Author: Lawrence Deacon 2019-01-03 13:51:45
Published on: 2019-01-03T13:51:45+00:00
The email conversation discusses the argument that cross-asset lightning nodes do not offer premium-free American call options. The initiator of the contract must deposit 1 WJT into the exchange before the exchange will create the contract, and therefore, the opportunity costs are borne by the initiator. If x_p = 0, then the issuer is guaranteed a loss. This implies that nobody will act as an exchange since it could be coerced into issuing an American Call Option for free, hence the argument that Lightning Network will always have a single asset. The conclusion drawn was that Lightning nodes do not offer premium-free American call options because whether or not the contract and issuer are the same person, setting up a premium-free American call option using a HTLC guarantees a loss for one or both parties.
Updated on: 2023-06-02T16:35:10.068000+00:00