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Lightning data provider Amboss wants to draw more enterprises to Bitcoin's Lightning, hopefully spurring adoption of the speedy and cheaper protocol, with the introduction of the so-called LINER (Lightning Index Rate) index.
The index provides businesses more insight into how much it costs to set up Lightning accounts on an annualized basis, as well as the yield businesses can earn by providing liquidity to the Lightning Network. With this public information they can better compare these numbers with the counterparts in traditional financial institutions a la Wall Street.
In many ways, LINER displays Lightning's cost advantages over legacy financial institutions, according to Amboss CEO and co-founder Jesse Shrader, which he believes will help draw businesses to the network.
There are two metrics measured in this graph. One is "yield," which can be earned when deploying capital to the Lightning Network. LINER's yield statistics are drawn from Amboss's Lightning Network Liquidity marketplace, Magma for buying and selling Lightning channels.
Usually lenders of money have to trust to some degree that the borrowers will pay them back. The same goes for centralized finance—custodial crypto platforms that promise a percentage yield for storing their Bitcoin with a certain provider. The risk for users is trusting a third party with funds. In Celsius's case, it went bankrupt amid the crypto bear market and it's unclear if it will ever be able to return the Bitcoin to all the users who entrusted their money with the company.
But, when used without a middleman, Lightning and Bitcoin don't have the same credit risk as the traditional financial system.
"If you are a large operator and able to team up with merchants, on the one hand you're earning low risk yield. On the other hand you're disrupting payment networks that haven't been innovated in decades," as Shrader put it in conversation with Decrypt.
Shrader argues this yield is also a way to combat monetary inflation. "For those who understand Bitcoin and who want to avoid the monetary devaluation that can happen—that's likely to happen—you can take the Bitcoin that you have and put it to work," he said.
Cost, benefit analysis
Then there's the cost metric. Digital transactions cost money to process. Every time a merchant accepts a payment for their goods, they generally have to pay a three-percent fee (in the US) for each transaction.
Though Lightning transactions are notoriously cheap, there are also costs to using Lightning, namely opening and closing channels, which cost an on-chain Bitcoin fee, which fluctuates over time.
"Now you can make a direct comparison to how much I am paying Visa [or another payment processor] to do my payment processing," Shrader said.
"[Using Lightning in the US] there will be modest savings even in this high transaction cost time. But for the rest of the world doing international payments -- the actual fee on top of that is much higher," Shrader argued. "Enterprises will be able to save money on payment processing just from the LINER cost metric."
LINER takes inspiration from the traditional banking system. It's crafted to be roughly equivalent to LIBOR, the prominent benchmark interest rate at which global banks lend to each other.
So far, most businesses in the Bitcoin world don't accept Lightning payments. We'll see if the growth of more accessible data like LINER offers enough incentive for businesses to make the switch, or if Lightning’s still too confusing for them.