Functionary

A functionary is one of the specialized physical devices that operate and secure a federated Bitcoin sidechain like Liquid. Each functionary pairs a server with a tamper-resistant hardware security module (HSM) that guards the cryptographic keys, and the set of functionaries collectively replaces proof-of-work mining with a known, permissioned signing membership. There are currently 15 functionaries on the Liquid Network.

Two roles: block signer and watchman

Functionaries wear two hats. As block signers, they propose and sign sidechain blocks in round-robin fashion, producing a deterministic one-minute block every minute; a block is accepted once a supermajority have signed it. As watchmen, they collectively custody the pegged-in bitcoin and authorize peg-outs back to the main chain. The HSM tracks block height and the previous block hash so it will never sign a block that moves the chain backwards, blocking reorg-style attacks.

The 11-of-15 threshold

The federation secures the locked bitcoin with an 11-of-15 multisignature script, one key per functionary HSM. Spending the peg requires at least 11 honest signers, so the network tolerates several simultaneous failures or compromises before custody is at risk. An emergency timelock lets a small set of recovery keys reclaim funds if the federation becomes permanently non-functional.

Functionaries are what make a peg-in and peg-out possible, and their multisig is the heart of the federated peg.