Aren't mSats effectively imaginary? I was under the impression that they were not supported by all wallets. How do they get resolved?

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They indeed are immaginary. If we accept the Timechain as the ground truth, nothing other than sats exist. Sub-sats amounts are not settlable onchain, thus that's imaginary credit.

All credit is imaginary, until the debt collector knocks on your door.

That's the point really. Do we want to make bitcoin a matter of debt? We're already on the doomed path with the idea of collateralization to get fiat loans