At Liquidium, we prioritize the security of our platform and the safeguarding of our users' assets. We recognize the importance of transparency and direct communication about our security practices, especially given the significant amounts of assets our users entrust to us. This article aims to provide a straightforward, jargon-free explanation of the steps we're taking to ensure the highest security standards.

Discreet Log Contracts (DLCs) are an innovative feature in the realm of blockchain and Bitcoin, offering a secure and private way to execute contracts. DLCs are smart contracts for Bitcoin, but unlike traditional smart contracts that require a blockchain to execute all the logic, DLCs execute most of their logic off-chain. This approach not only enhances privacy but also reduces the blockchain's load, contributing to overall scalability.

How Do DLCs Ensure Security?

1. Off-Chain Contract Execution: Most of the contract's execution occurs off-chain, which significantly reduces the visibility of the contract's details to the public. Only the involved parties have knowledge of the contract's specifics, enhancing privacy and security.

2. On-Chain Settlement: The final settlement of the contract occurs on the Bitcoin blockchain, leveraging its robust security features. This ensures that the outcome is immutable and trustless, providing a secure closure to the contract.

3. Mutual Agreement Required: Both parties in the contract must agree to the outcome for the contract to settle. This mutual consent mechanism ensures that one party cannot unilaterally execute or alter the contract, providing a layer of security and fairness.

4. Use of Oracles for External Data: DLCs often rely on oracles to fetch external data, which is crucial for the contract's execution. The security of DLCs is partly ensured by using reputable and reliable oracles, minimizing the risk of manipulation or inaccuracies in the data that could affect the contract's outcome.

5. Auditable: While most of the contract's execution is off-chain, the final settlement is transparent and verifiable on the blockchain. This allows for the auditing of the contract's outcome, ensuring that the execution aligns with the agreed-upon terms.

By integrating these features, DLCs provide a secure, efficient, and privacy-preserving method for executing contracts on the Bitcoin blockchain. They represent a significant step forward in combining the principles of smart contracts with the robust security and decentralization of Bitcoin. Liquidium's transition to in-house developed DLCs, coupled with our commitment to audits and open-sourcing, underscores our dedication to leveraging this technology to enhance the security and reliability of our platform.

Understanding the critical role of verification and transparency in security, we commit to conducting a comprehensive code audit on our in-house DLCs. This audit will be carried out by a reputable third party, ensuring an unbiased and thorough examination of our technology.

Moreover, we pledge to open-source our oracle technology. This decision is not taken lightly; it reflects our belief in transparency and our confidence in the robustness of our security measures. By open-sourcing our oracles, we invite the community to review, scrutinize, and contribute, thus fostering an environment of collective security and trust.

To mitigate risks associated with transaction manipulation, Liquidium employs the sighash_all signing method. This technique ensures that once a transaction is signed, its contents cannot be altered, effectively safeguarding against unauthorized changes and enhancing the integrity of our transaction processes.

We value the dialogue with our users and the broader community. Your feedback is instrumental in guiding our efforts to refine and strengthen our security measures. We're committed to not only maintaining an ongoing conversation about security but also to acting on the insights and concerns brought forward by our community.

We understand the weight of the responsibility we carry in managing and protecting your assets. Our team is dedicated to upholding the highest standards of security, continually advancing our technology, and maintaining an open line of communication with our users. We're here to ensure that your experience with Liquidium is not only fruitful but also secure.

We thank you for your trust in Liquidium. Should you have any questions or require further details about our security practices, we encourage you to reach out. Your security and peace of mind are our utmost priorities.