Lightning Pool is a non-custodial batched uniform clearing-price auction for Lightning Channel Lease (LCL). A LCL packages up inbound (or outbound!) channel liquidity (ability to send/receive funds) as a fixed incoming asset (earning interest over time) with a maturity date expressed in blocks. The maturity date of each of the channels is enforced by Bitcoin contracts, ensuring that the funds of the maker (the party that sold the channel) can't be swept until the maturity height. All cleared orders (purchased channels) are cleared in a single batched on-chain transaction.
The existence of an open auction to acquire/sell channel liquidity provides all participants on the network with a more stable income source in addition to routing network fees. By selling liquidity within the marketplace, individuals are able to price their channels to ensure that they're compensated for the time-value of their coins within a channel, accounting for worst-case force close CSV delays.
Pool critically allows participants on the network to exchange pricing signals to determine where liquidity in the network is most demanded. A channel opened to an area of the sub-graph that doesn't actually need that liquidity will likely remain dormant and not earn any active routing fees. Instead, if capital can be allocated within the network in an efficient manner, being placed where it's most demanded, we can better utilize the allocated capital on the network, and also allow new participants to easily identify where their capital is most needed.
Amongst several other uses cases, the Pool allows a new participant in the network to easily bootstrap their ability to receive funds by paying only a percentage of the total amount of inbound funds acquired. As an example, a node could acquire 100 million satoshis (1000 units, more on that below) for 100,000 satoshis, or 0.1%. Ultimately the prices will be determined by the open market place.
A non-exhaustive list of use cases includes:
- Bootstrapping new users with side car channels: A common question posted concerning the Lightning Network goes something like: Alice is new to Bitcoin entirely, how can she join the Lightning Network without her, herself, making any new on-chain Bitcoin transactions? It’s desirable to a solution to onboarding new users on to the network which is as as simple as sending coins to a fresh address. The Pool solves this by allowing a third party Carol, to purchase a channel for Alice, which includes starting outbound liquidity.
- Demand fueled routing node channel selection: Another common question with regards to the LN is: "where should I open my channels to , such that they'll actually be routed through"?. Pool provides a new signal for autopilot agents: a market demand signal. The node can offer up its liquidity and have it automatically be allocated where it's most demanded.
- Bootstrapping new services to Lightning: Any new service launched on the Lightning Network will likely need to figure out how to obtain inbound channels so they can accept payments. For this Pool provides an elegant solution in that a merchant can set up a series of "introduction points" negotiated via the market place. The merchant can pay a small percentage of the total amount of liquidity allocated towards it, and also ensure that the funds will be committed for a set period of time.
- Allowing users to instantly receive with a wallet: A common UX challenge that wallets face concerns ensuring a user can receive funds as soon as they set up a wallet. Some wallet providers have chosen to open new inbound channels to users themselves. This gives users the inbound bandwidth they need to receive, but can come at a high capital cost to the wallet provider as they need to commit funds with a 1:1 ratio. The Lightning Pool allows them to achieve some leverage in a sense, as they can pay only a percentage of the funds to be allocated to a new user. As an example, they can pay 1000 satoshis to have 1 million satoshis be allocated to a user.