With the rising popularity of bitcoin, the lightning network has emerged as an important scaling solution to allow faster and cheaper bitcoin transactions. As a layer 2 protocol on top of the bitcoin blockchain, the lightning network enables fast, scalable and low-cost bitcoin payments by moving transactions off-chain. This opens up opportunities for investors who believe in the long-term potential of lightning network and want exposure to this nascent industry. In this article, we provide a guide on how investors can gain exposure to the growth of lightning network through various investment avenues.
Purchase stocks of companies building lightning network infrastructure
One way to invest in the growth of lightning network is to buy stocks of companies that are building infrastructure and tools to support LN. For example, Blockstream is a leading blockchain company that has contributed to developing the lightning network protocol. Blockstream’s c-lightning is one of the major implementations of LN. Investors can buy equity shares of Blockstream privately or wait for a potential IPO. Similarly, Lightning Labs is another notable startup building technology for scalable blockchain payments. Lightning Labs has received funding from major investors like Craft Ventures, Vy Capital, Slow Ventures etc. As it scales up, Lightning Labs can offer shares to other investors through private equity or an IPO route. Apart from these startups, public companies like Twitter, Square have shown interest in integrating Lightning Network for bitcoin tips and payments. So investors can also gain indirect exposure to LN by investing in these public companies.
Purchase LBTC – tokenized bitcoin on Lightning Network
LBTC stands for Lightning Network Bitcoin. It represents bitcoin that is transferred on the lightning network. LBTC takes advantage of LN’s speed and low cost to enable fast trading and transactions with bitcoin. Several crypto exchanges like Bitfinex, Okcoin have started supporting LBTC on their platform. So investors can purchase LBTC on these exchanges to gain exposure to Lightning Network activity. The value of LBTC is pegged to bitcoin, so as LN usage grows, demand for LBTC is also expected to increase. This growth potential makes LBTC an attractive asset for speculative investors. However, LBTC also comes with risks like exchange hacks, loss of peg etc. So investors should be aware of the risks involved.
Run a lightning node
For investors who want direct exposure, running a lightning node allows participating in LN’s network growth. Lightning nodes enable routing of payments, earning of fees and supporting the infrastructure of LN. By staking BTC as collateral, investors can run a node and earn fees from processing transactions and providing liquidity. The hardware requirements are minimal but running a node involves certain technical skills. Several implementations like c-lightning, lnd, eclair provide software to setup lightning nodes. Overall, running a node provides great exposure but requires hands-on involvement. Investors must consider their technical expertise before taking this route.
Develop applications on Lightning Network
The Lightning Network opens up possibilities for developers to build decentralized applications for micropayments, smart contracts etc. Building apps on LN provides an entrepreneurial opportunity for investors with a technical background. For example, apps for streaming payments, machine to machine transactions and bitcoin wallets can be built on LN. Success of these apps depends on the growth of LN adoption. So investing effort in building LN apps gives direct exposure to the scaling network’s growth. However, the risks of competition and technology failure needs to be considered.
The Lightning Network holds great promise as a scaling solution for bitcoin payments. For investors, it offers different avenues to gain exposure to this emerging innovation. Buying shares of lightning network companies, acquiring LBTC and running lightning nodes allows participating in the growth of this network. Developing lightning apps gives direct exposure but requires strong technical skills.