Wednesday, December 23rd 2020 - Issue #894

A stablecoin emerges on the Lightning Network

Don't sleep on the team at Suredbits and the work they're doing on Discreet Log Contracts (DLCs). If you do, you will miss out on the fact that people are bringing products to market on top of Bitcoin that were previously thought to be impossible and destined for altcoin chains. Not only that, but they're bringing BETTER, more robust products to market. The latest example is a stablecoin issued on the Lightning Network using DLCs Suredbits is referring to as a Contract for Difference (CFD).

This particular contract allows (currently) one party to lock in a stable amount of USD value in BTC to avoid bitcoin price volatility while their counterpart takes a long position on BTC. As bitcoin's price moves, the contract allocates sats to one party to make sure the individual who is engaged in the contract to lock in a USD value of bitcoin is doing just that. If the price of bitcoin goes up, sats are allocated to the individual who is taking the long position. If the price of bitcoin goes down, sats are allocated to the party looking to lock in a stable USD value. All of this happens on the Bitcoin blockchain and the Lightning Network. No obscure governance token, DAO, or central third party holding USD in a bank account necessary. All that is needed are sats and a willing counter-party.

At the moment, the CFD that Suredbits has created is a primitive with a very limited scope, but is a strong building block to begin building on as Nadav points out towards the end of his blogpost on the subject. Right now only two parties can benefit from any one particular CFD, but in the future Nadav believes these CFDs will be transferable, which opens up an insane amount of use cases that many haters have claimed would be impossible to build on Bitcoin.

Uncle Marty will repeat this until he's blue in the face; there is an order of operations to all of this and Bitcoin is the only protocol in the space that understands this. These use cases may be possible on other chains at the moment, but they were brought to market at the sacrifice of sufficient decentralization at the protocol layer. This is made glaringly obvious by the platform with the most stablecoin use on top of it at the moment, Ethereum. It has to transition to a whole new blockchain, which they're calling ETH 2.0, because they bloated the initial chain to the point of it not being scalable to any meaningful size.

All will come to Bitcoin in time.  
Final thought...

Feeling the holiday warmth at the moment. Even though it's been a particularly shitty year for most people on this planet, take some time to be grateful for the small things. Life is beautiful. 

Merry Christmas, freaks!
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