Amboss launches Hydro to quench liquidity demand on Bitcoin's Lightning Network

Lightning Network data analytics provider Amboss has launched Hydro — a subscription-based auto-sourcing liquidity solution for the Bitcoin BTC +1.05% Layer 2.

Hydro aims to enable businesses to receive payments over Lightning without the complexities of channel management or requiring centralized custodial intermediaries, according to a statement.

The solution allows users to automatically access liquidity from decentralized sources to their Lightning node on demand, with fees from 3.5% for the initial setup to as low as 0.003% for payments, Amboss stated.

"Hydro is a game changer for businesses to get the benefits of the Lightning Network without trusted custodians, intermediaries or the headache of channel management," Amboss co-founder and CEO Jesse Shrader said. "As the Lightning Network welcomes global participation, Hydro simplifies real-time payment infrastructure to bootstrap global circular economies like we’ve seen in Costa Rica's ‘Bitcoin Jungle.'"

Pay with 'ambucks,' powered by Magma

Hydro is powered by Magma, Amboss's marketplace for buying and selling Lightning channels, sourcing liquidity from the open market. Sellers can earn a bitcoin yield to provide liquidity on Magma, opening Lightning channels to online stores, wallets and other Lightning users without the custodial risk of centralized yield-generating platforms.

Hydro works by purchasing Lightning channel leases from those sellers that meet its quality criteria for the lowest price. Users can customize their Lightning node payment capacity and automatically purchase channels using Amboss's prepaid credits "ambucks."

Businesses can also set target inbound liquidity — the total value of bitcoin payments it can receive — enabling tailored, cost-effective channel management without the opportunity cost of locking up significant amounts of their own capital or the technical expertise required for manual channel management.

Addressing Lightning Network adoption

The Lightning Network is a second-layer solution of payment channels built on top of the Bitcoin blockchain, designed to enable fast and low-cost transactions. 

Businesses have previously faced challenges in sourcing liquidity and managing Lightning channels, hindering enterprise adoption and fueling use of centralized custodial solutions.

Overall Lightning Network adoption has continued to grow over the past year, however, with a current total capacity of nearly 5,000 bitcoin ($129 million), according to The Block's data dashboard. Although, this is down 12.5% from a peak of 5,640 bitcoin in July.

In July, Shrader told The Block in an interview that BlackRock's proposed spot bitcoin ETF misses the opportunity to deploy those funds on the Lighting Network and earn non-custodial yield by providing payments infrastructure, disrupting payment processors like Visa, Mastercard and American Express.