LN Pool Integration

I’d like to propose an idea to integrate Lightning Pool with Sovryn. What does the community think?

TL;DR - Lightning Pool allows Bitcoin holders to lend their funds to earn Bitcoin risk free into the lightning network. Sovryn can be source of liquidity, as well as a platform to trade yield instruments, akin to the treasury market.

I think this will be crucial to:

  1. support a bitcoin risk free yield curve
  2. bridge the layer-2 eco-systems and place Sovryn at the financial center
  3. differentiate and capitalize on a yield mechanism which likely cannot exist on opposing chains
  4. build a secondary market-place to sell channel-leases

I’ve created a google doc with preliminary, yet more detailed thoughts here: Sovyrn / Lightning Pool Integration - Google Docs

Feel free to add any comments or critiques. If people find this viable I am happy to assist in any non-technical manner.

Thanks!

7 Likes

I think it is a really good idea and the future for layer-2 is to make them interoperable. Has there been much conversation with people on the lightning network side of things?

Thanks for the idea and document write-up @dseroy . It does sound like a promising avenue to explore. I didn’t know about Lightning Pool yet, have some reading to do!

1 Like

I like that direction. Yago already commented on roll up and speed / cost improvements. While BIP300/301 move ahead - fast settling payments on lightning are already live - seems like a good play. Has anyone come up with a downside? Not obvious to me what that would be.

@Ferric_William @Jonezee @LordElvic thanks for your replies! Sorry for the delayed response on my end. Admittedly, I’m spreading myself thin here but yes this is definitely an idea we’re exploring.

I’ve connected with a few people through the Hackathon channels and we may submit an initial proposal to see what we can come up with. If you all want to be involved we’re definitely needing some additional research and technical.

Conceptually, the idea is great. We feed lightning in-bound liquidity and earn yield for Sovryn.

However, additional research is needed around these areas:

  • How do we bridge between RSK <> Lightning
    Possible Answers: FastBTC, Submarine Swaps like RedShift, Maybe Atomic Swaps in a wallet like Liquality?
  • Can the bridge be trustless and cost effective?
    Possible Answers: Not sure about this yet, but a question that definitely needs to be answered. Unfortunately it feels like some aspects of this inevitably will need to be custodial/trusted so that is just something we’d be upfront and very open about.
  • How do we custody the leases on the Lightning side?
    Possible Answers: We need to connect with some Lightning Devs to better understand this

Please feel free to share any questions or critiques. I have no issues opening this up to the community and trying to hive-mind it.

Thanks

3 Likes

Hi there,

i’m Sacro and i am pretty new to Sovryn. What you are creating here is incredible!
While i do not have as much in-depth knowledge as many of you, i’d like to give a few thoughts
on ln-pool integration because I recently played around with it on my lightning node.

The concept of hodling btc in lightning channels and earn yield on it is really cool and definitely worth exploring for Sovryn.
As the lightning network is increasing it’s reach at an astounding rate, using LN via Sovryn to earn yield could absolutely
BOOST Sovryn’s adoption and would be a unique selling point in comparison with other Defi programs.
Just imagine the advertising: Use sovryn to earn yield from lightning network transactions/providing liquidity on LN while hodling your keys! A lot of bitcoiners would love this.

There’s 2 options to generate yield via LN: Selling Liquidity via channel-opening (pool) and earning fees on transactions that go through the opened channels.

But selling channels via pool is very difficult.

The only nodes that can do it need to be very well connected and have a lot of liquidity. There is / will be competition.
Most LN transactions happen between a few BIG nodes. It’s not as decentralized yet as it should be (Rene Pickhardt with his Pickhardt payments could be great progress and very interesting for smaller nodes).

Nobody wants to pay for a channel that has limited reach or low liquidity.
Buyers are companies/exchanges that need a lot of inbound liquidity to receive btc.
They do not want a transaction to fail because their rented channels cannot be reached by their customers.

In order to be succesful Sovryn would need to make sure that their nodes are very well connected within the lightning network.
It would need to be listed on the Bos-Score [Bos Score - Lightning Network Node Ranking]

Why could Sovryn play a big role here: We are a network of people. Let Sovryns connect their LN-nodes to each other and increase the reach of each node.
Let Sovryn’s who do not run a ln-node provide liquidity for these nodes via Sovryn. Let Sovryn sell the channels/Liquidity of SOV- lightning nodes via Pool.
Where a single small ln node would typically fail, a sovryn ln node thats connected with hundreds of other sovryn ln nodes and thats branded like that could succeed on pool.

I have some technical background but am not a dev by any means. I imagine that this would be really difficult to build if not impossible and takes a lot of time. Right now this would not be worth it, but if LN keeps scaling, this could be a big opportunity in the years to come.

How to bring rbtc <=> lightning btc
How to bring SOV-Lightning nodes / channels together?
How to provide these nodes with liquidity via Sovryn in a trustless/trut minimized way?
How to interact with pool?

Thanks

2 Likes

Thanks for the note. I think you nailed most of the points! I had to temporarily table this idea until we see how the LN <> RSK bridge turns out. That will make a big difference in determining if it’s economically and efficient to cross between the worlds.

Ideally, Sovryn can become the liquidity market-place for LN channels and subsequently secondary market-place for those contracts.

The LN side def is a bit more complicated so your thoughts on this would be helpful. My understanding is when using Lightning Pool, nodes get ranked as T0 or Tier 1. If you want to get decent rates and your bids filled then you need T1 nodes meaning a superior routing node. This means to make this work we would need to partner with quality nodes or manage our own node and build up the score. That may impact the trustless nature of it.

Still a lot to flesh out. Please feel free to add any additional thoughts.

1 Like

That’s correct, in order to be able to sell channels you need to have a superior routing node. Lots of Liquidity, lots of big and well connected channels, lots of uptime, long ln-node history. Right now i doubt that it’s worth the effort. The rates are ok but the amount that is lended is still small. Anyway, with all the growth i think it’s worth keeping an eye on (i do). Pool is rather simple to use from a LN-node perspective.

But there’s one thing that makes me much more excited:

i’m not sure if you’re familiar with the work of rene pickhardt (pickhardt payments, https://arxiv.org/abs/2107.05322).
He recently described how it’s possible to transfer big amounts (multiple btc) via lightning. He found a way to basically split a big transaction in a large number of smaller ones, with each small one taking another route. This will take a while until it’s usable, but i see a big opportunity here for a network of sovryn nodes, to generate a good yield by routing large volume through LN.

What’s therefore needed is: a bunch of nodes, lots of channels, good connections, low fees. The yield option for sovryns would be that people that don’t run their own ln node can provide liquidity to sovryn ln nodes and earn yield through ln transactions costs. With Pickhardt payments, the Volume should be much higer than it is currently and with good ln connections a stable yield should be certain. The beautiful part is that you earn yield in btc on your btc. The question is if this works in a trustless way.

Pickhardt Payments won’t be out soon, thats more of a longer term play. (1-2 years minimum). But so is Sovryn :slight_smile:

If sovryn can provide users with an easy to use option to earn yield on the latest LN tech, it’s a big win.

1 Like

We have chosen to fund a grant proposal from the Sovrython lightning project winners to build the ln<>rsk bridge.

if you want to get involved, please reach out to Kris#8171 and / or pseudozach#1633 on discord; we don’t envision funding / pursuing additional lightning projects other than this one in the immediate future.

This of course applies to anyone on this thread - if you want to get involved in LN integration with sovryn / rsk, those are the guys to reach out to.

2 Likes