In the late 2021, the Bitcoin Bankathon featured a diverse range of projects focused on leveraging Bitcoin and blockchain technology for financial inclusion, banking solutions, and economic development. The winning projects addressed various needs, including providing a financial platform for small companies (BitFunding), decentralized lending protocols (Growr On-chain), user-friendly Bitcoin payment solutions (Cardinal) or even environmental initiatives (Blockchain Carbon Registry) by Algorand. Not all of them still have operational web pages or have demonstrated any progress after winning.

Standard Sats project become a notable participant, though it hasn't become a winner. Many projects focused specifically on applications for El Salvador, suggesting the hackathon may have had a particular emphasis on supporting Bitcoin adoption in that country, which was the first to adopt Bitcoin as legal tender.

With Fiat channels, the Standard Sats project addresses a fundamental challenge in the Bitcoin Lightning Network ecosystem: the volatility of Bitcoin and the need for stable currency options. The team built an implementation of synthetic stablecoins on top of the Bitcoin Lightning Network, allowing users to maintain fiat-denominated accounts backed by satoshis (the smallest unit of Bitcoin) and maintained by Lightning Service Provider natively. The solution leverages "hosted channels" (also called "custodial channels" or "host-channels") to support constant nominal value in fiat currency while being programmatically backed by the corresponding amount of satoshis. Fiat channels came along with "Stable Sats" idea promoted by Galoy money but were closer to eCash projects which came later in in the form of federated or centralized custodial solutions. Many of the received grants and some projects also built products with VC support.

What makes Fiat channels particularly valuable is its full compatibility with Lightning Network specifications, enabling seamless transactions between fiat and Bitcoin while maintaining the native properties of the Lightning Network. The project aims to serve both unbanked communities and established financial institutions, offering use cases like global remittances in local currencies, merchant payments in fiat units, and flexible control over Bitcoin exposure. The team released multiple components during the hackathon, including an Eclair protocol plugin, a hedging plugin, and a forked wallet application, demonstrating a working implementation of their concept. At that time the wallet has had a name Standard Sats Simple Bitcoin Wallet. The solution could potentially bridge the gap between traditional financial systems and Bitcoin, providing a practical path toward broader cryptocurrency adoption.

In "The Kollider Exchange, Two Attacks Later," Ilya Evdokimov reveals critical security vulnerabilities discovered while integrating now closed Kollider with Standard Sats' Hedge service. As part of their security assessment, Evdokimov's team uncovered two major flaws: the HODL-Invoice Attack, which exploited timing discrepancies in automatic withdrawals, and the Fee Siphoning Attack, a classic Lightning Network vulnerability that could drain exchange liquidity by manipulating routing fees. Despite the potential for significant exploitation, with Kollider having 5.7 BTC in total node liquidity, the team chose to report both issues instead of exploiting them.

The security testing was conducted as white-hat hacking with proper disclosure to Kollider's team, and the bounty rewards were partially deposited into an insurance fund to safeguard against future vulnerabilities. Unfortunately, Standard Sats later placed some funds on FTX, which at the time appeared to be a reputable exchange with substantial backing. When FTX collapsed just 2-3 months later, the test account and its funds were lost. This unexpected setback forced Standard Sats to redesign their backend infrastructure to work with different exchanges, significantly delaying planned improvements to their synthetic stablecoin implementation and hampering the project's momentum in the Bitcoin Lightning Network ecosystem. Kollider also rolled out their own solution for synthetic stablecoins wallet which wasn't particularly successful. The interesting part was that Standard Sats unknowingly offered Kollider partnership which they have rejected.

One of the most promising developments in 2023 was the emergence of 10101 (itchysats), a project leveraging Discreet Log Contracts (DLCs) to create a Bitcoin-native stablecoin system without traditional custodians. This approach used extended channel states to create synthetic dollar-pegged assets directly on Bitcoin, with price oracles providing the reference data needed to settle contracts. Simultaneously, several foundations and Bitcoin companies launched substantial bounty programs specifically targeting ecash projects, with rewards ranging from 5-10 BTC for implementations that could provide privacy, scalability, and stable value for Bitcoin users. Apparently, Standard Sats first lost VCs to 10101 since they were mostly interested in non-custodial solutions while for grant givers Fiat channels weren't looking private enough. Surprisingly, the project kept going on and could even recover after Google announcement about KYCying developers on Google Play that led to deplatforming of the application. Small support by one anonymous bitcoiner allowed to facilitate required maintenance and move on to FDroid while fixing minor bugs along the way.

While Simple Bitcoin Wallet provided a stable and wholesome foundation for projects like Valet to build upon, the Eclair node implementation that powered the backend proved increasingly challenging to maintain. Unlike Core Lightning Project, which offered a more developer-friendly plugin architecture, Eclair's API for plugins was considerably more sophisticated and demanded intricate knowledge of its internals. This complexity was compounded by the Scala programming language, which, despite its powerful functional programming features, presented a steep learning curve and limited the pool of available developers who could contribute effectively. The situation was further exacerbated by lack of funding, making it nearly impossible for small teams to dedicate the necessary resources to maintain the codebase. It became obvious pretty soon that Standard Sats is becoming a truly reckless experiment.

It is about a time to reduce some risks. This is why we decided to stop running Fiat/Hosted channels. Meanwhile another lesser known technology Private Hosted Channels was also abandoned after 3 or 4 months of its introduction. Very few people in Lightning do really know about it as an advanced credit instrument which could significantly improve UX and payment success for end users. Big thanks to @steepdawn974 and even bigger to LNBIG who actually funded SBW/Immortan development. The Standard Sats is not stopping though, we have some ideas to try. The Valet project will continue to be maintained as a non-custodial Lightning wallet for cheap Android devices.