You can make any token you want, there's still counterparty risk with the mint. Even the btc denominated tokens are really stablecoins backed by bitcoin.
Counterparty risk refers to the other party of a contract (e.g. delivery of rice or oil),
Issuer risk to the issuer of a financial instrument (e.g. bond or bill of exchange).
Counterparty risk is significantly greater in terms of complexity, volatility, and contagion.
– Bitcoin M0 (commodity money) has none of these two risks (there are others).
– Contract parties paying with eCash settles C/P risk (Cashu and Fedimint can do)
– Issuer risk (slow/fast rug) must be eliminated on the mint level (needs Bitcredit Protocol).
Please, point me to the project you're referring to :)
The reason I'm leaning toward a cashu-like protocol is that I have been developing a stablecoin protocol, and one of my conclusions is that such a service is unavoidably custodial, by definition.
Would you mind to elaborate? I have a protocol for a stablecoin, and I have long been leveraging platforms, increasingly growing convinced that a protocol like cashu is optimal, but unsure on how to proceed.
We have built fiat channels very early. In the end of 2021. Galoy released their product around the same date.
Ecash dollars may exist pretty much similarly and may do even benefit from proof of reserve schemes. But overall Fiat channels was the best tech because it just worked on LN, that's it.
Really interesting question! The idea of building a stablecoin on top of Cashu isn’t crazy at all but it does come with a set of challenges. Cashu is designed as a privacy-focused ecash system with custodial mints, which makes it great for anonymous micropayments, but less straightforward for representing stable assets like USD. One theoretical path would be to have a mint issue ecash tokens backed by fiat (e.g., USD), similar to how USDT works. But that introduces trust in the issuer, which goes against the ethos of decentralization and censorship resistance. Still, it’s worth exploring. I’m surprised more people aren’t talking about this. Maybe a multi-mint setup could help reduce centralization risks?
You can make any token you want, there's still counterparty risk with the mint. Even the btc denominated tokens are really stablecoins backed by bitcoin.
With the mint it's actually 'issuer risk'. Small but important difference.
Is the issuer not a counterparty?
Thank you both @96c0b276a3 and @telcobert for your observations.
@telcobert would you mind to elaborate on the 'issuer risk' detail?
They are both 'credit risks'.
Counterparty risk refers to the other party of a contract (e.g. delivery of rice or oil), Issuer risk to the issuer of a financial instrument (e.g. bond or bill of exchange).
Counterparty risk is significantly greater in terms of complexity, volatility, and contagion.
– Bitcoin M0 (commodity money) has none of these two risks (there are others). – Contract parties paying with eCash settles C/P risk (Cashu and Fedimint can do) – Issuer risk (slow/fast rug) must be eliminated on the mint level (needs Bitcredit Protocol).
More about this in a few weeks. Stay tuned.
Hey, just read about your initiative. Where do it differs from cashu? (if?)
Thank you!!
Please and thank you!
I remember seeing that one if the projects has it.
Not sure why you would want it though. It would be pretty risky and likely not backed by anything.
Please, point me to the project you're referring to :)
The reason I'm leaning toward a cashu-like protocol is that I have been developing a stablecoin protocol, and one of my conclusions is that such a service is unavoidably custodial, by definition.
They are custodial whether its a stablecoin or Bitcoins.
I'll try find it.
Thank you! :)
Yes
Thank you for your answer :)
Would you mind to elaborate? I have a protocol for a stablecoin, and I have long been leveraging platforms, increasingly growing convinced that a protocol like cashu is optimal, but unsure on how to proceed.
We have built fiat channels very early. In the end of 2021. Galoy released their product around the same date.
Ecash dollars may exist pretty much similarly and may do even benefit from proof of reserve schemes. But overall Fiat channels was the best tech because it just worked on LN, that's it.
So ecash dollars backed by bitcoin still do not exist but are possible. Interesting.
There was this idea of stablenuts and then I thought Boardwalk Cash was a stable coin on ecash. Here's the github for Boardwalk Cash.
On lightning there is the idea of stablesats.
Thank you!! Will check them! :)
https://xcancel.com/CashuBTC/status/1711676159639929135
Really interesting question! The idea of building a stablecoin on top of Cashu isn’t crazy at all but it does come with a set of challenges. Cashu is designed as a privacy-focused ecash system with custodial mints, which makes it great for anonymous micropayments, but less straightforward for representing stable assets like USD. One theoretical path would be to have a mint issue ecash tokens backed by fiat (e.g., USD), similar to how USDT works. But that introduces trust in the issuer, which goes against the ethos of decentralization and censorship resistance. Still, it’s worth exploring. I’m surprised more people aren’t talking about this. Maybe a multi-mint setup could help reduce centralization risks?