Dollars at the click of a button on the Lightning Network could soon become a reality. An innovation from Galoy, the provider of open source core banking platforms such as Bitcoin (BTC) Beach wallet, could provide safe haven from the volatility of BTC.
The innovation, called Stablesats, uses derivatives contracts to create a Bitcoin-backed synthetic dollar pegged to USD. The founder of Galoy, Nicolas Burtey, told Cointelegraph in an ‘explain like I’m five’ kind of way that the wallet works as so:
“When we receive sats over Lightning, we convert it into dollars so that even if the price of Bitcoin changes, the user is not affected by the liability.”
But why do we need dollars inside of a Lightning wallet–isn’t that what stablecoins are for? In effect, stablecoins such as USD Coin (USDC) and Tether (USDT) already provide the functionality of synthetic or digital dollars.
In a YouTube video, Burtey explains that “Lightning [Network] is the best payment protocol there is, so instead of using all these different payment protocols that stablecoins use.” It keeps users in one place in one app or wallet. According to the website, “Stablesats only relies on the Bitcoin payment network to work.”
The idea was built upon a suggestion by Bitmex in 2015 of creating a synthetic USD. However, in a press release, Burtey suggests that the idea may have been before its time: there was no Lightning Network and no nation-state Bitcoin adoption.
As Bitcoin continues to make waves in emerging markets, price volatility is often brought into question. For example, the Bank of England chief argues that Bitcoin is too volatile for legal tender. The ease with which users can now access dollars flies in the face of that argument. Burtey told Cointelegraph sums up the situation:
“Because lightning is getting a lot of traction in developing countries, but this is also the place where people live paycheck to paycheck. So they can’t necessarily afford the volatility until they manage to have some savings.”
As Cointelegraph reports, U.S. dollar-pegged stablecoins are “viable alternatives” in emerging markets, and appetite for them swells in countries with high inflation and unstable regimes. The innovation on the Lightning Network provides users with another means of Dollar-exposure.
Sebastien Verreault, the lead contributor to the Stablesats GitHub repository, explained that Dollar exposure is just a first step: “Ultimately, we can unlock the ability for every Lightning user to choose their own units of account without ever leaving the network.”
Galoy is behind the Bitcoin Beach Wallet in El Salvador, the Bitcoin Jungle App in Costa Rica, and Guatt Wallet in Panama, which is yet to be released. The Bitcoin Beach Wallet is the most popular wallet in El Zonte, the heart of Bitcoin adoption in El Salvador.
Nicolas Burtey (right) with Central Bankers explaining the Bitcoin Beach Wallet in May. Source: Twitter
Central Bankers from around the world tried out the Bitcoin Beach Wallet on a visit to El Salvador in Ma this year.
Source: Cointelegraph
