By
Temitope Olatunji
April 18th, 2024
Lightening Cash is a project that uses zero-knowledge proofs to provide users with an assurance of privacy in their blockchain-based transactions.
Even by the standards of the fast-moving cryptocurrency markets, the rise of decentralized finance has been remarkable. Only one year after hitting the $1 billion milestone, the total value locked in DeFi exceeded $40 million in February this year.
While other platforms are now making headway in propagating their own DeFi ecosystems, the vast majority of that growth has taken place on the Ethereum blockchain. Ethereum often comes under fire for its lack of scalability and high transaction fees, and rightly so.
However, there’s another issue with Ethereum-based DeFi that’s less frequently discussed – privacy. Every single transaction that takes place on Ethereum is recorded publicly. If you give someone your public wallet address, they can find out how much crypto you’re holding.
In the context of DeFi, the issue comes with even bigger problems. Ethereum’s transparency promotes front-running in DeFi. Front-running generally occurs in arbitrage transactions where traders attempt to profit from price differentials across exchanges.
The problem is that once a DEX transaction is broadcast to the network, even before it’s included in a block, it’s possible that another user, or more commonly, a bot, will see the same opportunity. They swoop in, bid a higher gas price so that a miner will include their transaction in a block first, and take the profit away from the trader. The practice is rife, as demonstrated in an August 2020 blog post from programmer Dan Robinson, who told of how his team ended up losing out on $12k worth of profit to a front-running bot.
Therefore, it’s evident that the privacy issue on Ethereum isn’t a trivial problem. Thankfully, at this point in DeFi, crypto innovators are beginning to emerge with solutions, and one such example is Lightening Cash, developed on the fast-growing Binance Smart Chain.
What Is Lightening Cash?
Lightening Cash is a project that uses zero-knowledge proofs to provide users with an assurance of privacy in their blockchain-based transactions. Zero-knowledge proofs, or ZKPs, protect user privacy with a layer of encryption that allows data to be shared between parties without disclosing the actual data itself. This means that the validating nodes on a network can verify a transaction but without having to see or publicly record all of the details of the transaction. It’s the same technology that Zcash uses to ensure privacy.
Lightening Cash is based on the same protocol as Zcash but operates on the Binance Smart Chain (BSC). BSC launched in September 2020 as a means of overcoming the lack of smart contract capabilities on the original Binance Chain. It offers several benefits for applications, including low fees, fast throughput, and compatibility with the Ethereum Virtual Machine.
Lightening Cash operates as a layer through which users can funnel transactions into DeFi protocols running on the BSC via the Lightening Cash user interface. Users pay a small fee in the native LIC token, which is forwarded into the project’s Treasury. The Treasury fund is used as a mechanism to help manage the price of LIC tokens, which is designed with long-term sustainability in mind.
LIC Token
A core challenge with many farmed tokens is that they end up being highly inflationary, which is ultimately not a sustainable source of value. Holders will simply dump the tokens once they reach a high enough value, forcing prices down. Lightening Cash aims to overcome this with a buy-back program.
Fees accrued in the Treasury will be used to buy LIC tokens from Pancake Swap, helping to provide a deflationary effect. This will offset the inflationary pressure that comes with offering LIC as rewards for farming and staking. The project aims for LIC tokens to provide a high APY but ensuring a price level that doesn’t incentivize dumping.
The LIC token will be issued under a fair launch model. Fifty million tokens will be released, with 35% allocated for farming, 33% going towards operations, development, team, and advisers, 12% to a community program, 15% held in reserve, and 5% to providing liquidity on PancakeSwap. Much of the token supply is also subject to an unlocking period, with the reserve supply subject to community governance for release.
The LIC token will be set at an initial listing price of $0.038 on PancakeSwap, meaning the initial market cap is $203,300.
Conclusion
As the first privacy protocol on the Binance Smart Chain, Lightening Cash stands a good chance of gaining adoption by BSC-based applications. However, the project aims to become a blockchain-agnostic protocol, which will provide significant scope for further growth. Given the privacy challenges faced by DeFi users, it seems likely that we can expect to see more from Lightening Cash and other privacy-preserving technologies in the future.