tl;dr: Will we be able to have decentralized stablecoins on lightning (not USDT/USDC)?
I think at this point most agree that it will be a good thing to get support for stablecoins on lightning for at least the following reasons:
- Stablecoins are one of the main uses people have for alts at the moment, and if we can get that liquidity back on BTC that'd be fantastic for securing the chain (we need higher on-chain fees to make miner economics work in the long-run).
- Many people in the third world are getting onboarded to "crypto" via stablecoins right now and have no idea that they're using some awful chain like Tron to do it, this is bad for freedom for obvious reasons.
I also think stablecoins on lightning are inevitable. Taro, RGB, and Synonym.to (via omnibolt), Holepunch/Keet (via some other tech?), Galoy (via stablesats) are all working diligently on this.
My question is: will we have a way to use decentralized stablecoins on lightning (i.e., not Tether or USDC)?
I know Fuji.money will be creating a decentralized, overcollateralized (bitcoin-backed) stablecoin on Liquid, and Sovryn has created ZUSD, another overcollateralized (also bitcoin-backed) stablecoin on RSK, but it's not clear to me how these things could be supported on lightning.
Stablesats isn't great in my opinion since it relies on a custodial service that can put your sats into a derivatives position to achieve the peg.
It's very clear to me how a centralized issuer could issue a stablecoin on Taro/RGB/Synonym/Keet, but it's less clear how a decentralized protocol could do the same.
So, SN, how do you think this could be achieved? Do we have any working theories?
Bitcoin will become the ultimate stablecoin.
yes
We see Lightning as the "lingua franca" to connect between different layers.
The most common use case for stablecoin is for merchants to be able to accept Bitcoin but convert on the go to a stable MoE/UoA.
We are going to explore submarine swaps between LN and Liquid, to allow the merchants to accept Bitcoin LN and instantly swap to a stablecoin such as Fuji USD on Liquid. Viceversa the merchant can pay suppliers via LN swapping again on the go.
That's a cool idea. Use the speed of LN for the transaction itself and use Liquid for the stablecoin.
I think we should start talking about it in terms of a distributed stablecoin rather than a decentralised one. Not just for avoiding the negative connotations of “crypto decentralisation” but also because it more accurately reflects the technical behind this. It isn’t decentralised like Lightning or Bitcoin, but would be spread out.
Specifics aside, what we’re doing on Taro at Valera starts with the centralised stablecoins. Tether, USDC, etc. Distributed stablecoins, especially those that don’t use shit models, are a lot more difficult to make.
Which means there’ll be a lot of specialist tech built for each one that either becomes part of the world’s infrastructure or withers away into obscurity.
The way I’d approach this is to have threshold open federation type things acting as signers. What logic you want to add to actually make the stablecoin work inside of that federation is up for research.
Sounds like @fuji_money
There is no such thing as a "decentralized stablecoin". If it's a stablecoin, there must be some central entity backing it. Alternatively, if there is some algorithm that controls the supply based on the exchange rate, there must be some central oracle that reports (signs) the exchange rate on-chain.
You could have a mixed algorithmic/collateralized stablecoin with multiple oracles, no? Bitcoin price oracles are a dime a dozen these days.
What happens if I send a false price (custom packet or something easy for you to google a "malformed packet") to one of these "Oracles"? If you think it wouldn't be from the site the Oracle is expecting, you'd be dead wrong. Internet Protocol is basically US mail protocol. I can put the White House as my return address if I don't care about a reply, the destination address is the only thing that matters.
This is very true. The internet as we know it is weak.
You don't think there's a way to mitigate this sort of attack at all?
Just one method: You could use a weighted average price from multiple oracles that updates on some determined interval and rejects price changes that are too far outside of the weighted average.
You are describing a federated oracle system, and federated is not the same thing as decentralized. Oracles provide their service because they make an income doing it, and this income aligns the incentives of oracles to report as unified a price as possible. That incentive naturally aggregates them into a cooperative that controls the pricing mechanism of any system that relies on them.
Whomever owns the oracles gets to manipulate the market to their will. This is basically the same problem with paul sztorc's "truthcoin" system- at the end of the day there is no way to actually verify information about the outside world.
We can agree on this
https://i.postimg.cc/h4p9SFpb/shitcoins-change-my-mind.jpg
"Decentralized" I start to really hate this word. We tend to decentralization, but we'll never reach it. All the scammers "yelling FULL DECENTRALIZED" are full of shit. Censorship resistant is way better word. For Bitcoin network to be 100% decentralized, 100% users would need to understand the full code and run a full node. In that impossible scenario we could yell "FULL decntralized" without lying.
So for the stablecoin maybe we can reach an acceptable level of censorship resistance. To maintain the peg we need central entity or oracles ... Stablecoin will have a role to play for adoption but it's also a trap.
Totally agree that nothing can be "100% decentralized", but I think most would also agree that USDC/USDT are very centralized and censorship-prone.
I know of only one decentralised Stable Coin but you've never heard of it and it is very small with limited amounts on the open market.
Fortunately for me I'm getting paid with it and it's relatively easy to convert it to anything else including moving it to my credit card to spend.
Lightning wouldn't help it though because it already has free instant transactions without limits so I'm not sure what purpose there would be wrapping it in lightning. I'm struggling to understand what a "stable coin on lightning" means when you can already flip these things around at minimal costs and very quickly.
this sounds like an opening to shill whatever it is you're talking about, tbh.
if you don't get why stablecoins on lightning are a better idea than stablecoins on these alt chains then idk what to tell you. Not sure how you got to stacker news.
Whats the name of the coin
HBD - Hive Blockchain Dollar. Linked to Hive. https://hive.blog
It appears to be a terra/luna rip-off. Algorithmic stablecoin "backed" by a token tied to a blockchain that nobody uses.
You're welcome to your opinion.
I'm not sure if it was the right question. You can implement Lightning on any blockchain. First these blockchain has to support stablecoins. Bitcoin doesn't support any stable on it's blockchain so you can't have stablecoin on Bitcoin LN. But you could have LN on stablecoin blockchain.
Read more about Taro, Omnibolt, and RGB.
https://lightning.engineering/posts/2022-4-5-taro-launch/ https://www.rgbfaq.com/what-is-rgb https://github.com/omnilaboratory/OmniBOLT-spec (omnibolt to be implemented on mainnet soon by the guys at https://synonym.to)
I want to double down on the comment you're answering to. I believe that LN spanning two blockchains - Bitcoin and stablecoin - would be better than LN only on the Bitcoin chain but with two assets.
Imagine (God forbid) that Bitcoin forks an offshoot called Bitcoin Crash. If the stablecoins are issued on the main chain, the issuers now get to decide which fork to support. What if for some reason they choose Bitcoin Crash? Do we really want to give them such power?
I made a post about that before.
Omnibolt kek
Instant payment of smart assets issued on OmniLayer and Etherium(soon future).
Probably silly question but how could a stablecoin tied to a fiat base ever not be centralized in some capacity?
Doesn't someone need to make the real decisions on how to keep the peg stable and generate just enough extra profit to make this even worthwhile?
There are multiple ways.
Stablesats uses a derivatives strategy, so there is no "issuer" per say.
Overcollateralized stablecoins are backed by collateralized debt positions owned by users.
Algorithmic stablecoins are a synthetic asset backed by a set of incentives to keep the peg.
Thanks but I thought Terra/LUNA showed perils of algorithmic pegging? Someone figures out how to exploit something unforeseen and it's over.
Yes, but there are non-algorithmic overcollateralized stablecoins or semi-collateralized semi-algorithmic (like frax).
I think fiat over lightning is a really bad idea. I'm surprised more people aren't talking about it. It has so many perverse incentives, its not even funny. I could see it as a convenience layer for a merchant perhaps, but I don't think this fantasy of a bunch of HODLers running a network of exchange nodes is going to go anywhere.
Here's a potential application for it: a:
b:
When merchant ends up with too much bitcoin and needs more dollars:
Here's the problem with this all; How do the fiat channels settle when they are closed if they aren't using a stablecoin? Anytime you open a fiat channel, you'll need to have a written contract with your channel partner to settle manually through your bank.
I don't remember anybody planning to have fiat channels without stablecoins. All the projects like Taro and RGB include on-chain stablecoins exactly because of the problem you mentioned.
-I don't know of any "third world" country where someone can use USDT or USDC in many convenience stores. Therefore, I don't consider the kind of onboarding happening right now as beneficial to these countries.
-I dislike the term stablecoin because fiat has no stability other than ennui, preventing more rapid price changes. the notion of creating a decentralized digital asset which mimics the purchasing power of a dollar fails to account into its tokenomics what a dollar even means. More specifically, the stablecoin concept suffers at least one extremely flawed quality: to maintain a 1-to-1 peg between the number of dollars accounted for in a company's assets and the number of stablecoin units minted, the minter must either charge a fee, or try to earn money on the "assets" which necessarily comes with risk in the underlying instrument. Without resolving this issue, stablecoins serve as little more than a bank, whereas many of us support bitcoin because WE FUCKING HATE BANKS.
Bitcoin doesn't need FIAT currency on it. Yes, people will implement fiat currencies and violently enforce some public acceptance of a peg to bitcoin, but FIAT = FIAT. Not your keys, not your coins. I think we all do well to steer clear of all that horrible crap. Bitcoin needs its own price discovery. FIAT currencies necessarily muddy the waters, and warp value because some people literally get it cheaper than others.
NO FIAT ON BITCOIN!!
Why would I want a stable coin
I can just use US dollars
Can’t we talk about the benefits of drive chain ?
To be honest I understand the implications of a stable coin especially on lightning however you use a stable coin that will not appreciate like a bitcoin keeping you stuck in the same spot for not holding the real appreciating asset which is bitcoin... Now that I'm typing this out to be honest kind of sounds like an attack vector to trick people into not understanding true value and thus being in bitcoin but still stuck in this fiat system...
without Fed or central banks’s engagement, there’s less adoption for sure, I’d even like to see fiat on LN rather in CBDC format, the tech is ready