Innovative concepts and ideas are never hard to find in the cryptocurrency industry. Lightning Pool is, at its core, a revolutionary service to push Bitcoin adoption to new levels. It also borrows some elements from DeFi to enhance the Lightning Network.
The Lightning Pool Concept
As the name suggests, Lightning Pool is closely tied to Bitcoin’s Lightning Network. This scaling layer has been active on the network for some time now. However, it is not used as commonly as most people would like to see. There are still some liquidity concerns, even in 2020. Far from an ideal solution, and one that needs some creative solutions.
As such, the Lightning Pool concept was born. It is a non-custodial P2P marketplace for Lightning node operators. Through the service, they can buy and sell payment channels. An intriguing approach to improving overall acceptance of Lightning payments. Moreover, those who provide liquidity may be able to earn some passive revenue this way.
It is the first time Lightning Network liquidity becomes a tradable asset. Moreover, until now, users have not been able to earn a return on their capital. The important aspect is how the Bitcoin holders will always keep custody of their funds.
This concept is somewhat akin to decentralized finance solutions. However, with those platforms, users need to actively spend their funds to earn potential returns. Lightning Pool is intent on avoiding that debacle altogether. A strong showcase of how versatile Bitcoin can be, in comparison to other blockchains actively exploring decentralized finance today.
A Solution for Everyone
Lightning Pool is a fairly elegant solution. It isn’t designed just for business, as it caters to everyone. Having the option to streamline LN payment channels to service customers efficiently is a big step forward. Moreover, this solution removes any liquidity concerns from the equation. Liquidity on the Lightning Network has been a significant topic of debate in recent months.
Partaking in this solution requires the Go client. Users are also advised to dig into the gRPC and REST APIs. The Lightning Pool team expects to launch its UI in the near future. Once that user interface launches, a lot more people will be able to conveniently access this new solution. Additionally, it will help improve overall liquidity on the Lightning Network even further, creating new potential gateways for BTC to JPY transfers, for example.
Addressing the inbound liquidity problem for the Lightning Network is an ongoing process. Having to deal with such a scarce resource far from perfect. Moreover, it is – prior to the launch of Lightning Pool – very difficult to allocate more inbound liquidity. Although some solutions have been experimented with, there is still an issue to be addressed.
Making things more difficult is how there can be surges in demand for LN liquidity. By giving node operators a chance to be paid for opening up new channels, this demand can be met more easily.
One thing the Lightning Network lacks is broader merchant adoption. Given the state this layer has been in since 2018, that is not too surprising either. Lightning Pool can offer solutions in this department as well. The service is a “benchmark” of sorts to help new nodes allocate their capital efficiently. This is great news for merchants looking to get acquainted with Lightning Network payments.
Keeping all of the above in mind, there is a lot to look forward to. Bringing Bitcoin to more people, and allowing users to earn revenue from providing non-custodial liquidity, are two major developments. A new era dawns upon the Bitcoin industry, assuming Lightning Pool turns out to be a success.
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