Can the Lightning (LIGHT) Protocol make money from Decentralized Venture Capital?

There is enormous interest in the Lightning (LIGHT)Protocol token. CoinMarketCap estimates Lightning was the most trending cryptocurrency on 26 September 2021. So what is Lightning and why is Mr. Market interested in it?

Lightning (LIGHT), or the Lightning Protocol (LIGHT), is the token for the Lightning Ecosystem. The Lightning Ecosystem’s purpose is to give investors access to Decentralized Venture Capital (DeVC) through the Binance Smart Chain blockchain.*

Proceeds from Lightning Protocol sales will finance the Lightning Incubator. The Lightning Incubator gives project developers that meet its criteria money, guidance, support and access to Lightning’s integrated Initial Dex Offering (IDO) Launchpad. The Lightning Launchpad allows Lightning Protocol holders to invest in approved blockchain projects.

I know of no connection between the Lightning Ecosystem and the Lightning Network. The Lightning Network is a second layer payment protocol they add to the Bitcoin (BTC) blockchain. The purpose of the Lightning Protocol is to make Bitcoin transactions faster by making the Bitcoin blockchain more scalable.

The Lightning Ecosystem

The ultimate hope at Lightning is to create a decentralized alternative to traditional venture capital.

In traditional venture capital, a select group of wealth investors control access to startup money. In Decentralized Venture Capital (DeVC) anybody with cash could use Lightning (LIGHT) to invest in IDOs.

Lightning offers a two-round system of reserves that allows developers to offer multiple IDOs to let both large and small investors buy in. Holders in all tiers can invest large amounts in any IDO.

The two rounds are a reserved allocation round and an FCFS (First-Come-First Serve) Round. In the reserved allocation round users can purchase their tier defined maximum until they exhaust the supply or a deadline.

In the FCFS round or Round Two, they put all remaining tokens in a nonsegregated pool. They allow users to purchase IDO shares up to their remaining limit in Round Two.

The Lightning Launchpad offers four levels of IDO investment: Bronze, Silver, Gold, and Diamond. Bronze offers 5,000 to 10,000 shares for up to $250. Silver offers 10,001-35,000 shares for up to $500. Gold allows users to buy 35,001-100,000 shares for up to $1,000. Diamond allows you to buy 100,001 or more shares for up to $2,500.

The Lightning Incubator

The Lightning Incubator serves as a bridge between companies and Project Developers. Lightning partners with many respected Trust-as-a-Service (TaaS) companies. Thus Lightning provides a market for the products its incubated projects create.

CertiK and Hacken audit all the Lightning incubated projects. They claim these audits will help all Lightning IDOs meet the US Securities and Exchange Commission’s (SEC) Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements. Many IDOs are illegal in the United States because of the SEC rules.

The Lightning Incubator helps developers build projects that can operate on several blockchains through cross-chain support. They claim Lightning Incubator projects could operate on the Ethereum (ETH), Avalanche (AVAX), Polygon (MATIC), and Binance (BNB) blockchains.

Interestingly, they claim non-incubated IDOs can access the Lightning Ecosystem through the Lightning Cross-Chain Launchpad. Hence, a non-Lightning IDO could receive DeVC funds through the Lightning Incubator. In addition, Lightning Ecosystem users could buy shares in that IDO.

The Lightning Pools

The Lightning Ecosystem allows investment in blockchain products through private pools and vetted pools. The private pools include:

Meld (MELD) is non-custodial decentralized finance (DeFi) banking protocol that runs on the Cardano blockchain. Lightning Private Pools or Private Rounds are private sales or seed sales that raise capital to launch projects.

The Lightning Vetted Pool or Blizzard. For example, the Blizzard Vetted Pool is a yield aggregator on the Avalanche (AVAX) Network. The Blizzard Network offers Prime Aggregation for Avalanche Yields. Blizzard allows investors to earn passive income from Avalanche by yield farming.

The Lightning Protocol (LIGHT)

The Lightning Token contains what they claim is the first deflationary elasticity protocol.

To explain, Lightning tries to prevent inflation by regularly burning LIGHT to keep the token scarce and prices high. Lightning rewards investors through automatic rebases they issue directly to wallets.

Mr. Market gives the Lightning Protocol (LIGHT) a little value. Lightning had a Coin Price of 48.73₵, a Fully Diluted Market Cap of $48.726 million, and a 24-Hour Market Volume of $2.476 billion on 27 September 2021.

CoinMarketCap named Lightning, the 2866th most valuable cryptocurrency, on 26 September 2021. They based these numbers on a Maximum supply of 100 million LIGHT and a Total Supply of 80.76 million LIGHT. In comparison, Coinbase gave Lightning a Coin Price of 49₵, a Market Cap of $2.5 million on 27 September 2021.

So What is Lightning?

I think the Lightning Ecosystem resembles an investment bank. To explain, Lightning arranges finance and helps companies raise capital investment banks do.

Thus, Lightning is trying to enter the investment banking business and compete with behemoths such as Goldman Sachs (NYSE: GS). Investment banks can be lucrative.

For instance, Goldman Sachs reported a quarterly gross profit of $15.388 billion and a quarterly operating income of $6.84 billion on 30 June 2021. Investment banks can accumulate enormous amounts of cash, Goldman Sachs had $590.666 billion in cash and short-term investments on 30 June 2021.

In addition, Goldman Sachs reported a quarterly ending cash flow of $49.134 billion, a quarterly financing cash flow of $37.888 billion, and a quarterly operating cash flow of $17.362 billion on 30 June 2021. Goldman Sachs also reported an ending cash flow of $191.155 billion on 30 June 2021.

Thus, Lightning is entering a lucrative business. However, there is no proof Lightning can incubate successful blockchain projects or make money from them. Yet the profits could be vast. Moreover, there is a possibility that a finance giant such as Goldman could buy the Lightning Ecosystem.