Lightning Labs has created a new system that is a kind of DeFi (decentralized finance) for bitcoin. Lightning Network (LN) creator’s new product has earned the name Lightning Pool.
With the new product, operators can purchase the liquidity needed to make the operations. Thus, it is guaranteed the operation of the network in a more fluid way.
In addition, a new way to make money within LN emerges. Operators who want to provide liquidity can participate in auctions to decide the destination of their resources. In this way, it is possible to direct liquidity to the network areas in greater need at that time, explains the company in its blog.
Bitcoin’s DeFi makes network more resilient
Users who need liquidity participate in auctions to choose the best channels from which they can buy that amount.
Better use of the features “improves the network as a whole”, said Ryan Gentry, the company’s head of Business Development in another blog post. And this improvement makes it “more reliable and resilient for everyone”, he concludes.
The comparison of the DeFi is because in this type of crypto network, protocols usually pay those who generate liquidity for exchanges or loan platforms.
What is Lightning Network?
Elizabeth Stark, the co-founder of Lightning, explained what LN is in an article at Coin Center. “Imagine if every computer has to store all the emails to receive some. That’s how blockchains work”, Stark wrote.
But Lightning Network changes that by allowing “computers to make blockchain transactions by storing only the information that matters —their money”.
Thus, LN is a protocol for giving scale and more speed to blockchains. And although it was created to address some bitcoin limitations, “it can be implemented on any blockchain”.