An Argument For Single-Asset Lightning Network

Summary:

ZmnSCPxj corrected Lawrence's misunderstanding regarding American Call Option. He explained that the two HTLCs together form a single American Call Option, issued by the exchange to the initiator of the payment. He clarified that it is not the initiator issuing an American Call Option to itself by routing a payment to itself but rather forcing the exchange to give it the equivalent of an American Call Option by routing a payment to itself. The cost of locking the WJT asset is paid by the exchange and not the initiator of the contract. However, the initiator must deposit 1 WJT into the exchange before the exchange creates the contract. Therefore the opportunity costs are borne by the initiator.ZmnSCPxj discussed a non-custodial exchange that acts as a Lightning Node on both BTC and WJT networks. He explained how he created a BTC channel and a WJT channel with the non-custodial exchange, locking his assets into both channels. He then sent out via the WJT channel to any WJT-accepting merchant to get something in value equivalent to the WJT he sent out. The WJT in the channel was no longer his, and given a fungible WJT asset, it meant he reacquired the WJT he put in the channel, available to him on-chain to dispose of as he wished. If the WJT was locked up in an HTLC, he was not paying the opportunity costs for locking WJT. It was the exchange that paid the opportunity cost since he already paid the WJT to the exchange for an unrelated payment. ZmnSCPxj talked about coercing the exchange to issue him an American Call Option by routing a BTC payment from himself to a WJT payment to himself. Since the CLTV would be a future time and date, he could delay failing or accepting the incoming HTLC until just before the indicated locktime. ZmnSCPxj concluded that nobody would rationally act as a Lightning node swap exchange since being an exchange meant offering American Call Options that are premium-free. If there were no Lightning node swap exchanges, then cross-asset swaps over Lightning could not be done, and the Lightning Network would remain a single asset.

Updated on: 2023-06-02T16:31:43.873860+00:00