> For the complete documentation index, see [llms.txt](https://lithium-2.gitbook.io/lithium-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://lithium-2.gitbook.io/lithium-docs/lithium-protocol/challenges.md).

# Challenges

1. **Lack of Decentralized Energy-Backed Instruments**\
   The global financial system has not yet integrated decentralized, energy-backed instruments, leaving a significant gap between real-world energy production and digital finance.
2. **Limitations of Treasury Bills**\
   Treasury Bills, the legacy financial product, suffer from several constraints:
   * Centralized issuance controlled by governments.
   * Reliance on fiat currency and national monetary policies.
   * Yields often fall below inflation, eroding real value.
   * Limited accessibility for global investors, creating barriers to entry.
3. **On-Chain Alternatives Are Fragile**\
   While on-chain Treasury Bills exist, their market (\~$4 billion) remains tied to the U.S. government's "full faith and credit." These instruments have low returns (3-5% yields) and are inherently centralized, offering little innovation compared to their off-chain counterparts.

***

### **How Lithium Addresses These Challenges**

* **Decentralized Energy Bonds:** By introducing energy-backed instruments, Lithium breaks the reliance on fiat-backed legacy systems.
* **Boosted Yields:** Miners can lock rewards for up to 25% APY, significantly outperforming traditional fixed-income products.
* **Accessible Marketplaces:** A decentralized marketplace allows global participation, unlocking liquidity and yield opportunities for both miners and traders.
* **Enhanced Security:** Locked rewards create sunk costs for miners, improving network stability and preventing short-term adversarial behavior.