In the cryptocurrency space, Bitcoin's status as a store of value is widely recognized, but its application in payment scenarios still faces many bottlenecks. As a peer-to-peer off-chain payment channel solution, the Bitcoin Lightning Network (LN) carries the mission of promoting the widespread adoption 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, promoting large-scale adoption of cryptocurrency payments.
Project introduction and narrative
UTXO Stack is a hybrid Lightning Network (Hybrid LN) composed of the Lightning Network (LN) and Fiber Network (the Lightning Network implementation on Nervos CKB, FN), combined with a decentralized liquidity staking pool (Decentralized Liquidity Staking Pool, DLSP), enhancing the liquidity of the Lightning Network and introducing stablecoins into the Bitcoin ecosystem through a comprehensive infrastructure.
On December 19, 2024, UTXO Stack completed its Series A financing round with a valuation of $50 million, with participants including UTXO Management, PAKA, CMS, and others. The new funds will accelerate the development of UTXO Stack. Earlier, the seed round financing of UTXO Stack was completed 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 its first-ever large-scale airdrop incentive program targeting BTC liquidity within the Lightning Network in early January 2025. Subsequently, UTXO Stack will collaborate with the CKB Lightning Network Fiber Network mainnet launch to conduct liquidity airdrop incentives for assets related to CKB and RGB++. UTXO Stack is expected to complete its TGE (Token Generation Event) in Q1 2025, marking the first TGE for the Lightning Network ecosystem.
The focus of UTXO Stack is on servicing the decentralized liquidity staking of LN. While bringing liquidity to LN, it can also provide a new native non-custodial yield channel within the realm of BTCFi (Bitcoin Finance). Currently, Babylon is the only provider of native non-custodial yield in BTCFi, and UTXO Stack will become the second. Furthermore, 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, with a sustained growth 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, the current Lightning Network channels hold about 5,000 BTC ($500 million). 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 committed to addressing the current pain points of LN, promoting it to become the global payment infrastructure underlying PayFi (Payment Finance). From the perspective of TPS (Transactions Per Second), LN outperforms centralized systems and high-performance public chains, making it more suitable for the role of global payment infrastructure. Additionally, LN has advantages in instant finality, privacy protection, and transaction fees. In the future, as a solution that supports LN, UTXO Stack will undoubtedly capture immense value from 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. Restricted by a lack of stablecoin support, insufficient liquidity, and high user entry barriers, the development of the Lightning Network still faces challenges. UTXO Stack proposes a comprehensive set of solutions directly targeting the three core pain points of LN.
1. Introduce stablecoin support: Address the issue of Bitcoin being unsuitable for payments.
Currently, a major obstacle in promoting LN for everyday payments is that Bitcoin is not suitable as a payment currency. First, because of Bitcoin's price volatility; second, its attributes as digital gold and a store of value make people reluctant to spend it. However, UTXO Stack can bring stablecoins into LN through the hybrid Lightning Network. First, FN utilizes the Turing-completeness 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 function, ultimately entering the seamlessly interconnected FN and LN networks. This feature expands LN from a single Bitcoin payment network to an ecosystem that supports stablecoin payments, significantly enhancing its practicality.
Additionally, as an edge node serving as an intermediary between the LN and FN networks, it can enable atomic swaps of assets between networks. Assets like BTC and stablecoins (such as USDI) can be seamlessly exchanged between the two networks, ensuring either full completion or roll-back. For example, if Alice buys coffee from Bob, the edge node can receive Alice's BTC payment on the LN side and then transfer it out in equivalent stablecoin form 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. UTXO Stack's DLSP allows users to stake Bitcoin, stablecoins, and other assets into a shared liquidity pool, which will be 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 kept as profit for the nodes, while most flows back to the fund 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 in a 1:1 ratio, i.e., liquidity tokens. This way, staked assets can earn returns while maintaining asset liquidity, enabling participation in other economic activities (such as DeFi) and significantly improving capital efficiency.
Moreover, thanks to the Turing-completeness and programmability of CKB, DLSP is a smart contract-based system. DLSP can achieve automated liquidity management through smart contracts, significantly enhancing the liquidity management efficiency for node operators. To draw an analogy with trading platforms: existing liquidity leasing is like an order book model, while the DLSP approach is more akin to an automated market maker (AMM).
3. Zero-cost channel opening: Lowering the entry barrier for users
Opening channels on LN requires an initial fee, creating an economic barrier for new users. UTXO Stack introduces a 'zero-cost channel opening' model through smart contracts, where DLSP pre-pays related fees. If users subsequently receive sufficient incoming payments, they can maintain the channel and repay the fees; if not, the channel will be closed within a given time frame (e.g., three months), and any remaining funds will be returned to DLSP.
This model allows users to open channels without economic burdens, simplifying the entry process into the Lightning Network and significantly lowering the barrier to using the Lightning Network.
Building a comprehensive ecosystem: The technological 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 on DLSP and combines wallets, payment SDKs, and decentralized asset exchange nodes to provide comprehensive support for users and developers.
1. JoyID Wallet: The user entry point for the payment ecosystem
JoyID wallet, as an important component of UTXO Stack, not only supports rapid payments for LN and FN, but also enhances account security and user experience through integrated Passkey technology. JoyID wallet has the following features:
· Multi-asset support: Users can manage Bitcoin, stablecoins, and other assets in the wallet simultaneously.
· Easy participation in DLSP: Users can stake assets in DLSP to earn returns with one click.
· Stablecoin payment feature: Users can directly use stablecoins for Lightning payments through the wallet.
Currently, the number of JoyID users has exceeded 800,000. With its ease of use and comprehensive features, JoyID is expected to become a key entry point for 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 functions: Multi-asset atomic swaps (such as transactions between Bitcoin and USDI), functioning similarly to the aforementioned edge nodes.
· Application scenarios: After introducing stablecoins, ensure seamless exchange of various assets within the hybrid Lightning Network.
3. P2P payment SDK: Empowering developers
UTXO Stack's P2P payment SDK provides developers with rapid integration tools to embed the efficient payment functions of the hybrid Lightning Network into Web2 applications.
· Typical application scenarios: Content payment (such as article reading or video watching), subscription services, in-game purchases, etc.
· Developer support: The SDK allows existing Web2 services to be transformed to support P2P payments without complex infrastructure changes.
Through these modules, 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 mutual growth between users and developers.
Opening the Vision of Web5: The Future of Lightning Payments
UTXO Stack aims to build a truly decentralized peer-to-peer 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 as DLSP allows individuals to contribute liquidity to a fund pool, gaining reasonable returns while meeting the liquidity demands of the Lightning Network.
This goal is highly aligned with the philosophy of Web5. The core of Web5 combines the application convenience of Web2 with the decentralized characteristics of Web3, providing users with an autonomous yet simple user experience.
By supporting developers in integrating 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 service: Users pay for traffic or bandwidth on demand, without monthly or annual subscriptions.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 idle network bandwidth or computing resources and receive instant payments through LN.
These application scenarios can fully meet users' real needs, whether it's the demand for purchasing services or the need to earn revenue by selling services. In the future, as more people participate in the Lightning payment network, this peer-to-peer economic model will demonstrate greater synergy, thereby unlocking the potential of Lightning payments and promoting the large-scale adoption of cryptocurrencies. UTXO Stack: Unlocking the Payment Potential of Bitcoin's Lightning Network
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