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Rusty Russell 1y ago

My problem with "stable channels" is not technical, but entirely around incentives.

"A banker is someone who lends you an umbrella when it's sunny and asks for it back when it starts raining".

People want downside protection. But you cannot keep enough reserves to give it to them in Bitcoin, you need some other asset like USD, which is much harder to audit.

So in practice you offer some limit on downside protection, hopefully well-documented! But no limit on upside protection. Of course if you hit the downside limit your (broke) customers leave, so your business model is likely "hope Bitcoin goes up".

This can be extremely profitable, of course. But high-risk ventures with this kind of "heads I win tails you lose" property rarely attract the most ethical of players :(

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uncleJim21 1y ago

I’ve had similar thoughts but couldn’t articulate.

Especially regarding the last point: couldn’t we argue holding bitcoin vs stablechannels is a special case of sovereignty? I.e. taking responsibility for volatility instead of outsourcing to a counter party?

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🐢 1y ago

🎯

It’s a bet on inflation and money printing surely, but volatility will kill.

5a
5ad99598... 1y ago

Stable channels aren't about downside protection, they're about convenience. If you want to save in fiat, there are far better ways of doing it than putting funds in lightning. Having fiat in lightning is so you can spend over lighting without (or, while minimising) a) having to think about exchange rates; b) having to calculate/pay capital gains tax as a result of making purchases. If you don't mind doing those things, stick with btc channels. If you do find those things a pita, having a modest fiat balance in lightning, at the cost of not getting the benefit of btc rising on that balance, and the risk of losing fiat value if btc falls too far is probably worthwhile.

If you hit the downside limit on a fiat channel, your customers don't leave broke, they leave with the btc balance of the channel, ie they "bought the dip". Even if they didn't end up buying the absolute bottom, that's historically still had a good outcome in the long term.

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Rusty Russell 1y ago

Stable channels were promoted as things for those who couldn't afford downward volatility.

And it's absolutely not like "buy the dip", that doesn't make any sense.