Lightning Network can eliminate weaknesses in DeFi, says Michael Saylor
2 min read
The Lightning Network (LN) has presented very innovative solutions to the market. Recent weaknesses in the market for decentralized finance (DeFi) and even decentralized protocols bring a reminder: exaggerated yields can be too good to be true.
Can Lightning Network eliminate weaknesses in DeFi
In this sense, protocols that offered good returns ended up facing several difficulties. Many did not honor their commitments, others blocked looting. And of course, there’s the case of hacking attacks, which often cause millions of dollars in damage.
For many BTC maximalists, DeFi is a fraud and an unnecessary risk. However, Michael Saylor believes in this market. But with one caveat: DeFi can only thrive on the BTC network.
More specifically, Saylor believes the Lightning Network (LN) will act as the future hub of DeFi. In this sense, the second layer of BTC will be able to provide fast, cheap transactions with a much higher degree of security.
DeFi more securely
Saylor’s statement was given in response to a Bloomberg article on Tuesday (13). The article was talking about the end of expressive DeFi yields.
As the article explained, the protocol yields turned out to be “too good to be true.” And as investors discovered this, protocols saw their values plummet.
Sharing the story, Saylor wrote the following tweet:
“The sound ethical, economic & technical foundation for DeFi is #Bitcoin. The next generation of DeFi will be built using the #Lightning protocol and the #BTC token.,” said Saylor.
As such, the CEO of MicroStrategy has been quite bullish about the Lightning Network, BTC’s scaling solution. In fact, not even the sharp devaluation of the cryptocurrency dampened the executive’s optimism.
Saylor believes that BTC is the future of money and therefore the Lightning protocol will help scale transactions more efficiently.
“If you are going to make payments and transactions at high speeds, you need a base layer that is ethically, economically and technically sound. So, that’s what BTC does. With that, DeFi users will switch and perform billions and billions of transactions on a second layer like Lightning.”
LN
Through Lightning, users use satoshis – the smallest unit of BTC – to create channels and run their nodes. In short, this arrangement would make it possible to offer liquidity to the channels and, in return, be remunerated for it.
Above all, using Lightning means there is no risk of losing control of private keys or the protocol being hacked. Due to the security of BTC, the network is much more stable and secure to host these applications.
