The Lightning Network is a faster and cheaper form of Bitcoin, but using it without a custodian can be a nightmare, requiring businesses accepting Lightning payments to know much more about the inner workings of Lightning “liquidity” than they'd like.
In super simple terms, businesses need liquidity to send and receive payments on the Lightning Network. But getting it in a hurry can be tricky to pull off.
Lightning Network data provider Amboss has launched a new subscription service “Hydro” to automate obtaining the liquidity necessary on the Lightning Network, a pain point for businesses or users accepting payments. By abstracting away these details, they hope to draw more businesses to the Network.
“Without liquidity, payments simply aren't possible,” Amboss CEO Jesse Shrader told Decrypt. “Amboss is focused on this problem because troubleshooting liquidity contributes to a steep learning curve for Lightning as well as requiring ongoing maintenance for Lightning users.”
Over time, developers have abstracted away pulling in liquidity from other sources to some degree. Hydro aims to abstract these details even more than before, purchasing the liquidity automatically behind the scenes when users need it.
Credit card payment processing fees for merchants average 2.24 percent a payment and might increase. But the Lightning Network is potentially a cheaper option—and managing liquidity can be automated, then there’s less downside to using the Lightning Network to accept payments.
Prepaid liquidity
Using Hydro, merchants buy prepaid Ambucks credits ahead of time that they can use to automatically buy liquidity when needed.
The user can specify what kind of Lightning channel leases they’d like to buy, such as how much inbound liquidity they need or what size node they’d like to connect to. Under the hood, Hydro uses Magma, Amboss’s marketplace where users can buy and sell liquidity. Hydro looks for the channels that meet the merchant’s needs at the best price.
“Amboss sources liquidity from a variety of providers that advertise their willingness to open channels for a fee. Amboss accepts payments in advance for pre-paid credits. Once channels have been opened, Amboss pays providers for creating channels that were requested,” Shrader said.
Arguably the most compelling part of Hydro is that businesses are able to keep control over their funds rather than trust a custodian to accept the Lightning payments for them. For decentralization advocates, this offers a way to have their cake and eat it.