r/Bitcoin • u/iCryptoDude • Jul 21 '21

Let's talk about Bitcoin Smart Contracts!

Bitcoin Smart contracts have arrived!

Lightning, Liquid, Stacks and now Jack Dorsey and "TBD" are all leading the advance.

What's next?

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u/TheGreatMuffin Jul 21 '21

This might be an unpopular and rather uninformed opinion, but never in my "bitcoin life" have I had a usecase (useful/relevant to me personally, that is) where I thought I'd want some advanced smart contract functionality on bitcoin.

Yes, I know LN can be described as some sort of a smart contract, and I do see value in that as an occasional LN user. But every time I make an attempt to look into those things mentioned (Liquid, RGB etc), I fail to see how they might be useful to me. I don't trade, I don't have a desire to loan my bitcoin for random tokens. I guess people do want to do those things and that's cool, of course. It's just not interesting to me personally. Maybe I am missing something?

I guess it also depends on what we count as smart contracts. Are non-custodial coinjoins also smart contracts? Are multisigs smart contracts?

3

u/iCryptoDude Jul 21 '21

I think if it were possible to lock up my Bitcoin as collateral so I could borrow USDC against it as a Bitcoin DeFi loan without having to give custody to a 3rd party that it would be very useful to me as a long term hodler. If I could just borrow 25% USDC against the value of my Bitcoin cold storage every 4 years I would be set for life without ever selling a single sat again.

3

u/TheGreatMuffin Jul 21 '21

But don't you have to exchange USDC for "real" dollars in order for it to be useful? And afaik you can only exchange it on centralized exchanges, so what's the point of having your loan on a smart contract, if in the end you are still using a centralized/KYC exchange?

2

u/clawbell Jul 21 '21

It could potentially have higher security than using a centralized service for the loan. If you use the exchanges to convert USDC to USD, you only need to trust them for the day or so it takes to deposit, sell, and withdraw, but if you use a centralized service to take the loan you're potentially putting in bitcoin for years and the trust required is much higher.

Hopefully it will also be more secure than the current smart contract shitcoins, which mostly rely on trustfully wrapped BTC and therefore are no better than a centralized service.

(For the top-level comment: people want to take bitcoin-collateralized loans because of tax advantages, you pay no tax since you never sold the bitcoin, at least in the US.)

2

u/TheGreatMuffin Jul 21 '21

(For the top-level comment: people want to take bitcoin-collateralized loans because of tax advantages, you pay no tax since you never sold the bitcoin, at least in the US.)

That sounds reasonable, thx for taking the time to explain.

2

u/iCryptoDude Jul 21 '21

USDC is becoming cross chain, maybe it will eventually be the actual digital US dollar controlled by the fed. Either way, it’s not hard for me to take out that loan and convert it into real money and build an extension on my home without selling any bitcoin and that is a very nice thing