https://x.com/tonklaus/status/1729567459579945017
A few day ago I broadcast the first Stable Channel onto the bitcoin mainnet.
Stable Channels lets users get stable USD or leveraged BTC price exposure using Lightning. Peer-to-peer, 100% bitcoin.
This is finance, streaming. Let's look inside.
We have two types of users in a Stable Channel:
1 - Stable Receivers want stable USD. To peg their BTC at, say, $100.
2 - Stable Providers want to leverage their BTC.
Short vs. long. We connect them over Lightning and settle frequently, so they both get what they want.
Both sides put in $100 (of bitcoin) into a dual-funded channel.
Last week this was 0.002648 BTC, or 0.005296 BTC total.
The transaction took less than one hour to settle on the bitcoin blockchain.
Each side contributed $2.15 for transaction fees.
Every 5 minutes there's a Lightning settlement. Both nodes query 5 BTC/USD price feeds and take the median.
BTC price ⬇️? More BTC required for $100 stability. Stable Provider pays Stable Receiver.
BTC price ⬆️? Less BTC for $100. Stable Receiver pays Stable Provider.
Since confirmation, there have been 763 settlement events, 288 per day.
If the Stable Receiver's BTC is not within 0.01% of the agreed-upon USD value ($100), a payment is made.
611 payments were made for a total of $43.90 and an average of payment of $0.07.
Zero fees.
Each counterparty keeps track of their numbers and whether they are paid on time. No oracle signatures are required.
If they are not paid on time, their counterparty's risk score goes up.
Each side remains self-custodial, and can leave at any time. This has trade-offs.
The BTC price has been stable recently.
The stable USD side now has 0.00002545 more BTC. The long side lost BTC.
Despite little volatility, ~$44 dollars went back and forth.
Lots of payments? No problem with Lightning. Lessen counterparty risk with rapid settlement.
What are the benefits of Stable Channels?
Self-custodial, simple, no fiat, no banks, no tokens, no shitcoins, no Treasury bonds, less oracle risk. Better for financial privacy, decentralized, tax advantages.
And of course: only bitcoin and bitcoin infrastructure.
Okay, and the challenges?
Same problems as Lightning: need to run a node, hot private keys, maybe high fees, always online. + your counterparty can leave anytime.
If we can prevent catastrophic failure, can we manage marginal counterparty risk with great software? TBD.
What can you do with Stable Channels?
Stable USD, long BTC. Better trading experience, quick-to-market structured products.
Be kept stable at the 7-day, 52-week, 200-week BTC moving average, lessening user volatility.
Plug in funding rates and yield. Plug in payments!
Acknowledgments. Thanks to many folks for their open-source code, inspiration, and conversations: @jamaljsr @niftynei @Snyke @cguida6 @KenSedgwick @Blockstream @olegmikh1 @r0ckstardev @_AlexLewin @BtcFrancis @endothermicdev @adam3us @arielaguilar @markgoodw_in @peterktodd
Next steps.
Want to get stable in USD terms, or leverage your BTC? DM.
Want to run the code? It's open-source, a CLN plugin. Happy to walk you through it. github.com/toneloc/stable…
Want to suck hundreds of billions of USD liquidity into bitcoin and Lightning? Join us. 🧙♂️
https://github.com/toneloc/stable-channels
