- Amboss, a Lightning data provider, introduces the LINER (Lightning Index Rate) index, aimed at driving the adoption of Bitcoin’s Lightning Network among enterprises.
- The LINER index facilitates comparison of Lightning Network’s cost and yield with traditional financial systems, thus exhibiting its cost advantages.
In an effort to catalyze corporate adoption of Bitcoin’s Lightning Network, Amboss, a renowned Lightning data provider, has launched an innovative tool called the LINER (Lightning Index Rate) index. This index offers companies a clearer understanding of the associated costs of setting up Lightning accounts and the potential yield from providing liquidity to the Lightning Network.
The highlight of the LINER index is its ability to furnish businesses with transparent data, allowing them to juxtapose these metrics with their traditional financial counterparts. This comparison elucidates the cost-efficiency of the Lightning Network over legacy financial institutions, as stated by Jesse Shrader, CEO and Co-founder of Amboss.
The LINER index presents two crucial metrics: the potential yield and the cost. The yield represents the profits achievable from deploying capital into the Lightning Network. This data is sourced from Amboss’s Lightning Network Liquidity marketplace, Magma, which serves as a platform for purchasing and selling Lightning channels.
In traditional lending scenarios, lenders trust that borrowers will repay them. The same principle applies to centralized finance, where custodial crypto platforms pledge a yield percentage for storing Bitcoin with them. However, utilizing Bitcoin and the Lightning Network without an intermediary eradicates this credit risk, a unique advantage over conventional finance.
Shrader emphasized that this low-risk yield has the potential to disrupt decades-old payment networks, and also serves as a shield against monetary inflation for those holding Bitcoin. This opportunity enables Bitcoin holders to put their assets to work, combating monetary devaluation.
The second metric, the cost, provides insight into the expenses related to digital transactions. Each transaction a merchant accepts comes with a processing fee, typically around three percent in the US. Although Lightning transactions are known for their affordability, they still have associated costs, such as opening and closing channels, which incur fluctuating on-chain Bitcoin fees.
The introduction of the LINER index now allows a direct cost comparison between traditional payment processors, like Visa, and the Lightning Network. As per Shrader, this comparison reveals modest savings for businesses in the US, with potentially more significant savings for international payments.
Drawing inspiration from the conventional banking system, the LINER index is designed to mirror LIBOR, the leading benchmark interest rate at which global banks lend to each other. As the LINER index continues to make data more accessible, businesses may find the incentives necessary to transition to Lightning Network, overcoming its perceived complexity.