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twentyone 2y ago

#[0]​ Just finished listening to an interview with you posted today. I hadn’t even thought about the possibility of a spot bitcoin ETF company using the bitcoin to host lighting nodes to earn yield. Makes total sense though. This could create additional competition among companies offering spot bitcoin ETFs. If a company, individual, etc. chooses to hold bitcoin ETF shares rather than self custody, why not pick the ETF that could offer you a yield from the bitcoin being used on a lightning node rather than just NGU since it’s not being rehypothecated but rather just being locked up for additional use. This could also be used to offer little to no management fees from the ETF provider by using that earned lightning node income. This would be a later phase of course. A spot bitcoin ETF in the US needs to be approved first. Whether you’re for or against Blackrock or others having a spot bitcoin ETF it’s still an interesting idea that I hope is discussed further.

#bitcoin

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Tony 2y ago

The downside is they would have to keep bitcoins hot. Quite dangerous in case you want to have decent returns on this - will be a huge honeypot. Only the most cautious and conscious will be able to handle such a scheme.

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twentyone 2y ago

That is a very good point. I do wonder though if the risks would be outweighed by the incentives in the eyes of the ETF firm. I don’t get the impression that being responsible with a customer’s funds is a primary concern. And the significance of the risk to the firm could be clouded by greed.

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sethforbtc 2y ago

Are there ways to reduce the threat surface? Host lots of nodes with medium levels of liquidity rather than a huge one with tons of BTC locked in a channel. Keep node management decentralized…

(Not that I trust the Big Finance guys to understand or care about this…..)

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twentyone 2y ago

I would think that strategy would reduce the risk. Like custody of the spot bitcoin ETF to likely Coinbase, it’s possible a division of Coinbase or another custody company could provide this type of management service. I’m a true believer of self custody but understand that’s not suitable for all situations. Coinbase being the primary custodian of most of the spot bitcoin ETF firms is another significant honeypot concern. Diversification of custody for the spot bitcoin ETF firms and the Lightning node idea would be good practice in general.

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sethforbtc 2y ago

I wonder if a node funding a large channel could be insured against loss from a hack. I could see an insurer offering a product like this to a corporate player….

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twentyone 2y ago

Yea I agree this is a possibility. Insurers will always find something to insure 😁 How they would come up with the rates would be interesting. And if a loss occurred it likely would be paid in fiat. And to go to the market to buy bitcoin with that fiat to replace what was lost? Now that would be quite an event

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preston 2y ago

Yeah it’s definitely something we need to consider and think about with these big players getting involved with ETFs.