Nym joins the Liquid Federation ahead of Bitcoin halving

Nym is now running a Liquid functionary node to support the Bitcoin layer-2 ecosystem

Author: Nym

April 17, 20244 mins read

Nym is now running a Liquid functionary node to support the Bitcoin layer-2 ecosystem

Bitcoin launched a transformative movement in decentralized technology. We are now about to witness the next algorithmic step in its deflationary design: the fourth halving of bitcoin mining rewards.

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The next Bitcoin halving is scheduled for blockheight 840,000 and set to take place in the coming days. This will be an important indicator of the future success of the decentralized blockchain and currency.

The genesis of Bitcoin is historically and technically entwined with that of mixnets. Leading up to the halving, Nym has officially joined the 65-member-strong Liquid Federation to signal support for Bitcoin and its growing layer-2 ecosystem.

Joining the Liquid Federation

Nym is now a part of 15 globally distributed functionary operators for the Liquid Network, one of Bitcoin’s first and most popular sidechains. Liquid functionaries are specialized and tamper-proof HSM servers that operate the core infrastructure of Liquid, facilitating thousands of transactions daily. These functionaries essentially propose and sign blocks, manage the two-way Bitcoin peg, and secure the bitcoin held by the network in the federation’s multi-sig wallet in a globally distributed and decentralized way. Nym is running the functionary on dedicated infrastructure in Switzerland.

The goal is to deepen the support for Bitcoin’s layer-2 protocols, which will help scale Bitcoin to meet global demand. This is the first step in a more comprehensive partnership between Nym, the Liquid Federation, and Liquid’s technical provider, Blockstream.

Dr. Adam Back, CEO and co-founder of Blockstream, had this to say about Nym’s initiative: “I am pleased to announce Nym as a new functionary within the Liquid Federation. Liquid’s Confidential Transactions, which rely on homomorphic encryption, are designed to keep transaction details confidential while protecting the network’s integrity and security. Nym’s decision to become a Liquid functionary underscores our shared commitment to enhancing privacy within the Bitcoin L2 ecosystem.”

The next step will be an integration of Liquid on the Nym mixnet, extending Liquid’s default confidentiality to also protect the patterns of transactions in transit. This will enable strong network level privacy to a growing number of Bitcoin users who are using layer-2 protocols to stack sats, save on fees, and improve privacy.

A short history of Bitcoin and mixnets

Mixnets and Bitcoin have an intertwined and shared history that goes back to the 1990s. It was while running a cypherpunk mixnet-based anonymous email re-mailer that Adam Back noticed a big problem: people were using the mixnet to send anonymous spam, clogging up the network and “causing a nuisance.” Rather than using a whitelist, which would require identifying users (which no cypherpunk would want), Adam Back coded up the research of Cynthia Dwork and Moni Naor on proof-of-work to prevent the sending of spam e-mail through the mixnet by way of the cost of hashing. This led to the development of an early version of the scheme, called Hashcash, which would eventually become the consensus protocol of Bitcoin. The entire blockchain industry was thus sparked.

With the advent of Bitcoin, one half of the cypherpunk dream was being realized: digital cash. The second half, however, is still being built: mixnets for full network privacy. Combined, the two technologies can finally secure the fundamental rights of freedom and privacy on the internet.

As a decentralized and incentivized overlay network, Nym mixnet is striving to protect the anonymity and privacy of all of its users by integrating with any wallet or app. Like Bitcoin’s blockchain, moreover, this is made possible by the work of its community. While Bitcoin’s ledgers are authenticated through miners who receive block rewards for their work, the Nym mixnet relies on a global network of unlinkable node operators to route, mix, and anonymize user traffic. Online anonymity is less a service than it is a collective project.

“The very idea of Nym came to me in 2017,” Harry Halpin, Nym CEO and founder, recounts. “When I asked Adam Back how we could make Bitcoin better, and Adam told me that while Bitcoin was more-or-less perfect, the idea of using spare computing power for privacy hadn’t been explored. At that moment, I thought that mixing packets could work like mining Bitcoin. Years of coding later, I’m thrilled to see Nym work even closer with Liquid and Blockstream.”