Good morning James,
> It seems like the router in this case is essentially short a straddle on the
> BTC vs. WJT exchange rate with almost 0 premium. One way for the router to
> hedge this is to be long an equivalent straddle by constructing their own
> cross-chain payment to themselves with s
Good morning Tamas,
> Although there is no escape from above reasoning, a market maker could still
> be profitable as long as the option is worth less than the bid-ask spread.
> Therefore the issue does not mean that LN cross asset exchange is not
> feasible, but that there is lower bound on bid
Good morning Alex,
> > Do you mean, that if you make a swap on Lightning, which *might* be a
> > Bitcoin-to-WJT American Call Option, I will refuse to forward until I also
> > get something that is a WJT-to-Bitcoin call option, similar to a butterfly
> > spread?
> > That implies that in the "no
Hello ZmnSCPxj,
> Do you mean, that if you make a swap on Lightning, which *might* be a
Bitcoin-to-WJT American Call Option, I will refuse to forward until I also
get something that is a WJT-to-Bitcoin call option, similar to a butterfly
spread?
> That implies that in the "normal", non-American-ca
It seems like the router in this case is essentially short a straddle on
the BTC vs. WJT exchange rate with almost 0 premium. One way for the router
to hedge this is to be long an equivalent straddle by constructing their
own cross-chain payment to themselves with some other node, for the same
amou
ZmnSCPxj,
Brilliant reasoning. I sum it up to make it more accessible:
Failing to route on purpose can be used to opt out of a previously agreed
exchange of two differents assets.
A rational actor will opt out if the exchange is no longer fair. Anyone who
grants an option for free heads financ
Good morning Alex and Will,
> 1. Cross-asset brokers charge a standard option premium to perform the
> brokerage. I can't tell if you think this is totally broken or if it's just
> sad. I don't understand lightning well enough to figure that out on my own -
> could you expand more on what effec
There’s another potential partial solution here if we can create some
cryptographic protocol for atomically swapping information. This would be used
to swap the final HTLC sig for the hash preimage, preventing the optionality
issue. This idea was inspired by a paper called “Timed Commitments” by
Very good point.
Two possible responses come to mind.
1. Cross-asset brokers charge a standard option premium to perform the
brokerage. I can't tell if you think this is totally broken or if it's just
sad. I don't understand lightning well enough to figure that out on my own -
could you expand
