Online Field Experiment

This Working Paper is a non-institutional research paper on field trials with the Bitcoin Lightning Network and the Ethereum ecosystem. It characterizes the conduct of an online experiment in a multidisciplinary context. The given research manuscript is a pre-release, informally reviewed by a group of independent community members. It serves for educational purposes and allows the wider crypto community to provide feedback for the improvement of Plenny. This version was published at the time of research and development (R&D) but has not undergone the formal peer review required for final publication.

The Plenny experiment aims to investigate token economics applied to providing liquidity to the Lightning Network, which is a layer-2 technology (L2) built on top of Bitcoin. The trial explores to what extent Lightning Nodes are ready to interact with the Ethereum ecosystem when incentivized with token rewards.

In the context of the crypto ecosystem, the study aims to answer the following primary questions:

  1. To what extent can a decentralized application using Ethereum support decentralization and growth of the Bitcoin Lightning Network?
  2. To what extent can cross-chain blockchain technology be applied to supplement the fee income of Lightning Nodes with token rewards to enable the active provision and expansion of lightning services?
  3. On what transaction cost basis does Ethereum Layer 2 technology allow for developing a capacity market and oracle network that mirrors payment channel capacity and transaction fees on the Bitcoin Lightning Network to improve connectivity as well as liquidity allocation for Lightning Nodes?
  4. On what technical, economic, and legal basis is it possible to combine decentralized financial services with the provision of payment channel capacity, when creating fungible tokens for the non-financial digital economy of a non-custodial decentralized application and permission-less network?
  5. To what extent can rewards through hybrid tokens used in the regulationfree sector of the P2P and P2C paradigm generate active income comparable to passive income of asset tokens such as earning interest or dividends (i.e. non-financial digital economy versus decentralized financial economy)?

The answers to these research questions are sought through the practical implementation of Plenny. Other factors shall be added to this general equation as they come to light during the online field experiment.

The initial focus of research and development is on the application phenomena triggered by decentralized applications in the context of technical, economic, and legal aspects. In this way, the open-source project addresses specific problems that include but are not limited to the impact of minting, burning, locking, staking and delegating, the influence of custodial vs. non-custodial wallets, consequences for the token economy in case of active income (i.e. service rewards) versus passive income (i.e. financial interest), and the fundamental effects of fungible items related to on-chain, off-chain, and cross-chain transactions.

With the deployment of Plenny, its features are being put to the test. The Dapp and the DON as well as the associated token must prove their usefulness in practice. Ultimately, the question arises as to whether the Ethereum ecosystem is capable of supporting the economics of the LN and its payment channels.