Attorney at law has emerged about possible use cases for that Bitcoin (BTC) Lightning Network, and if the network may potentially support decentralized finance (DeFi) applications and non-fungible tokens (NFTs). The discussion adopted the publication of the paper by three well-known bitcoiners.
The paper, entitled On Impossible Things Before Breakfast, incorporated exactly what the authors known as a “post-mortem on Terra” along with a “pre-mortem on DeFi,” where a vision for any future for that Lightning Network was organized.
The paper was compiled by Ross Stevens, founder and executive chairman from the Bitcoin-focused financial services firm NYDIG, popular Bitcoin proponent and Castle Island Ventures partner Nic Carter, and former investment manager at Baillie Gifford & Co., Allen Farrington.
Amongst other things, the paper stated that “all algorithmic stablecoins will fail,” and contended that this is correct regardless of how well-intentioned they’re.
Furthermore, the 3 authors predicted that “the vast majority” of DeFi projects – because they exist today – will ultimately fail.
The paper noted the trouble with DeFi is it lacks a loan provider of last measure, and therefore “(re)produces the problems solved by central banks” within the fiat economy. Bitcoin, however, “solves the issues produced by central banks,” based on the authors.
“Lightning facilitates the introduction of a growing ecosystem of Lightning-based lending options, known as LiFi (“Lightning Finance”), which leverage the safety, transparency, and decentralized nature of Bitcoin,” the authors further contended.
They continued to propose “stablecoins, NFTs, and tokenized securities” as three “powerful, emerging LiFi asset issuance use cases.”
DeFi applications have to date not removed around the Bitcoin network towards the same extent because they dress in other blockchains for example Ethereum (ETH) and Solana (SOL). Similarly, NFTs are hardly ever seen on Bitcoin, although they are doing (not directly) exist.
‘True decentralization via LiFi’?
The paper was shared on Twitter by MicroStrategy Chief executive officer and famous bitcoin bull Michael Saylor, who stated that Terra’s failure is responsible for many to think about if the Lightning Network could provide a more decentralized type of DeFi.
Despite what could seem like an endorsement by Saylor, the paper rapidly received its great amount of critique using their company people from the community.
Among individuals who commented on Twitter, Eric Wall, the main investment officer at crypto hedge fund Arcane Assets, published: “I’m still laughing,” while talking about the concept that NFTs turn into a factor around the Lightning Network.
Meanwhile, Udi Wertheimer, a developer and bitcoin proponent, responded, saying it’s “literally physically out of the question NFTs on lightning.”
“Lightning obviously requires fungibility,” Wertheimer authored, while adding it “simply can’t work if [it’s] non fungible.”
Others also belittled the thought of NFTs and DeFi around the Lightning Network, with Alex Berge, the editor of Bitcoin Development Center, calling it “just as blatant and misguided as Terra/Luna.”
Still, quite a few users also defended the concept that DeFi on a minimum of some level might be implemented inside a sustainable way around the Lightning Network, saying that “stablecoins and fully collateralized loans upon your BTC will have merit.”
Based on Berge, however, even this type of fundamental method of DeFi could be hard to implement inside a decentralized way, stating:
“It’s very difficult otherwise difficult to apply that without some kind of centralized interaction. Neither of individuals could be implemented exclusively via Lightning at this time either.”
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