BitcoinBusiness

LN Markets Closes Pre-Seed to Build Bitcoin Derivatives on the Lightning Network

Lightning-based Bitcoin derivatives trading platform LN Markets announced it has closed a pre-seed funding round with investors such as Bitfinex, Fulgur Ventures, and Arcane Crypto.

LN Markets told the BTC Times that since launching their alpha in March earlier this year, it had aggregated over $10 million in total volume, despite implementing maximum margin limits of 0.01 BTC. 

Traders on the LN Markets application execute trades directly from their Lightning wallet without the need to rely on an exchange as a custodian, which further eliminates withdrawal queues that can occur at centralized exchanges.

“We did a demo with one of the largest fund managers in France and it was like magic to them. When you settle a traditional financial instrument, it can take up to three days. With Bitcoin, it can take between one hour and one day. But with Lightning, it’s instant,” co-founder Romain Rouphaël shared with the BTC Times. 

One of the biggest challenges LN Markets faces is capturing the Bitcoin derivatives market on centralized exchanges. In the last 24 hours alone, leading derivatives exchanges reported between $500 million and $2 billion in trading volume only for their BTC-USD(T) products.

According to LN Markets, regulatory hurdles are the reason for the application’s 0.01 BTC margin limit, as European AML regulations only allow for transactions below €50 without triggering KYC.

However, it appears as if the Lightning Network derivatives exchange has found a niche amongst traders, having recorded a spike in trading volume in April this year in a time when traders are increasingly requesting Lightning implementations from exchanges.

written by

Andrew Yang is a researcher obsessed with Bitcoin and the Lightning Network.