Introduction
Discreet Log Contracts (DLCs) have been proposed by Thaddeus Dryja, co-creator of the Lightning Network protocol, in 2017. DLCs are smart contract structures that aim to address three main issues with previous contract schemes. These issues include scalability, data integration, and user privacy.
The Basics of DLCs
The concept of DLCs is straightforward. Two parties create a multisig address and choose an oracle. The oracle, such as one announcing the price of Bitcoin, publishes commitments to the messages it will sign to announce the price at a specific time. Contract Execution Transactions (CETs) are created to interact with the oracle. Each CET contains encrypted signatures that can only be decrypted using information from the signed oracle message. If the oracle fails to provide the necessary information to settle the DLC, both parties are refunded their money after a timelock period.
The Advantages of DLCs
Tadge outlined the advantages of DLCs in the original whitepaper. DLCs are scalable, requiring only a single transaction to fund and settle the contract. They also allow for external data to be integrated into the blockchain. Additionally, DLCs offer privacy, as oracles do not gain insight into the participants of a contract. Unlike traditional escrow multisigs, DLCs prevent oracles from selectively harming a single user.
Shortcomings of DLCs
One of the main shortcomings of DLCs is the coordination issue. Depending on the contract nature, a large number of CETs may be required, which can lead to network issues and potential DoS attacks. Another issue is the possibility of a free option problem, where one party withholds funding the DLC on-chain if it is not in their favor.
DLC Markets
LN Markets has introduced a new DLC specification to cater to institutional actors. While existing DLC projects are more focused on retail consumers, this new specification addresses the specific needs of larger institutional actors. The issues faced by institutional customers include the free options problem, lack of margin calls, and inefficient capital usage.
The Role of DLC Coordinator
To address these issues, LN Markets has introduced the concept of a DLC coordinator. The coordinator facilitates contract negotiations and ensures that neither party has access to the funding signatures. The coordinator holds both signatures and is incentivized to submit the funding transaction. This coordination process simplifies the setup of DLCs and eliminates the free options problem.
Liquidations in DLCs
The involvement of the coordinator also enables reliable communication for handling liquidations and adding additional margin. Liquidation transactions can be triggered before the contract expiry if the price is outside the contract range. The coordinator helps facilitate the coordination of adding margin and allows the winning party to withdraw funds. This dynamic enhances the liquidity management capabilities of DLCs.
The Potential Impact
While these adjustments may seem small, they have the potential to transform DLCs into a solution that meets the needs of larger economic actors and pools of capital. Just as the Lightning Network revolutionized transactional use of Bitcoin, DLCs could have a similar impact on capital and financial markets' use of Bitcoin.
Conclusion
Bitcoin's open system allows for anyone to build on it, and DLCs offer a unique approach to smart contracts. While DLCs may not be a primary use case for everyone, it is essential to recognize their potential for significant growth and adoption in the future.
Frequently Asked Questions
How much of your portfolio should be in precious metals?
This question can only be answered if we first know what precious metals are. Precious metals have elements with an extremely high worth relative to other commodity. This makes them valuable in investment and trading. Gold is today the most popular precious metal.
There are however many other types, including silver, and platinum. The price of gold fluctuates, but it generally remains stable during times of economic turmoil. It is also not affected by inflation and depression.
In general, prices for precious metals tend increase with the overall marketplace. They do not always move in the same direction. The price of gold tends to rise when the economy is not doing well, but the prices of the other precious metals tends downwards. Investors expect lower interest rate, making bonds less appealing investments.
When the economy is healthy, however, the opposite effect occurs. Investors are more inclined to invest in safe assets, such as Treasury Bonds, and they will not demand precious metals. They become less expensive and have a lower value because they are limited.
You must therefore diversify your investments in precious metals to reap the maximum profits. It is also a good idea to diversify your investments in precious metals, as prices tend to fluctuate.
Is the government allowed to take your gold
Because you have it, the government can't take it. You earned it through hard work. It belongs exclusively to you. This rule could be broken by exceptions. You could lose your gold if convicted of fraud against a federal government agency. Your precious metals can also be lost if you owe tax to the IRS. However, even if you don't pay your taxes, your gold can be kept as property of the United States Government.
Which precious metals are best to invest in retirement?
It is gold and silver that are the best precious metal investment. They are both simple to purchase and sell, and they have been around for a long time. These are great options to diversify your portfolio.
Gold: The oldest form of currency known to man is gold. It is also extremely safe and stable. It's a great way to protect wealth in times of uncertainty.
Silver: Silver is a popular investment choice. It's a good choice for those who want to avoid volatility. Unlike gold, silver tends to go up instead of down.
Platinium: Platinum is another form of precious metal that's becoming increasingly popular. It is very durable and resistant against corrosion, much like silver and gold. However, it's much more expensive than either of its counterparts.
Rhodium – Rhodium is used to make catalytic conversions. It's also used in jewelry making. It is also very affordable in comparison to other types.
Palladium: Palladium is similar to platinum, but it's less rare. It's also much more affordable. Investors looking to add precious and rare metals to their portfolios love it for these reasons.
How to open a Precious Metal IRA
First, decide if an Individual Retirement Account is right for you. Once you have decided to open an Individual Retirement Account (IRA), you will need to complete Form 806. To determine which type of IRA you qualify for, you will need to fill out Form 5204. You must complete this form within 60 days of opening your account. After this, you are ready to start investing. You might also be able to contribute directly from the paycheck through payroll deduction.
Complete Form 8903 if your Roth IRA option is chosen. Otherwise, the process will look identical to an existing IRA.
To qualify for a precious-metals IRA, you'll need to meet some requirements. You must be at least 18 years of age and have earned income to qualify for a precious metals IRA. For any tax year, your earnings must not exceed $110,000 ($220,000 for married filing jointly). Contributions must be made regularly. These rules are applicable whether you contribute through your employer or directly from the paychecks.
An IRA for precious metals allows you to invest in gold and silver as well as platinum, rhodium, and even platinum. But, you'll only be able to purchase physical bullion. You won't have the ability to trade stocks or bonds.
You can also use your precious metallics IRA to invest in companies that deal with precious metals. This option is offered by some IRA providers.
However, investing in precious metals via an IRA has two serious drawbacks. They aren't as liquid as bonds or stocks. They are therefore more difficult to sell when necessary. Second, they don’t produce dividends like stocks or bonds. Therefore, you will lose money over time and not gain it.
Statistics
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
External Links
finance.yahoo.com
irs.gov
bbb.org
wsj.com
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- Want to Keep Gold in Your IRA at Home? It's Not Exactly Legal – WSJ
How To
Guidelines for Gold Roth IRA
Starting early is the best way to save for retirement. Start saving as soon as possible, usually at age 50. You can continue to save throughout your career. You must contribute enough each year to ensure that you have adequate growth.
You also want to take advantage of tax-free opportunities such as a traditional 401(k), SEP IRA, or SIMPLE IRA. These savings vehicles allow you to make contributions without paying taxes on earnings until they are withdrawn from the account. This makes them a great choice for people who don’t have access employer matching funds.
It is important to save consistently over time. If you don't contribute the maximum amount, you will miss any tax benefits.
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By: Shinobi
Title: DLCs Evolving To Meet Institutional Needs
Sourced From: bitcoinmagazine.com/technical/dlcs-evolving-to-meet-institutional-needs
Published Date: Wed, 14 Feb 2024 19:01:37 GMT
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