In the field of cryptocurrency, Bitcoin's status as a store of value has been widely recognized, but its application in payment scenarios still faces many bottlenecks. As a peer-to-peer off-chain payment channel solution, Bitcoin's Lightning Network (LN) carries the mission of promoting the popularization of cryptocurrency payments, but it also has some limitations. Recently, UTXO Stack launched its white paper, seeking to inject new vitality into the Lightning Network through revolutionary technical design and infrastructure, and promote the large-scale adoption of cryptocurrency payments.
Project overview and narrative
UTXO Stack is a hybrid Lightning Network (Hybrid LN) composed of the Lightning Network (LN) and the Fiber Network (a Lightning Network implementation on Nervos CKB, FN), combined with a decentralized liquidity staking pool (Decentralized Liquidity Staking Pool, DLSP), to enhance the liquidity of the Lightning Network and bring stablecoins into the Bitcoin ecosystem.
On December 19, 2024, UTXO Stack completed its Series A financing with a valuation of $50 million, with investors including UTXO Management, PAKA, CMS, and others. The new funding will accelerate the development work of UTXO Stack. Previously, UTXO Stack completed its seed round financing on April 4, 2024, led by ABCDE Capital and SNZ Capital, with participation from CKB Eco Fund, OKX Ventures, Waterdrip Capital, Matrixport, y2z Ventures, DRK Lab, and UTXO Management.
UTXO Stack will launch a historic large-scale airdrop incentive program for BTC liquidity within the Lightning Network in early January 2025. Subsequently, UTXO Stack will align with the mainnet launch of the CKB Lightning Network Fiber Network to provide liquidity airdrop incentives for CKB and RGB++ related assets. UTXO Stack is expected to complete its TGE (Token Generation Event) in Q1 2025, marking the first TGE in the Lightning Network ecosystem.
The focus of the UTXO Stack is on serving the decentralized liquidity staking of LN. While bringing liquidity to LN, it can also provide a brand new native non-custodial yield channel within the landscape of BTCFi (Bitcoin Finance). Currently, Babylon is the only entity providing native non-custodial yield in BTCFi, and UTXO Stack will become the second. Moreover, unlike Babylon, the Bitcoin LN track where UTXO Stack operates is still a blue ocean. According to a report by Grand View Research, the global cryptocurrency payment market is expected to reach $2.15 billion by 2030, growing at a rate of 17.1%. If we look towards the centralized electronic payment sector, its market size will reach $21 trillion. As a superior iteration of centralized payments, there are currently about 5,000 BTC ($500 million) in Lightning Network channels, and with projects like UTXO Stack promoting large-scale adoption in this field, there is potential for exponential growth in the long term.
UTXO Stack is dedicated to addressing the current pain points of LN, propelling it to become a global payment infrastructure underlying PayFi (Payment Finance). From the perspective of TPS (Transactions Per Second), LN outperforms centralized systems and high-performance public chains, thus better suited for the role of global payment infrastructure. Furthermore, LN has advantages in instant finality, privacy protection, and transaction costs. In the future, as a solution supporting LN, UTXO Stack is bound to capture immense value within the Bitcoin ecosystem.
From pain points to breakthroughs: UTXO Stack's innovative solutions
Although the Lightning Network has shown great potential in low transaction fees, high speed, and privacy, its shortcomings are also evident in practical applications. Limited by the lack of stablecoin support, insufficient liquidity, and high user thresholds, the development of the Lightning Network still faces challenges. The UTXO Stack proposes a comprehensive set of solutions that directly address the three core pain points of LN.
1. Introduce stablecoin support: Solve the problem of Bitcoin being unsuitable for payments.
Currently, one of the main obstacles to promoting LN in daily payments is that Bitcoin is not suitable as a payment currency. Firstly, due to Bitcoin's price volatility; secondly, its properties as digital gold and a store of value make people hesitant to spend Bitcoin. However, UTXO Stack can introduce stablecoins into LN through the hybrid Lightning Network. First, FN utilizes the Turing-complete capabilities of the CKB blockchain to natively support user-defined assets. Therefore, stablecoin assets based on the RGB++ protocol can be issued on the Bitcoin chain and then transferred to the CKB chain through a bridge-less cross-chain feature, ultimately entering the seamlessly interconnected FN and LN networks. This functionality will expand LN from a singular Bitcoin payment network to an ecosystem that supports stablecoin payments, significantly enhancing its practicality.
Additionally, as an edge node acting as an intermediary between the LN and FN networks, it can facilitate atomic swaps of assets between networks. Assets like BTC and stablecoins (such as USDI) can be seamlessly exchanged between the two networks, ensuring that either everything is completed or everything is rolled back. For example, Alice buys coffee from Bob; the edge node can receive Alice's BTC payment on the LN side and then transfer it out in the equivalent stablecoin on the FN side, continuing through FN routing until it reaches the recipient, Bob.
2. Decentralized Liquidity Staking Pool (DLSP): Enhancing liquidity
Insufficient liquidity has always been a core challenge for LN. The DLSP of UTXO Stack allows users to stake Bitcoin, stablecoins, and other assets into a shared liquidity pool, which is then rented out to the hybrid Lightning Network. Nodes in the hybrid Lightning Network obtain liquidity from DLSP to provide routing services for LN and FN users. Users pay service fees to the nodes, a portion of which is retained as income for the nodes, while the majority flows back into the liquidity pool as dividends for DLSP liquidity contributors.
At the same time, DLSP introduces liquidity staking derivatives (Liquidity Staking Derivatives, LSD), allowing liquidity assets injected into DLSP to generate staking certificates, or liquidity tokens, on a 1:1 basis. This way, the staked assets can earn returns while maintaining their liquidity, allowing participation in other economic activities (such as DeFi), significantly increasing capital efficiency.
Moreover, thanks to the Turing-complete programmability of CKB, DLSP is a system based on smart contracts. DLSP can achieve automated liquidity management through smart contracts, significantly improving the liquidity management efficiency of node operators. To draw a parallel with trading platforms: existing liquidity leasing is like an order book model, while the DLSP approach is more like an automated market maker (AMM).
3. Zero-cost channel opening: Lowering user thresholds
The opening of LN channels requires an initial fee, which creates a certain economic threshold for new users. UTXO Stack introduces a 'zero-cost channel opening' model through smart contracts, where DLSP pre-pays the related fees for users. If users subsequently receive enough incoming payments, they can maintain the channel and repay the fees; however, if users do not receive sufficient incoming payments within a given period (for example, three months), the channel will be closed, and any remaining funds will be refunded to DLSP.
This model allows users to open channels without economic burdens, simplifying the entry process into the Lightning Network and significantly lowering the barriers to using the Lightning Network.
Building a comprehensive ecosystem: The technical layout of UTXO Stack
UTXO Stack provides not just a single-function technical solution but builds a complete hybrid Lightning Network payment ecosystem through multi-layered infrastructure design. This system centers around DLSP while integrating wallets, payment SDKs, and decentralized asset exchange nodes, offering comprehensive support to users and developers.
1. JoyID Wallet: The user entrance to the payment ecosystem
The JoyID wallet, as an important component of the UTXO Stack, not only supports fast payments for LN and FN but also enhances account security and user experience through the integration of Passkey technology. The JoyID wallet has the following features:
· Multi-asset support: Users can manage Bitcoin, stablecoins, and other assets within the wallet simultaneously.
· Easily participate in DLSP: Users can stake assets in DLSP with one click to earn returns.
· Stablecoin payment feature: Users can directly use stablecoins for Lightning payments through the wallet.
Currently, the number of JoyID users has surpassed 800,000. With its ease of use and comprehensive functionality, JoyID is expected to become a key entry point into the Lightning payment ecosystem.
2. Decentralized exchange nodes: Bridges connecting assets
UTXO Stack offers a set of decentralized asset exchange nodes, supporting decentralized, trustless atomic swaps between Bitcoin, stablecoins, and other assets.
· Core functionality: Multi-asset atomic swaps (such as trading Bitcoin and USDI), similar to the edge nodes mentioned earlier.
· Application scenarios: After introducing stablecoins, ensure seamless exchanges of various assets within the hybrid Lightning Network.
3. P2P payment SDK: Empowering developers
The P2P payment SDK of UTXO Stack provides developers with rapid integration tools to embed the efficient payment features of the hybrid Lightning Network into Web2 applications.
· Typical application scenarios: Content payments (such as article reading or video watching), subscription services, in-game purchases, etc.
· Developer support: The SDK can transform existing Web2 services to support P2P payments without complicated infrastructure changes.
Through these modules, the UTXO Stack not only addresses the technical pain points of the Lightning Network but also provides a complete infrastructure for the Lightning payment ecosystem, further promoting bi-directional growth for users and developers.
Opening the Web5 vision: The future of Lightning payments
The UTXO Stack aims to build a truly decentralized peer-to-peer economy (P2P Economy) ecosystem. In this ecosystem, individuals and entities will seamlessly serve each other through a fair incentive mechanism, promoting cooperation without relying on centralized intermediaries, just like how DLSP allows individuals to contribute liquidity to a fund pool, gaining reasonable returns while meeting the liquidity needs of the Lightning Network.
This goal is highly aligned with the philosophy of Web5. The core of Web5 lies in combining the convenience of Web2 applications with the decentralized characteristics of Web3, providing users with an experience that is both autonomous and simple.
By supporting developers to integrate UTXO Stack's technology into existing Web2 applications, Lightning payments are not limited to wallet transactions but can be widely applied to various online services: gcv\ p.0, /C---0nkmDN services: Users pay for bandwidth or traffic on demand without needing to subscribe monthly or annually. 01.0
· Storage and computing services: In distributed storage or computing services, fees are settled in real-time based on actual usage or usage time.
· Bandwidth or resource sharing: Users can rent out idle network bandwidth or computing resources and receive instant payments through LN.
These application scenarios can fully meet users' real needs, whether it is the need to purchase services or the need to sell services to earn income. In the future, as more people participate in the Lightning payment network, this peer-to-peer economic model will showcase greater synergy, thereby unleashing the potential of Lightning payments and promoting the large-scale adoption of cryptocurrencies. UTXO Stack: Unleashing the payment potential of the Bitcoin Lightning Network
This article comes from a submission and does not represent the views of BlockBeats.
