Does Lightning Labs Pave The Way For Bitcoin (BTC) and DeFi?

Wed 20 Jan 2021 ▪ 22h58 ▪ 3 min read — by Felix Meyer

Has Lightning Labs unearthed a gold mine for Lightning Network users? This new exchange system aims to improve the functioning of the network, while helping nodes under stress and, by paying back ‘good Samaritans’.

Lightning Pool: a paid mutual aid

Lightning Labs has announced the launch of a system that allows Bitcoin (BTC) holders to ‘stake’ on an exchange network and get paid for it.

Nodes on the Lightning Network do not have access to information to help them decide how to fund transactions, while operators have no way of notifying other nodes of their need for liquidity.

To address this issue, Lightning Labs created the Lightning Pool, a marketplace for nodes to acquire the liquidity needed to keep the network running smoothly.

Users can use the Lightning Pool’s bidding feature to identify network participants in need of liquidity, and in return receive compensation for their liquidity.

The system makes it easy to set up a system that allows the nodes receiving liquidity to determine the best purchasing channels.

After wrapped bitcoin (WBTC), a new DeFi success for Bitcoin

A statement from Lightning Labs explains that the Lightning Pool can be used to streamline the channel management process and allow them to focus on acquiring new users, rather than accessing cash.

The system has been coined LiFi, and has similarities with DeFi: they are both based on non-custodial protocols that pay people for providing liquidity to exchanges.

Lightning Labs adds that liquidity providers can earn a profit in real Bitcoin without needing to go to a third party, or lose custody of their assets.

This profit is calculated based on the premium that buyers are willing to pay to gain access to capital without counterparty risk.

This is good news for Lightning Network nodes, who were recently asked to carry out an urgent update after a vulnerability was found on the network. If DeFi won’t come to Bitcoin, Bitcoin will come to DeFi – even if it has to get wrapped to do it. The Lightning Pool aims to balance the distribution of liquidity on the Lightning Network, but obviously, liquidity providers will need a few bitcoin in exchange to encourage them to share, even if sharing is caring!

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Felix Meyer avatar
Felix Meyer

Le trading et l'analyse technique sont mes spécialités depuis 4 ans. Je décortique le marché et vous partage mon expertise.


The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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