Galloy Introduces 'Stablesat', Bringing US Dollars to the Lightning Network
Categories: Crypto News US
GalloyIntroduces 'Stablesat', Bringing US Dollars to the Lightning Network
The volatility of bitcoin is the most cited criticism of ElSalvador's adoption of bitcoin as legal tender. To address this legitimateconcern, Bitcoin Beach wallet developer Galloy has released a new featurecalled “StableSets”, which allows users to send synthetic US dollarsover the Lightning Network. Developing countries are often considered the onesthat benefit the most from bitcoin adoption.
However, the harsh reality is that the volatility of theasset presents a physical barrier to adoption as a medium of exchange, as mostpotential users do not have the financial legroom to withstand unexpected pricemoves.The company also announced that it has raised US$4 million to developGalloyMoney, an open-source bitcoin banking platform, a versatile applicationprogramming interface (API) and an enterprise-ready Lightning gateway that willallow organizations to access Lightning payment provides access.Stablesats is able to offer bitcoin-based US dollar balances through amechanism known as inverse perpetual swaps.
It works by pledging the user's bitcoins as collateral to an exchangethat is used to purchase derivative contracts used to hedge BTC under the USdollar value. Inverse perpetual swaps are denominated in fiat, along with any gainor gain price in bitcoin.
Accordingly, if the price of bitcoin falls, or there is anunrealized BTC loss when the price of bitcoin rises, the user's dollar accounthas an unrealized BTC gain. At a high level, this is what enables Stablesats tomaintain a stable dollar balance without interfering with the traditionalbanking sector.
From a risk perspective, the main concern is inherently acounterparty risk, as derivatives trading necessarily takes place with a centralizedexchange, which also holds custody of the bitcoin. In recent times, it hasbecome very familiar to see exchanges getting hacked, or otherwise freezinguser withdrawals.
This exciting innovation from Galloy has the potential tofacilitate widespread bitcoin adoption, assuming the risks can be containedproperly. Simple, user-friendly consumer applications led to mobileapplications, and there is no reason to believe it would be any different inthe case of bitcoin.