Good morning Lawrence,

> > On re-reading your argument, no, you have misunderstood massively.
> > The two HTLCs together form a single American Call Option, issued by the 
> > exchange to the initiator of the "payment".
> > It is not the initiator somehow issuing an American Call Option to itself 
> > by routing a payment to itself.
> > It is the initiator forcing the exchange to give it the equivalent of an 
> > American Call Option by routing a payment to itself.
> > In particular, the cost of locking the WJT asset is paid by the exchange, 
> > not the initiator of the contract.
> The initiator of the contract must deposit 1 WJT into the exchange before the 
> exchange will create the contract. Therefore the opportunity costs are borne 
> by the initiator.

You still have not understood.

We are discussing here a non-custodial exchange that acts as a Lightning Node 
on both BTC and WJT networks.

Suppose I know of such a non-custodial exchange.
I create a BTC channel to this.
Then I create a WJT channel.

In both cases, yes, I have to lock my assets into the channels created (unless 
we now have dual-funded channels and I convince the exchange node to fund the 
WJT channel).

What I do then is to send out via the WJT channel to any WJT-accepting merchant 
and get something in value equivalent to the WJT I send out.
It can be something as trivial as a submarine swap, where I get ***onchain 
WJT*** by paying my ***offchain WJT*** over Lightning.

In this way, the WJT in the channel is ***no longer mine***, and given a 
fungible WJT asset then a submarine swap means I have reacquired the WJT I put 
in the channel in the first place; it is now available to me onchain to dispose 
of as I wish.
If the WJT in the channel is locked up in an HTLC, ***I am not paying the 
opportunity costs for locking WJT***.
It is the exchange which pays the opportunity cost since I have already paid 
the WJT to the exchange for a separate "unrelated" payment.

Afterwards, I can coerce the exchange to issue me an American Call Option by 
routing a BTC payment from myself to a WJT payment to myself.
Since the CLTV will be a future time and date, I can always delay failing or 
accepting the incoming HTLC until just before the indicated locktime.

All your analysis means is precisely that nobody will rationally act as a 
Lightning node swap exchange, since being an exchange implicitly means you are 
offering American Call Options that are premium-free.
If there are no Lightning node swap exchanges, then cross-asset swaps over 
Lightning cannot be done: nobody will enable the swap.
Hence the conclusion: Lightning Network will remain single asset.

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