Amboss launches new ‘Liner’ index for Bitcoin yield.
The data analytics firm Amboss has developed a tool called Lightning Network Rate (Liner) to simplify the process of generating yield on Bitcoin’s Lightning Network. The Lightning Network is a second-layer payment network designed to facilitate faster and cheaper Bitcoin transactions. To use the network, users must first acquire liquidity by committing Bitcoin to a payment channel. Service providers on the network commit funds and temporarily lease excess liquidity to users for a fee, generating yield on their committed funds. Amboss’s Liner tool provides key insights into yield opportunities on the network and will serve as the benchmark rate for measuring Bitcoin returns on committed capital.
The matching process between service provider nodes to maximize yield involves finding nodes capable of maximizing transaction volume, maintaining round-the-clock availability, and providing liquidity for a set time period. Amboss’s liquidity marketplace Magma, launched last year, already facilitates this matching process. Liner will now complement Magma by allowing liquidity providers to determine whether committing their capital will be worth their while. Purchasers of liquidity will also be able to determine the cost of leasing channel capacity.
Lightning Labs launched Lightning Pool in 2020, which aggregates supply and demand of liquidity in a similar way to Magma and generates a “current lease rate” for capital. According to author and investor Jonathan Bier’s book “Reckless: The Story Of Cryptocurrency Interest Rates,” Lightning Pool had double the volume of Magma in November 2022.
It’s important to note that the yields shown on Magma are “self-custodial yields,” meaning returns are only generated from the provisioning of liquidity without any Bitcoin changing hands.
