13 sats \ 13 replies \ @025738dda8 9 Jul \ on: Building Lendasat on ARK - Introducing DLC VTXOs bitcoin
I am sorry for probably a stupid question, does it mean that I can borrow sats while giving a collateral in sats? Why would I do that and why not simply pay that invoice directly? Who earns what?
I assume for tax purposes, though I doubt its going to fly
reply
Say you want to purchase something, but don't want to sell your bitcoin. And you expect bitcoin to rise in value.
Using a lending platform allows you to use that bitcoin as collateral to get funds now. Do the purchase of the thing.
Then once bitcoin value goes higher, you pay off the loan with the bitcoin in the collateral. Or you pay back the borrowed amount with other funds. Effectively using smaller percentage of bitcoin or none at all for the original purchase.
You also avoid capital gains tax on such a scenario. As when you get the borrowed funds, it doesn't hit capital gains.
reply
Well, I understand borrowing/lending principle. But thats when fiat is involved. Here, I understand, I borrow sats for sats... This is what I dont get.
reply
So this works for just sats too. Nothing stops a loan utilizing collateral as same as borrowed. Though it tends to be less efficient, you can still do so.
Interesting part is that you may use this better when market is losing value. So you pay off by buying into bitcoin when value depreciates and you still don't sell your original bitcoin.
reply
Just to clarify, as it might be confusing from your comment.
Using a collateralized loan on your Bitcoin makes sense when you think that the btc/usd price is going to appreciate in the next months, years. (if you are bullish). Because you will have to pay back your dollar loan at the market price at a later point in time.
Let's say today the btc price is at $65K, and you want to buy a new pair of shoes for $81. Today you'd have to pay ~125K sats for that. Assume the bitcoin price would appreciate to $100K you'd only have to pay ~85K sats.
With lendasat you can take a loan on the $81 and pay back $81 when the btc price is right.
learn more at https://www.lendasat.com
reply
Right, that's what I stated originally when speaking of different collateral to debt.
But when loan is the same debt as collateral, the relationship is reverse. So if you take a loan for bitcoin and get bitcoin back, you would use this for when market is in a downturn.
That said, lendasat site doesn't seem to indicate what you receive is a synthetic dollar using DLC instead of direct sats itself. Or maybe just wasn't clear to myself. 😅
reply
You do not receive a synthetic dollar.
Your Lightning invoice is paid instantly with Bitcoin, and you pay back later with Bitcoin, but in dollar terms.
reply
Understood. Then what would be the base denomination representation of the DLC dollar?
An inverse derivative locked contract like stablesats and what kollider built before is what I thought would be the base representation. Which means it would be a synthetic dollar.
Do you have any documentation explaining this portion of the contract and how you are attributing the derivative to make dollar representation?
reply
With a stablesats you would go short on Bitcoin, thus you will stay stable in dollar terms but not in bitcoin terms, meaning that you could end up with less btc if the market price appreciates.
With lendasats it's the other way around. You would basically go into an over collateralized long position with the lender, who would in turn go short. Thus the borrower takes the Bitcoin exposure while the lender takes the dollar exposure.
Do you have any documentation explaining this portion of the contract and how you are attributing the derivative to make dollar representation?
Not yet, but we will work on it.
So this works for just sats too.
How so? If bitcoin appreciates in value, both debt and collateral increase in value cancelling each other.
Unless you borrow and repay some USD-denominated amount of bitcoin. That would make more sense. And it is probably something like it, since we have an oracle in the system.
reply
Unless you borrow and repay some USD-denominated amount of bitcoin. That would make more sense. And it is probably something like it, since we have an oracle in the system.
Yes, this is how it works. The loan you take is USD-denominated meaning the exact sats amount will vary.
reply
We are all here to learn. No stupid questions. If someone says it’s a dumb question then he can provide a response
reply
That's right!
reply