Why do I say that Liquid is an algorithmic bank? Because its rules are written in code, just like Bitcoin, and are safeguarded and protected by a federation.
When you join Liquid, you know the rules, and they are difficult to change because many members of the federation would have to conspire with each other.
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Why didn't Liquid adopt the Monero model? Because then it would be impossible to guarantee 1LBTC=1BTC.
You are free to create a sidechain with the Monero model and back it with Bitcoin.
I challenge you to do so, and you will discover what hidden inflation is.
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Do you regard segwit as undesirable due to the witness discount? We could still remove that in a future soft fork