- Amboss Technologies is launching Magma, a brand new market for purchasing and promoting liquidity on the Lightning Network.
- Magma makes use of a novel “HODL” bill that awaits three on-chain confirmations earlier than finishing the acquisition of a channel.
- The market will even monitor popularity, eradicating repeat offenders and confirmed cheaters.
Lightning Network startup Amboss Technologies is launching Magma, a peer-to-peer (P2P) liquidity market for Bitcoin’s Lightning Network, per a press launch despatched to Bitcoin Magazine.
Amboss famous that whereas liquidity marketplaces are not new, the corporate has built-in a collection of options to present a novel providing, together with a novel sensible contract setup and a popularity function.
Why Liquidity?
Liquidity is a vital facet of managing a Lightning Network node and its channels. Its friends’ inbound capacities will decide how a lot bitcoin they can obtain, and their outbound capacities will decide how a lot bitcoin they can ship.
Users can get hold of outbound capability by opening a channel with one other peer on the community, however so as to obtain Lightning transactions, one wants to purchase inbound capability. But a tough a part of managing Lightning liquidity is how to rapidly discover new inbound capability to hold your online business receiving lightning community funds. This is the place liquidity marketplaces are available.
Liquidity marketplaces search to enhance communication about the place liquidity is wanted within the Lightning Network. Market pricing info might help contributors with some additional bitcoin make one of the best resolution about the place their liquidity is wanted (and receives a commission for it).
In order for a P2P market to perform, channels between contributors want to have funds deposited within the channel that may be transacted backwards and forwards. Payments within the Lightning Network can circulate each methods. It’s buying and selling the identical funds again and again, quite than attempting to enter new funds into the ecosystem for each buy, that enables {the marketplace} to perform with out a government offering liquidity.
However, an issue emerges when a purchaser indicators their want for liquidity.
“Opening a lightning channel to provide liquidity uses a standard bitcoin transaction, which requires multiple confirmations before the payment is considered final. For Lightning, this process is almost instantaneous.
This mismatch between confirmation times with on-chain and Lightning transactions creates a moment in-between a Lightning transaction and its corresponding on-chain confirmation that allows users to “cheat” the system – a gap Magma seeks to fill.
The “HODL” Invoice
Magma aims to protect users purchasing liquidity on the platform through a novel smart contract setup it calls a HODL invoice, which prevents a payment from being immediately resolved by waiting for three confirmations on the Bitcoin blockchain. As a result, the window of time that an attacker could exploit is removed.
This functionality allows Amboss to function as a gatekeeper without requiring any custody of funds on either side of the transaction. If the customer selling liquidity does not create the channel in time, they will not receive the Lightning payment as the contract gets canceled.
The time limit requirement creates a highly-responsive liquidity market, but Amboss took it one step further and implemented another protective measure.
Reputation
Amboss will even create a popularity system on Magma to assist make sure the integrity of {the marketplace}, rewarding market contributors who comply with the foundations and penalizing those that manipulate the system.
If a client bought a channel that for some motive didn’t resolve, Amboss will monitor the price updates and replace the popularity of the vendor. Repeated abuse of the system or confirmations of dishonest might lead to expulsion from the Magma market which might require dangerous actors to use one other channel for liquidity wants.
