Lightning Network Gets a Marketplace for Payment Channel Liquidity

The team behind the Bitcoin Lightning Network’s leading software implementation is launching a marketplace for Lightning users to lease liquidity for payments on the second-layer network.

Today, Lightning Labs announced the release of Pool, “a non-custodial, peer-to-peer marketplace for Lightning node operators to buy and sell access to liquidity,” according to a press release. The service will allow Lightning Network users to lend out bitcoin in payment channels in return for yield. Businesses and services providers can then draw on this liquidity when needed to manage Lightning Network payment flows.

“Efficient capital allocation is one of the most widely felt pain points when using the Lightning Network. Existing node operators do not have access to pricing signals to help determine where in the network their outbound liquidity should be allocated, and new node operators have no way to signal that they need new inbound liquidity,” the press release states.

“Lightning Pool brings these two sides together into a single market while allowing them to maintain custody of their funds.”

Pool provides a marketplace for Lightning Network liquidity

Bitcoin’s Lightning Network offers cheaper, faster payments than Bitcoin’s primary network by offloading these payments onto a “second layer” (a software that is built on top of the original Bitcoin software).

Lightning manages payments through two-way payment channels, where either side holds a certain amount of the funds locked up in a channel. Sending payments outside of a channel requires a “routing” transaction. (Say Alice has a channel with Bob and Bob has a channel with Carol; if Alice wants to send a payment to Carol, she can route it through Bob.

But what happens if Bob doesn’t have enough funds in his channel to complete the payment?

This is the problem Pool wants to ameliorate. Businesses or users managing multiple channels can buy liquidity from the marketplace when they need to top off…

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