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NCCR-mechanism

The DLSP module validates and provides data to the smart contracts of the Dapp using a key concept called Non-Custodial Channel Rewards (NCCR). The NCCR-mechanism is specifically designed for Lightning Nodes to incentivize participation on the Lightning Network via Plenny.

The NCCR-mechanism works through the PlennyCoordinator and PlennyOracleValidator smart contracts. The coordinator contract links the Bitcoin Lightning Network and the Ethereum blockchain. It stores payment channel data and allows users to provide info about their Lightning Nodes and channels and manages the specific Baseline Reward and the general Channel Rewards. PlennyOracleValidator runs channel validations (for opening and closing) and contains the logic for reaching consensus among the Lightning Oracle Validators (a.k.a. “LORCA”) that participate in the Decentralized Oracle Network (DON). This smart contract uses data from the Plenny DLSP module. In this role, Lightning Oracles compute transaction data off-chain and transmit it to the smart contract. Technically, the generation of Channel Rewards works as follows:

  • Each time outbound capacity is logged, the NCCR-mechanism is used to generate incentives for Lightning Nodes.

In this process, channel capacity is logged in sat and linked to PL2. Logging channel capacity on the Dapp is not an allocation of money, but a validation of implied collateral in publicly verifiable payment channels, resulting in rewards for sharing transaction data over payment communication channels. The concept provides a unique procedure to leverage bitcoin and allows Lightning Nodes to participate in the Ethereum ecosystem. Sats always remain in payment channels under the control of the associated Lightning Nodes. Specifically, channel capacity is not collateralized by holding sats in Bitcoin smart contracts. Instead, the Royalties and Channel Rewards due in PL2s are locked in an Ethereum smart contract. The NCCR mechanism works similarly to virtual payment vouchers, but instead of tying the bitcoin value of the capacity in the channel to sat/PL2, only the transaction costs, licensing fees and rewards associated with the lightning services are tokenized.

Currently, the Dapp only supports public payment channels.