Yesterday afternoon, Lightning Labs dropped one of the most important products to hit the market since the Lightning Network went live in 2018; Lightning Pool. Lightning Pool does two things simultaneously that materially improve Bitcoin's second layer; it creates an avenue through which one can receive yield on their bitcoin holdings in a non-custodial fashion while materially improving the UX of channel management. These are two things that many bitcoiners have been hoping for since the launch of the network, but before yesterday there was no real clear path.
The TL;DR of Lightning Pool is that it provides the ability for Lightning Node operators to earn yield on their sats held in channels by auctioning off inbound liquidity to users looking to open up a channel and begin using Lightning as quickly as possible. Introducing a new way for large node operators (and small node operators for that matter) to profit by providing utility to new users looking to leverage the network. Essentially, users looking to earn interest on their bitcoin holdings can now do so without ever giving up custody of their funds to a third party.
The launch of Lightning Pool is an event that your Uncle Marty views as something that will have a significant positive impact on the Lightning Network almost immediately. This product creates the conditions for a meaningful and actionable yield curve to begin taking form on top of Bitcoin. This is something that we've been talking about since July 2018 when Nik Bhatia began writing about the potential for the Lightning Network to help establish a risk-free rate on Bitcoin. The fact that a product is here to efficiently allow that yield curve to develop is MASSIVE. And the best part yet, the way Lightning Pool is designed this market develops in a truly capitalistic way. Free from third parties and centralized rate setters like the Federal Reserve. Users simply meet at the marketplace for channel liquidity and decide what the best rate is for their particular situation. Once there is enough volume flowing through the pool we should see yields consolidate towards relatively stable yield curve that reflects a legitimate rate of return for providing liquidity over certain durations of time.
The market is already forming too! It's less than 24-hours since the launch of the pool and there is already a bot tracking trades and calculating yields.
Be on the lookout for the podcast I drop tomorrow morning with Ryan Gentry from Lightning Labs. We go deep on Lightning Pool and the impact it will have on the market. This is much more exciting than the election.
Outdoor workouts are much better than indoor workouts.