- LINER Index aims to promote Lightning Network adoption by showcasing cost-efficiency. The Index measures ‘yield’ from deploying capital and ‘cost’ of digital transactions.
- Lightning Network can offer cost savings, especially for international transactions.
The Bitcoin ecosystem is on the brink of a major transformation as Amboss, a Lightning Network data provider, introduces the LINER (Lightning Index Rate) index. This new tool aims to boost the adoption of Bitcoin’s Lightning Network among the global business community, constituting a trillion-dollar market.
In essence, LINER could become a powerful catalyst for facilitating faster Bitcoin payments for billions of enterprises. Per reports, the LINER index promises to provide more transparency regarding the costs of establishing Lightning Network accounts.
It also highlights the potential yields businesses can gain by providing liquidity to the network. By facilitating these comparisons, enterprises can draw parallels between Lightning Network accounts and traditional Wall Street financial institutions.
Jesse Shrader, Amboss CEO and co-founder believes LINER showcases the cost efficiency of the Lightning Network over legacy financial systems, which should attract more businesses to the network.
LINER: Measuring ‘Yield’ and ‘Cost’ for Effective Bitcoin Transactions
The Index measures two metrics: the ‘yield’ and the ‘cost.’ The yield denotes the earnings a company can make by deploying capital to the Lightning Network. The data for this measure is derived from Amboss’s Lightning Network Liquidity marketplace, Magma. Unlike conventional lending scenarios where lenders must trust borrowers to repay them, the Lightning Network reduces credit risk as no intermediary is involved.
In a recent discussion, Jesse Shrader underlined the potential benefits for large operators who can collaborate with merchants. He highlighted how such collaborations could generate a low-risk yield and disrupt traditional payment networks. Shrader argues that Bitcoin can act as a hedge in the context of ongoing monetary inflation, effectively combatting potential monetary devaluation.
Then comes the ‘cost’ metric, which illustrates the expenses associated with digital transactions. Generally, every transaction costs money to process, with the typical merchant fee in the US being around three percent. However, even though Lightning transactions are incredibly affordable, there are costs associated with opening and closing channels, which require an on-chain Bitcoin fee.
Amboss CEO Reveals Game-Changing Cost Metrics
Shrader argues that the cost metric provided by LINER will allow enterprises to compare their transaction costs with traditional payment processors like Visa. He believes that while there may be modest savings in high transaction cost times for businesses in the US, the potential for savings is even greater for international transactions where fees are typically higher.
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LINER borrows inspiration from the traditional banking system, mirroring global banks’ LIBOR benchmark interest rate for interbank lending. However, despite the potential benefits of the Lightning Network, many businesses in the Bitcoin ecosystem have yet to adopt Lightning payments.
As Amboss introduces more accessible data through LINER, the landscape might change. The real test will be whether this tool manages to demystify the Lightning Network for businesses and become a powerful motivator for adoption.
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