Lightning Labs Launches New ‘LiFi’ Marketplace, Lightning Pool
Lightning Labs has just launched a peer-to-peer marketplace on Lightning Network, which will allow node operators to earn a yield on their Bitcoin.
Lightning Pool is a non-custodial peer-to-peer marketplace that has fixed one of LN’s main problems, and node operators will now be able to earn Bitcoin by buying or selling access to liquidity on Lightning.
Developer, Lightning Labs hopes the new product will encourage more Bitcoin hodlers to earn yield while maintaining self-custody, unlike centralized products like BlockFi.
The developer startup also hopes the new way for hodlers to earn free Bitcoin will address a lack of liquidity on the Lightning Network. While also generating more interest in the network and even inspire similar ‘Bitcoin reward’ projects.
The yield for Lightning Pool is earned on a peer-to-peer marketplace from buyers willing to pay sellers a premium for access to new capital on Lightning.
A spokesman for Lightning Labs said, ‘Lightning Pool is a non-custodial marketplace consisting of auctions that allow participants to buy and sell Lightning Channel Leases, with those looking to earn a return on their Bitcoin in Lightning channels, promoting more efficient capital allocation on the Lightning Network.’
‘Users can buy or sell Lightning channels, the equivalent of tubes of money, via the Pool marketplace,’ said the Lightning spokesperson. ‘Merchants and startups who want to receive funds on Lightning are natural buyers of channel liquidity, and node operators with spare capital looking to earn a return on their Bitcoin are natural sellers.’
Lightning Labs Creating a New Financial Eco-System
The Lightning Network is a network of payment channels that enables faster and cheaper Bitcoin transactions. The transactions are almost instantaneous and cost a fraction of a penny.
It’s all done through channels, which anyone can set up between any other person, but the problem arises when someone wants to lock up channels.
The problem with the Lightning Network is how to incentivise Lightning node operators enough to do this.
Node operators process transactions through these channels and collect fees for doing so. And to make a BTC transaction on the Lightning Network, you have to convince other nodes to lock up Bitcoin in the channels, which is where the problem lies.
Lightning Pool is seen as the solution to this as it offers a fee for any node operator willing to lock in the channels.
Using Lightning Pool, node operators who have access to liquidity on the Lightning Network can now get paid to allocate it to the highest bidders.
It’s all the very early days of a new decentralized financial eco-system which is being dubbed ‘LiFi’.
The Birth of Lightning Finance (LiFi)
LiFi (Lightning Finance) is a new financial eco-system being built on the Lightning Network. It’s similar to DeFi, but everything is built on Bitcoin and the Lightning Network.
By giving node operators a way to earn yield on their channels, Lightning Labs has created the new financial eco-system.
The success of DeFi, which is built on less secure and less decentralized blockchains, has been phenomenal. It’s clear, therefore, that the desire for decentralized financial products is there.
Being the most secure network, Bitcoin can offer unrivaled security and decentralization. Added with Lightning Network’s scalability, we should see more LiFi products built on the network, especially as Lightning Pool blooms.
Lightning Labs CEO, Elizabeth Stark said of LiFi, ‘Bitcoin-native financial products, and LiFi in particular, seek to harness the unparalleled security of the Bitcoin blockchain while creating a new generation of financial products tied to real Bitcoin. These can range from Discreet Log Contracts to Liquidity marketplaces like Pool, to Bitcoin-backed assets, all of which are possible on top of Lightning.’
This is Just The Beginning For LiFi, Lightning Pool and Bitcoin
Many equate the state of the Bitcoin network now to the Internet standard of 1992/93. Nobody could envisage back then that we would be able to stream movies on wireless phones while travelling at 250 kmh on bullet trains.
It’s the same for Bitcoin and the Lightning Network. The possibilities a decentralized and secure, programmable network, with an inbuilt economy that eradicates the need for trust is endless.
Lightning Network, although far from perfect, offers near instantaneous transactions for a fraction of a penny. This compounded with the possibilities of Bitcoin offers a future that’s simply impossible to imagine.
We’re early, we all know that. But with the advent of all these new products, we can all say we were there at the beginning, and were one of the first to use LiFi, and yes, even Bitcoin.
Author: Pablo Clarke
A Bitcoiner since 2017 and a Bitcoin Maximalist since 2018, Tommy is our main writer and editor at Bitcoin Maximalist. Other than researching and writing about Bitcoin, Tommy loves spending time with his family and supporting his beloved Leeds United.