In this episode we talk about the potential for forming capital markets on top of Bitcoin and the Lightning Network, by calculating an interest rate (LNRR – Lightning Network Reference Rate) based on the routing fees earned in staking BTC to Lightning Network payment channels. We discuss:
- Interest with no counter party risk – why this is historically important
- Different ways LNRR could be calculated
- Differing levels of risk available within bitcoin (cold storage, LN staked, off-chain lending)
- LN Interest or fees?
- Fractional Reserve vs Full Reserve
- Channel management and security risk
- CFA inclusion of cryptocurrencies into course material
- Nik Bhatia Twitter account: @timevalueofbtc
- Time Value of Bitcoin https://medium.com/@timevalueofbtc/the-time-value-of-bitcoin-3807b91f02d2
- Bitcoin risk spectrum https://medium.com/@timevalueofbtc/the-bitcoin-risk-spectrum-949f6abec290
- Next steps for LNRR https://medium.com/@timevalueofbtc/next-steps-for-lnrr-29f91fdc134e
- Observations from Bosworth’s tweet – https://medium.com/@timevalueofbtc/observations-from-alexbosworths-tweet-on-fees-e9b0be1fda86
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