How is OmniBOLT transforming the Lightning Network and bringing DeFi to Bitcoin
By: Operator Omnibolt
Tags: Blockchain Layer 2, Scalability, Lightning Network, Bitcoin, Lightning

How is OmniBOLT transforming the Lightning Network and bringing DeFi to Bitcoin Operator@OmniBOLT Mar 24·5 min read

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As decentralized finance (DeFi) keeps growing, OmniLayer will have to adapt. In 2021, scalability questions have been thrown to the forefront of the blockchain discussion.

As Ethereum’s gas prices keep growing due to DeFi transactions and NFT sales, and Bitcoin reaches a new all-time high on March 13 at 61,711.87 USD, fees in the BTC network have become more expensive. People looking to do transactions between tokens have flocked to different blockchains in search of lower fees. For example, BCH took over BTC on the volume of transactions during February of this year.

The race for scalability and allowing assets to move quickly and cheaply through a network is at the core of the blockchain today. Of course, one solution for Bitcoin is the Lightning Network, but at the moment, lightning channels only accept BTC transactions. There is a gap in the architecture that needs to be filled.

OmniBOLT the DeFi answer for the Lightning Network

OmniBOLT is a protocol built on top of Bitcoin and OmniLayer networks that allows native OmniLayer crypto assets to be transacted using the Lightning Network. The OmniBOLT channel allows for instant transactions of crypto assets issued on top of the OmniLayer.

It is important to understand that OmniBOLT itself does not issue any crypto tokens, instead it is an architecture that allows assets minted on OmniLayer to be exchanged using the Lightning Network. The tokens that move through these channels benefit from lower transaction fees and faster confirmation times, virtually instant. Additionally, the final state of the transactions is secured using both the Bitcoin network and the OmniLayer.

The most immediate use case for OmniBOLT channel is Omni Tether. The stable coin right now is the 3rd largest cryptocurrency by total market capitalization. The current rise in prices of crypto assets is fueling an investment bonanza, expanding the demand for Tether and driving fees higher.

In Ethereum, transactions in USDT have generated 1.65 million dollars in gas fees. As a result, many Tether users are turning to Omni Tether to escape the expensive costs of ERC-20 tokens. The pressure is shifting from Ethereum towards OmniLayer, which needs a fast way to scale USDT transactions in order to serve the new demand.

OmniBOLT is also able to onboard any of the more than 750 crypto assets built on top of OmniLayer. The result is a more scalable and versatile protocol that is able to meet the demands of the current and future crypto market.

Immediate use cases for OmniBOLT

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The use cases of OmniBOLT are many, and they will multiply as the DeFi and blockchain evolve. Of course, the most apparent one is to settle payments in USDT instantly using the Lightning Network. Transactions through these channels would not need the same confirmation period as that of the regular OmniLayer. Additionally, the fee structure would be customizable and would meet the market demand, and not the other way around. Other use cases are:

Instant Payment of tokens minted on OmniLayer. All of the properties OmniBOLT gives to Omni Tether would also extend to tokens from the OmniLayer ecosystem. No additional work is required to extend these benefits to other smart assets.

All of the properties OmniBOLT gives to Omni Tether would also extend to tokens from the OmniLayer ecosystem. No additional work is required to extend these benefits to other smart assets. Cross Channel Atomic swaps. OmniBOLT enables the use of Atomic Swaps between OmniLayer tokens and chains. For example, USDT and BTC have to be exchanged within a specified timeframe. To ensure neither party is able to cheat the other using a cryptographic hash function tied to a time deadline.

OmniBOLT enables the use of Atomic Swaps between OmniLayer tokens and chains. For example, USDT and BTC have to be exchanged within a specified timeframe. To ensure neither party is able to cheat the other using a cryptographic hash function tied to a time deadline. Decentralized exchange (DEX). DEXs are all over blockchain and DeFi. OmniBOLT enables a DEX to be created on top of lightning channels. These would benefit from the speed of lightning channels and the censorship resistance of the Lightning Network.

DEXs are all over blockchain and DeFi. OmniBOLT enables a DEX to be created on top of lightning channels. These would benefit from the speed of lightning channels and the censorship resistance of the Lightning Network. Collateral Lending contract based on the atomic swap. Here the borrower locks the valuable assets on an escrow account created using the atomic swap architecture. Then the person proceeds to repay the loan amount in different instalments. The original asset is returned to the borrower if all the payments were made in time.

Here the borrower locks the valuable assets on an escrow account created using the atomic swap architecture. Then the person proceeds to repay the loan amount in different instalments. The original asset is returned to the borrower if all the payments were made in time. Automatic market maker and liquidity pool for DEX. A liquidity pool is at its core a smart contract where two tokens are deposited in equal proportion. As one is borrowed more than the other, the latter becomes more expensive. The same capabilities can be replicated using OmniBOLT.

As we can see, OnmiBOLT enables the development of many DeFi use cases using OmniLayer and the Lightning Network. It is bringing new capabilities to the Omni family of protocols and ensuring that the project is able to compete with other blockchains in the market.

Yet, as we know, smart contracts are at the core of the current blockchain competition. They have allowed for the ICO bull market, the DeFi boom, and the current NFT craze. Here OmniBolt also offers a more scalable alternative.

Finally, OmniBOLT is developing a Smart Contract System on top of OBD channels. They would be off-chain, meaning that the network does not need to stop whenever a smart contract is processed like on Ethereum. The contracts would run on top of the OmniLayer and the Lightning Network. They would be more scalable and versatile than similar ones used on virtual machines.

Conclusion

The decentralized finance ecosystem is expanding on the entire crypto market. The pressure of high gas fees on other blockchains is forcing users to migrate to more scalable protocols. OmniBOLT is delivering on all the scalability the OmniLayer and Lightning Network needs by allowing native tokens to be exchanged over lightning channels.

Additionally, OmniBOLT is also creating new use cases for the base protocol. Automatic market makers, off-chain smart contracts, collateralized lending, and many other use cases will be powered by OBD channels. The capabilities of these new tools will empower current and new developers to create disruptive DeFi products using OmniLayer.

We are still early in the technological curve of the blockchain. OmniBOLT is the best guarantee that Bitcoin, OmniLayer, and the Lightning Network will remain at the core of the transformation.

OmniBOLT Technology guide part 1

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