Gaining exposure to Bitcoin derivatives trading often requires a centralized service provider. LN Markets is a slightly different creature, as it leverages the Lightning Network. An interesting way of betting on the price of Bitcoin now, or in the future.
The LN Markets Vision
At its core, one has to commend the LN Markets team for what they are trying to do. Although the interface is centralized, everything else occurs in a user-controlled fashion. Opening and closing positions is done by using the Bitcoin Lightning Network protocol. Users open positions by making transactions, and close positions themselves, In the latter case, they receive their outstanding balance directly into their wallet.
This is a big step up compared to the way traditional derivatives platforms handle this situation. They often require users to deposit funds onto their platform before executing trades. Moving funds off such platforms can also be very complicated, which is far from ideal. A decentralized approach to Bitcoin derivatives is a novelty, and a rather interesting one too.
Dipping in a Toe Before Swimming
As novel as this concept is, some people may be confused by how it all works. That is entirely normal. It is for this reason LN Markets provides a testnet version. It is a good way to get acquainted with the service, as well as the Lightning Network technology itself. Spending testnet coins does not require real-world money, making it a good testing ground.
No Signups Required
Perhaps the most appealing aspect of LN Markets is how users don’t need an account. All that is required to gain exposure to the instruments is a funded Lightning wallet. Additionally, that wallet needs a path or a direct channel with LN Market’s node. All of this is relatively easy to set up, and is a big step up from sharing personal information with third-party service providers.
Depending on the Lightning wallet one uses, it should be possible to authenticate directly with the LN Markets platform. There is also an option to create an “account” by sending 100 Satoshi to create a username and password. This latter option should not be explored unless there is absolutely no other option, though. The platform is designed for account-less authentication first and foremost.
Up to 50x Leverage
Although one may not suspect it at first, LN Markets offers some decent leverage. Users can enhance their position up to 50x. A more than acceptable leverage limit, especially given how “limited” liquidity on the Lightning Network still is today. This puts some constraints on what the platform can achieve, but it is certainly a step in the right direction.
As is always the case when experimenting with leveraged trading, positions can be liquidated very quickly. Users will need to keep tabs on those positions at all times. However, there is no extra charge for liquidation, which is a nice addition. All things considered, LN Markets appears to have its ducks in a row.
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