OmniBOLT — A Financial Revolution in combining OmniLayer and Lightning Network

Good day, dear reader of our blog. In this article, we will talk about important and very interesting things, namely the combination of the two fundamental Layer 2 solutions for the bitcoin blockchain and how OmniBOLT plans to make a revolution in the combination of these two solutions.

Let’s start by recalling what these solutions are. And let’s go a little deeper into history!

What kind of solution does OmniBOLT propose?

To understand what OmniBOLT offers in detail, we need to talk about the technical basics of how OmniLayer and Lightning Network work.

OmniLayer was built on the Bitcoin blockchain, so it cannot be called a cryptocurrency, but rather a layer that provides advanced exchange features such as custom currency, decentralized trading, smart contracts, etc. Since it is a layered protocol for the Bitcoin system, technically all Omni tokens can be called Bitcoin blockchain tokens. The blockchain automatically supports OMNI tokens without any major updates to its configurations. The concept of this is quite familiar with the HTTP and TC/IP relationship, where TCP/IP forms the connection between nodes that enables data transfer over HTTP.

OmniLayer is similar to the HTTP layer, which sits above bitcoin’s TCP/IP. This allows for features such as intelligent digital asset trading, contracts, decentralized cryptocurrency exchange, and even digital value exchange. Being a platform built on top of the BTC blockchain, all transactions relating to OMNI are recorded and valued by the Bitcoin network.

The essence of the Lightning Network is to create two-way payment channels between two established nodes in the network, through which instant, commission-free, two-way cryptocurrency payments will be made. Each node in the network initially blocks the blockchain amount allocated to the Lightning Network channel. The blocked funds are then processed by the channel using the cryptocurrency holders’ receipts rather than the cryptocurrency itself. The blockchain only records the allocation of funds to the Lightning Network open channel and the final balance of transactions after the channel is closed. The payment channel between nodes can remain open indefinitely at the request of users.

Well, having learned the basics of how these two solutions work, let’s move on to the key question raised in this article.

So what does OmniBOLT offer?

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.

Lightning Network offers superior functionality for cost-effective and efficient Bitcoin transactions, (it provides fast and inexpensive Bitcoin transactions, but the technology is limited to that single feature). OmniBolt takes the possible LN to a new stage in its development and its capabilities, allowing decentralized financial applications to work on top of the Bitcoin network.

OmniBOLT offers additional features for broader adoption and use of OmniLayer. With OmniBOLT Layer 2 solutions, users will be able to easily issue and interact with decentralized smart assets and off-chain smart contracts directly on top of Bitcoin as a component of the Lightning network.

OmniBOLT itself does not issue cryptocurrency tokens. It is an architecture that allows the exchange of more than 700 OmniLayer-based assets via the Lightning Network.

This guarantees 2 key benefits:

1. Tokens that move through OmniBOLT channels have lower transaction fees and almost instant confirmation;

2. The end result of the transaction is protected by the Bitcoin network itself and the OmniLayer architecture.

Separately, let’s look at the Key Features that will be available to users thanks to OmniBOLT:

1. Instant payment of smart assets issued on OmniLayer

2. Cross channel atomic swap of different assets

3. Decentralized exchange on top of lightning channels with quick exchange speed

4. Collateral Lending contract based on atomic swap

5. More flexible contracts for Decentralized Finance

Having looked in detail at all the features that OmniBOLT offers, I can add that the protocol will create a strong ecosystem around blockchain projects to accelerate innovation and commercial adoption of the technology. OmniBOLT facilitates the transition of industries to the on-chain era by developing Bitcoin’s core blockchain using its best second-tier solutions.

What is OmniLayer?

J.R. Willett published the first issue of the Mastercoin (old name for the OmniLayer) protocol in January 2012 as a “White paper” in which he proposed that existing Bitcoin protocols “use the already existing Bitcoin blockchain as a transport layer protocol to create new currencies with more complex rules without making changes to the Bitcoin protocol and software.”

OmniLayer is neither a fork of Bitcoin nor its own network, but rather a meta-layer on top of Bitcoin. It is essentially a software layer built on top of the Bitcoin blockchain that enhances the features of Bitcoin through its own additional characteristics.

Omni Layer allows tokenization and execution of other smart contract features on the Bitcoin network and benefits from its technology without the hassle of building a whole new blockchain.

What is the Lightning network?

Lightning Network is a technical solution being developed as a second-layer blockchain network protocol. Deployed on top of the bitcoin blockchain, the Lightning Network uses advanced smart contracts to achieve higher transaction throughput while maintaining the peer-to-peer nature of the bitcoin protocol.

Like the Bitcoin network, the Lightning network consists of nodes running specialized Lightning Network software. However, unlike the Bitcoin network, lightning transactions are not broadcast publicly and are not stored by all network participants. Individual lightning nodes communicate with each other privately.

We have covered the Lightning network in more detail in this article! 👈🏼

In conclusion, I can say that every year the popularity of using LN is only increasing, and the network is expanding rapidly. (See infographic).

With the combination of LN and crypto-assets on OmniLayer, OmniBOLT could take the earliest (and certainly mainstream) blockchain to the next level of usage.