Author: ZmnSCPxj 2019-01-03 13:04:58
Published on: 2019-01-03T13:04:58+00:00
The Lightning network interest earnings are minimal and the premium paid is insignificant. However, an increase in alternative interest earnings for Bitcoin on non-Lightning alternatives would reduce available liquidity on Lightning and increase Lightning fees. The cryptocurrency assets are highly speculative which makes large swings in exchange rates in short time frames typical. The premium paid is minimal compared to the upside of the speculative call option. The "premium" is split between both the exchange and the user of the American Call Option, and is paid as a temporary decrease in the supply of both assets to the rest of the economy. This violates the principle of "initiator pays" which means that rational payees may find it more lucrative to accept the popular asset, identify a "trustworthy" custodial exchange, and use the lower bid/ask spread on such a trust-based exchange to get more of their desired target asset compared to being paid on Lightning. The end result is the Lightning network primarily settling on the most popular asset, i.e. Bitcoin.
Updated on: 2023-06-02T16:20:18.551603+00:00