Lightning Speed: Open-Source Bitcoin Banks’ Fee Structures For Inbound Liquidity

In the Lightning Network, inbound liquidity is a precious resource. The Galoy Research team detected an irregularity, and, trying to fix it stumbled into a whole business model. Their elegant solution transforms a problem into dollars, which is remarkable. This case reads like a detective novel. Let’s dive in. Related Reading | Lightning Speed: Podcasting 2.0 And Its Relationship With The Lightning Network Liquidity Leechers And Inbound Liquidity In the article “Galoy Research: Self-Balancing Fee Structures for Inbound Liquidity,” the company describes the problem to then lay on us the solution. Galoy are the creators of the Bitcoin Beach Wallet that Bitcoinist described here. The irregularity that the team detected was this one: “Galoy CEO Nicolas Burtey noticed that the onchain hot wallet was being depleted by a subset of users. These users consistently sent offchain bitcoin to the Bitcoin Beach Wallet only to withdraw it again onchain.” The company had to “use submarine swaps to replenish our onchain wallet and regain some inbound liquidity.” The thing is, “inbound liquidity is a valuable resource on the Lightning Network. The “liquidity leechers” were using Bitcoin Beach Wallet as a less expensive alternative to a service like Loop from Lightning Labs.” How Does Loop Manage Outbound And Inbound Liquidity? The service’s official website describes Loops as “the easiest way to manage inbound and outbound liquidity on the...