Author: ZmnSCPxj 2018-12-28 03:53:22
Published on: 2018-12-28T03:53:22+00:00
The context discusses a possible solution for a router that is short on the BTC vs. WJT exchange rate. The router can hedge this by being long an equivalent straddle through cross-chain payments with another node. Two nodes on the Lightning Network can provide a BTC/WJT exchange and can construct an American Call Option to create a straddle. This process continues until both nodes have all their liquidity locked up in hedges. If the original payment was an American Call Option, neither exchange node will disarm their hedges, which ties up liquidity and prevents BTC->WJT and WJT->BTC exchanges on Lightning. Overall, this approach simply shifts the problem to someone else and does not actually solve it.
Updated on: 2023-06-02T16:26:20.494586+00:00