As part of Delphi Digital’s research into major ecosystems to find a new focus for its R&D arm, the firm has selected Cosmos over Ethereum as it thinks the latter is too slow and expensive.
Crypto miner Poolin pauses BTC and ETH withdrawals, citing ‘liquidity problems’
“We will make a snapshot of the remaining BTC and ETH balances on pool on September 6th to work out the balances,” said Poolin.
Lightning Speed: How To Take BTC From Reserve Asset To World Reserve Currency
Is the Lightning Network bitcoin’s killer app? It might be, but it still has a long road ahead. One of the stops on that road is the possible inclusion of stablecoins. Does bitcoin need them? Aren’t there inherent counterparty risks with those? The debate over those questions rages on. And in their latest post, The Bitcoin Layer makes the case for this development to be crucial in The Lightning Networks trajectory.
According to The Bitcoin Layer, “a global capital market operating on top of bitcoin-denominated financial rails is inching closer with each new onramp.” And the Taro protocol and all of the assets it would bring to The Lightning Network is the mother of all onramps. However, the risks it brings forth are as big as the opportunities it presents.
Let’s explore what The Bitcoin Layer has to say before jumping to conclusions. They might surprise us.
Making Lightning Interoperable With Everything
The first part of the article is about Magma, “a Lightning liquidity marketplace that allows nodes to buy and sell liquidity by leasing other network participant’s channels for a minimum specified period of time.” According to the article, Magma’s existence proves “a structural demand for secondary markets of liquidity”. In those markets, “participants can buy and sell collateral as needed—eventually blossoming into a deep and liquid capital market.”
Not only that, The Bitcoin Layer also theorizes about:
“Through time, Lightning Banks will emerge. As market participants lack the technical wherewithal to efficiently operate Lightning channels, most Lightning Network channel management will be subsumed by these entities who specialize in it.”
And this is where the Taro protocol comes in. When it was announced, our sister site Bitcoinist posed the following questions:
“So, the main idea is to create and transact stablecoins over the Lightning Network, but the technology allows users to create any asset including NFTs. And the bitcoin network underpins the whole thing. However, is this a positive development for bitcoin? How will this benefit the Lightning Network? Does a hyperbitcoinized world require tokens?”
And The Bitcoin Layer provides convincing enough answers to those questions. But first…
“Taro makes bitcoin and Lightning interoperable with everything. For the Lightning Network, this means more network volume, more network liquidity, and more routing fees for node operators, driving more innovation and capital into the space. Any increase in demand for transactional capacity that will come from these new assets (think stablecoins) will correspond with increased liquidity on the bitcoin network to facilitate these transactions.”
BTC price chart for 08/09/2022 on Kraken | Source: BTC/USD on TradingView.com
A Bitcoin-Denominated Global Capital Market
“Using sats as the transmittal rails for transactions across every currency opens the door for a bitcoin-denominated global capital market”. No one would contest that. Nor that “the Taro protocol opens the floodgates for this traditional finance liquidity to be subsumed by a faster, counterparty-free settlement network”. The network is counterparty-free, but, what about the assets’ inherent counterparty risk?
Conceptual Future Bitcoin-Lightning Risk Curve | Source: The Bitcoin Layer
According to The Bitcoin Layer, it’s all about risk and the barrier to entry:
“Higher tiers on the risk curve require less maintenance but incur more risk, whereas the lower levels on the risk curve incur less risk but have a higher barrier to entry for the average person who lacks the technical wherewithal for maintenance and security best practices.”
And they make the case that the introduction of Taro is a crucial step in the process of bitcoin fulfilling its destiny of becoming the world reserve currency.
“For bitcoin to become a world reserve currency, a deeply liquid capital market is an intrinsic requirement—and the Taro protocol is a promising step in making that happen. While bitcoin and LN are trillions of dollars away from becoming a legitimate alternative to other capital markets, they arguably maintain the lowest collective risk profile of any capital market in existence, as they are underwritten by an asset that when custodied incurs zero counterparty risk.”
Zero counterparty risk.
Does The Lightning Network Need Stablecoins, Though?
The answer to that question is still up in the air. The Bitcoin Layer acknowledges the inherent counterparty risk those present. It even puts them almost at the top of the risk curve. However, they consider them crucial and even welcome every other asset in the world to The Lightning Network. According to their theory, that’s how “a bitcoin-denominated capital market” emerges.
Of course, this is all speculation. The Taro protocol has not been approved. Bitcoin’s liquidity is far away from what it needs to be to become the global reserve currency. And, even though stablecoins on The Lightning Network might be closer than we think, the whole scenario takes place in a distant future.
Featured Image by WikimediaImages from Pixabay | Charts by TradingView and The Bitcoin Layer
Stablecoin projects need collaboration, not competition: Frax founder
As long as stablecoin “liquidity is growing proportionally with each other,” there won’t ever be true competition between stablecoins, says Frax Finance’s Sam Kazemian.
Liquidity protocol uses stablecoins to ensure zero impermanent loss
The cross-chain liquidity protocol has put special focus on user experience with a simple user interface without them having to deal with complex virtual networks.
Aave taps Pocket Network to beef up decentralized app development
Aave will leverage Pocket’s distributed network of 44,000 nodes to access on-chain data from various blockchains.
3AC co-founder returns to Twitter, blames liquidators for “baiting”
The tweet attracted wild reactions from the community with several accusing the co-founder of playing the blame game while his whereabouts are unknown.
Lido DAO price moves higher as the Ethereum Merge moves a step closer to completion
LDO price books a 45%+ monthly gain as the Ethereum network moves closer to completing its proof-of-stake upgrade.
Liquid markets are healthy markets, says Kairon Labs co-founder
Market making is a profession that has been around since the early 1980s, many crypto market makers come from backgrounds of traditional finance.
Crema Finance shuts liquidity protocol on Solana amid hack investigation
While awaiting Crema Finance’s report on the situation, the Crypto Twitter community took it to themselves to track down the hacker’s wallet and better understand the problem.
Crypto conspiracy theories abound, but prop traders are just doing their job
FTX founder Sam Bankman-Fried and Alameda Ventures made recent headlines for bailing out a handful of CeFi crypto platforms this week, but what exactly do market makers do?
Voyager Digital cuts withdrawal amount as 3AC contagion ripples through DeFi and CeFi
Traders brace for more bad news after headlines revealed that Voyager Digital had lent $655 million to Three Arrows Capital. Is another crypto market sell-off on the way?
Wire Network’s new protocol aims to end Web3 interoperability woes
The protocol promises to eliminate complexities seen with existing interoperability solutions and requires no bridges or oracles to integrate.
This is what’s standing in the way of DeFi’s ‘NFTification’
NFTs and DeFi have taken the world by storm in recent years, but both industries have downsides. Bringing them together could be a force for good.
Do Kwon dismisses allegation of cashing out $2.7B from Terra (LUNA), UST
The rumor surfaced after a Twitter thread by @FatManTerra shared the alleged details on how Kwon, along with Terra influencers, managed to drain funds while artificially maintaining the liquidity.
Bancor 3 goes live with impermanent loss protection for liquidity providers
Bancor’s new liquidity mining strategy promises to bring organic on-chain liquidity and make DeFi staking easier for DAOs.
Anchor Protocol rebounds sharply after falling 70% in just two months — what’s next for ANC?
The total value locked inside the Anchor Protocol’s liquidity pools reached an all-time high earlier this week.
What is impermanent loss and how to avoid it?
Read this guide to understand the risk, known as impermanent loss (IL), that liquidity providers take in exchange for fees earned in liquidity pools.
DEX aims to take on Uniswap with its concentrated liquidity bet
Concentrated liquidity has become the latest trend in the DeFi world with several projects shifting to the new liquidity model on various blockchains.
Terra, Avalanche and Osmosis lead the L1 recovery while Bitcoin searches for support
LUNA, AVAX and OSMO have outperformed most altcoins, hinting that a DeFi revival could be in store.