Stablesats from Galoy lets people use Lightning for daily payments without being exposed to short-term exchange rate volatility.
August 3, 2022 – Galoy Inc., whose open source core banking platform powers Bitcoin Beach Wallet in El Salvador, Bitcoin Jungle App in Costa Rica, and the soon to be released Guatt Wallet in Panama, is providing a more seamless and stable Lightning experience for people living on bitcoin.
Today the company announced Stablesats, the latest feature to be added to the platform. An alternative to stablecoins or fiat bank integration, Stablesats uses derivatives contracts to create a bitcoin-backed synthetic dollar pegged to USD. This enables dollar-equivalent USD accounts inside of Lightning wallets, solving one of the biggest problems for people using bitcoin for everyday transactions: short-term exchange rate volatility.
Galoy CEO Nicolas Burtey explains: “Bitcoin has brought digital transactions to previously unbanked communities across Latin America, Africa and beyond.. However, its volatility makes managing financial obligations difficult. With Stablesats-enabled Lightning wallets, users are able to send from, receive to and hold money in a USD account in addition to their default BTC account. While the dollar value of their BTC account fluctuates, $1 in their USD account remains $1 regardless of the bitcoin exchange rate.”
There is no stablecoin or token other than bitcoin underlying Stablesats, which means better interoperability and lower fees for users. And because the feature doesn’t require fiat banking system integrations, Stablesats is something that bitcoin banks and wallet projects can bring to market quickly. The regulatory approvals required to offer Stablesats will vary by jurisdiction.
How it works
The idea of synthetic dollars has been the topic of articles and conversation for years. BitMEX even described the idea in 2015. Burtey thinks that with the state of Lightning adoption and the emergence of circular bitcoin economies globally, now is the time for this solution to take off.
The current Stablesats implementation uses bitcoin derivatives markets, specifically an instrument called perpetual inverse swap.
Sebastien Verreault, lead contributor to the Stablesats GitHub repository, shares thoughts on the future: “The Stablesats rollout represents the first step in an exciting new driver for Lightning adoption. We see the integration of more exchanges, hedging strategies and currencies furthering resiliency and optionality. Ultimately, we can unlock the ability for every Lightning user to choose their own units of account without ever leaving the network.”
To learn more, visit stablesats.com.
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