4.3. Lightning Network payments

Lightning network is enabled for all fungible RAS tokens. Sequentia’s Lightning Network wallet functionalities use the same BOLT specifications meant for Bitcoin. It is possible to make an on-chain transaction by opening a payment channel in a token issued on Sequentia, and then all the following payments in that token can be made through that channel. Indeed, the channel can also be used as a route for the payments of other users, even in different tokens.

Lightning Network payments are expected to be used on Sequentia, particularly with stablecoin transactions, since they have high liquidity and are frequently transferred between custodial services/exchanges that have better means of creating well-balanced channels than the average users. However, in the future even tokens with lower liquidity might take advantage of the Lightning routes built for Bitcoin (or any stablecoin with enough broad adoption) to be exchanged as assets at the edges with multi-hop transfers.

Let us assume well-developed Lightning payment routes exist for Bitcoin, or any other token like a highly liquid stablecoin (let us say S-USD). Then building an entirely new network for any other RAS token is unnecessary since any asset can use the BTC or S-USD routes as a backbone for their transactions.

Imagine Alice wants to transfer a RAS utility token (let us call it UTL) to Eve for a value of 50$. Alice and Eve have no open Lightning channels between them with any token. However, Alice has an open channel with Bob in UTL, Bob has an open channel in BTC with Charlie, Charlie has an open channel in S-USD with Dave, and Dave, in turn, has an open channel with Eve in UTL. All channels have enough liquidity to allow a transfer of value for 50$ (though it is expressed in different tokens).

At this point, Alice can use the route between Bob and Charlie in BTC and the route between Charlie and Dave in S-USD to transfer UTL to Dave. How does it work? Alice sends 50$ worth of UTL to Bob in their Lightning channel. Bob charges a small fee to Alice and sends 50$ worth of BTC to Charlie. Charlie charges a small fee and sends 50$ worth of S-USD to Dave, who, in turn, charges a small fee and sends 50$ worth of UTL to Eve.

At the end of the process, Bob, Charlie, and Dave each have more UTL, BTC, and S-USD, respectively, in their balance than before, but their total balance value in US dollars has not changed, except they earned a little routing fee paid by Alice. Alice successfully transferred UTL to Dave despite having no Lighting channel open between them in RAS tokens.

Thanks to this routing with “assets at the edges,” it is possible to route any number of assets removing the need to bootstrap an entirely new network for any new asset, and achieve a broader multi-asset Lightning Network thanks to the already developed Bitcoin infrastructure. In the case above, UTL is at the edges, utilizing a pre-existent route in BTC on the Bitcoin network, and S-USD on the Sequentia network.

Another potentially revolutionary use case for the Lightning Network with RAS tokens is the high-frequency, low-cost peer-to-peer trading of stablecoins, utility, and security tokens against BTC or each other. This is detailed further in the DEX section dedicated to the Lightning Network swaps (see §5.2).