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LN Markets newsletter - Issue #8:
Update on DeFi with @SBF_Alameda
Our two sats on DeFi
New Lightning proposal by @roasbeef
1-click Lightning Networks with @lightningpolar
LN Retail payment with @GaloyMoney
Satoshi GPT-3
Bonus
https://lnmarkets.substack.com/p/8-july-24th-2020
Update on DeFi with @SBF_Alameda Our two sats on DeFi New Lightning proposal by @roasbeef 1-click Lightning Networks with @lightningpolar LN Retail payment with @GaloyMoney Satoshi GPT-3 Bonus https://lnmarkets.substack.com/p/8-july-24th-2020
Our two sats on #DeFi How can we define the value proposition of decentralization for finance?
In our view, #Bitcoin
is the first decentralized financial network, and the value proposition of its decentralization mainly boils down to censorship resistance.
Our two sats on #DeFi By analogy with #Bitcoin
, a truly decentralized exchange would enforce censorship resistance: it would guarantee that its trading rules are transparent and can not be altered by anybody, not even a government.
Our two sats on #DeFi The term #DeFi is mostly used to refer to the so-called “Decentralized Exchanges” and “Automated Market Makers”.
They have mainly been developed on Ethereum so far, but coding public smart contracts is highly challenging.
Our two sats on #DeFi And the possible attack surface increases exponentially with the complexity of the code.
Hence, most #DeFi contracts have back doors in case of major issue, meaning that they are not censorship-resistant.
Our two sats on #DeFi As we do no expect Ethereum design to change anytime soon, #DeFi built on Ethereum will probably never be able to deliver the true value proposition of decentralization: censorship resistance.
Decentralization will not happen on Ethereum.
Our two sats on #DeFi To label these financial contracts, the term open source finance would be more relevant (but certainly less catchy) than #DeFi in our view.
They are more transparent in the way they deal with the funds.
Our two sats on #DeFi But they remain centralized, since there is trust involved in a smart contract, or in the person that can freeze assets locked in a smart contract…
Our two sats on #DeFi Over the long run, after the rise of #DeFi governance tokens stops subsidising the whole field, end users will be faced with a trade-off.
Our two sats on #DeFi Trading on open source finance services, they will benefit from a better transparency, NOT a better control over their funds.
We don't think it will be sufficient for hedge funds & big whales to take the risk of having assets stuck in a smart contract
Our two sats on #DeFi With @LNMarkets, we took a different road.
We have decided to focus on the speed of fund transfers. We believe that it is a strong value proposition, much stronger than transparency.
Our two sats on #DeFi Anyone who has regularly transferred large amounts of bitcoins knows the terrible feeling of having to wait for an hour to be sure that your transaction is finally done.
#DeFi We have been following the DeFi craze from a distance, since well, as you know, we are more focused on building on Bitcoin’s Lightning Network.
@SBF_Alameda has recently published a great thread to demystify the dynamics of this very hot topic https://twitter.com/SBF_Alameda/status/1284965991445704705?s=19
