     • Borrower: Pledges collateral (e.g., Ordinals or Runes) for the loan.

     • Lender: Provides Bitcoin to the borrower.

     • Liquidium Oracle (via DLC): Acts as the trusted third signer, ensuring impartiality.

   • Atomic Transactions: The loan transaction is atomic. It either completes in full or not at all, with all parties verifying terms before signing. No room for tricks or half-baked deals!

   • Multisig Mechanics: Two of the three involved parties must sign off to unlock the collateral from escrow. This guarantees that no single party can control the movement of assets.

3. Timelock: This is like a safety deposit box for your collateral. The lender’s address is time-locked for the entire loan duration, meaning they can’t access the collateral prematurely. 

Until the loan period expires, the lender is stuck watching the clock tick—ensuring peace of mind for the borrower.

4. Code Audit: Code audits help identify and rectify vulnerabilities in the platform, ensuring the integrity and security of the technology we employ. 

We're thrilled to announce that Liquidium has successfully completed a comprehensive audit of our core components—DLC, PSBT, and Multisig—conducted by the expert security team at ScaleBit, a sub-brand of BitsLab. This team specializes in audits for the Bitcoin ecosystem, Zero-Knowledge proofs, and blockchain interoperability. 

Their meticulous review found no major issues, and all minor concerns were promptly addressed. Safety and transparency are our top priorities!

Remaining Risks

While we’ve stacked the odds in your favor, some risks still lurk in the shadows:

• Impersonation Scams: Watch out for bad actors pretending to be Liquidium employees. They’re the wolves in sheep’s clothing, trying to lure you into revealing sensitive information.

• Phishing Attempts: Phishing links may appear in comments of official social media accounts, leading to fake sites. Always double-check before clicking on those tempting links!

• User Behavior: At the end of the day, you hold the keys to your castle. Weak passwords, reusing passwords across platforms, and not being aware of common scams can expose you to risk. Be your own security hero!

Liquidium Quick Guide

Unlock your potential with Liquidium—the premier and most secure Bitcoin Layer 1 DeFi App! Maximize your returns while ensuring your fund is protected!

For Borrowers:

• Browse Offers: Select an Ordinal, Rune, or BRC20 as collateral for your loan.

• Set Terms and Confirm: Confirm loan terms and await the lender's countersignature.

• Repay to Unlock Collateral: Repay by or before the due date to reclaim your collateral.

For Lenders:

• Create a Loan Offer: Set loan terms and place an offer.

• Sign Upon Acceptance: Countersign to initiate the loan.

• Claim Collateral if Defaulted: If the loan defaults, claim the collateral as compensation.