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Bitcoin Pioneer LN Markets Raising Capital, Building 'Liquidation Killer'

Bitcoin Pioneer LN Markets Raising Capital, Building 'Liquidation Killer' 101
Source: Adobe/lanarusfoto

LN Markets, the first bitcoin (BTC) derivatives exchange built on top of the Lightning Network (LN), reached USD 6m in total aggregate trading volume and is now raising capital in order to accelerate its growth.

The platform was launched in December 2019 in Beta, while their Alpha version went live in March this year. Since December, the exchange has processed over 22,000 trades.

The company started their fundraising process a few weeks ago, LN Markets co-founder Romain Rouphaël told Cryptonews.com, declining to elaborate any further.

Currently, the platform has around 1,000 daily active users. Trading limits are still small because the platform is still in Alpha. Traders can only trade up to BTC 0.01 (USD 92) at this point in time.

According to Rouphaël, in their product pipeline, there are bitcoin options, a bitcoin volatility index, and a new financial instrument called “liquidation killer.”

The idea behind the liquidation killer is to prevent traders from getting their positions liquidated from sharp price movements as is often the case on existing exchange offerings. To prevent that from happening, a trader can purchase a liquidation killer that prevents liquidation, for example, for a 24-hour period. The option to purchase a liquidation killer will be available for all trades and the payment of the premium will be automatically added when the margin is paid.

Additionally, LN Markets is keen to develop financial products on top of the Lighting Network using the RGB Protocol.

It is a smart contract system built for the Lightning Network that enables the issuance of fungible and non-fungible digital assets as well as digital identities, similar to ERC smart contract standards for the Ethereum (ETH) network.

Using the new LN smart contract technology, the platform plans to add stablecoins to its platform to enable financial products to be quoted in dollars and euros in addition to bitcoin.

A trading API is also on the roadmap to enable traders to plug into LN Markets directly.

BitMEX on Lightning

The platform was founded by a group of ex-traders who left banking for Bitcoin in 2015. After several years of consulting and developing blockchain solutions for financial institutions, Côme Jean Jarry, Victor Afanassieff, and Romain Rouphaël founded the company in 2019 to build an entirely new trading experience with instant delivery versus payments - made possible by the Lightning Network. The team is located in Paris, France.

“When the Lightning Network came, we had the idea to build a type of BitMEX on the Lightning Network, where you could instantly send funds when you enter a position and get them back directly into your wallet when you close it out,” Rouphaël said.

Now, as part of its Alpha testing phase, the web-based trading platform offers CFD (contract for difference) trading on the currency pair BTC/USD with up to 50x leverage. But the platform’s two standout features are authentication via LNURL, and instant trading and settlement.

  • By signing a transaction using a Bitcoin Lightning wallet, users can create an account and start trading. There is no need for KYC (know your customer) or even an email address.
  • Depositing, withdrawing, and trading is instant thanks to the Lightning Network.

“We launched LN Markets on March 11 on the Bitcoin mainnet, a day before the crypto markets collapsed. What was interesting about launching during this period was that when the price of bitcoin crashed, it showed why LN Markets made sense because that day, a lot of traders had difficulties moving around their bitcoin and, ultimately, one large bitcoin hedge fund went bankrupt because it could not pay its margins on BitMEX on time,” Rouphaël said.

According to him, many traders choose to compromise on security by leaving funds on centralized exchanges because it takes too long to deposit funds, while withdrawal also takes time and costs money.

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