Stakenet’s vision: Part VI — The future of trading
Intro
In the last five articles, we went into great detail on the differences between centralized (CEXs) and decentralized exchanges(DEXs), on-chain (or, “Layer 1”) atomic swaps, off-chain (“Layer 2”) scaling solutions including the Lightning Network and Connext, how Stakenet bridges different blockchains and their uniquely different scaling solutions together at a code-agnostic “Layer 3” to achieve fluid interoperability across chains.
Also how Stakenet DEX utilizes all this to provide the world’s first decentralized, instantaneous, high-frequency cross-chain trading environment that beats centralized exchanges in performance and incentive. In this (most likely) final article, we will reflect on our blockchain’s past and where Stakenet intends to stand in the future. Make sure to read everything thoroughly as a little surprise is hidden at the end of this article.
Final Conclusion
Off-Chain Networks like Lightning Network or Connext Network offer, by far, the highest throughput and scaling factor. They allow for further usage of trusted and highly tested networks like Bitcoin and Ethereum.
They allow for native asset trading without any need to third-party trust or custodians. Additionally, they offer similar levels of reliance and security, ensured by LN's vast decentralized and well-established infrastructure.
As long as there is layer 1 and layer 2 trading side by side, there will always be an onboarding transaction necessary to move assets to layer 2 or an offboarding TX to move it back to layer 1, if needed. This means that users will purely benefit from layer 2 if all their actions solely take place on layer 2.
The future: Layer 2 and above
In the near future, we expect to see almost all decentralized trading taking place on layer 2 as Bitcoin and Ethereum adoption grows and their blockchains’ transaction pipelines become more prized, urgent, and more important to optimize.
This means no more on-chain trading or spending and no more moving funds back and forth between the blockchain and layer 2 payment channels.
Instead, we will see direct fiat-to-layer 2 ramps (and the other way around) and all trading and movement of funds will occur instantly for minuscule fees that equal fractions of pennies across multiple chains. The most famous lightning on-ramps are Strike, Bottlepay, and Lastbit.
This could result in the following scenario:
A user, let’s call him Bob wants to increase his XSN position. He currently has no BTC at his Stakenet wallet or on an Exchange. Because Bob is expecting an increase in the price, he wants to be fast. Depositing USD at his exchange might take from hours to days and would include on-chain transactions, so he is using the fastest way possible:
He easily buys Bitcoin, for example, at his Strike app with his credit card, which gets executed within seconds.
Some seconds later Bob goes on to buy some XSN with this newly bought Bitcoin. For this, he needs to deposit some Lightning BTC to his Stakenet light wallet. As this isn’t his first transaction, he already has existing channels in his Stakenet wallet.
The withdrawal from his Strike app gets executed via the Lightning Network, therefore the deposit to his Stakenet light wallet gets confirmed within seconds. The same goes for a trade, where BTC and XSN are swapped by using Lightning Swaps.
Bob has gone now from USD on his credit card to XSN in his own Stakenet light wallet within seconds and very low transaction fee. What a time to be alive! he thinks.
This was only a short scenario to explain easily how fast and cheap things will be once (almost) everything is happening on Layer 2.
Layer 2 tokens
Also, Tokenization will directly happen on layer 2 networks. There will be tokens that natively exist on layer 2. As an example, RGB is currently working on this, as per their recent announcement regarding their first beta wallet which you can see here.
Actual on-chain transactions will, in the future, only be used for cold storage or managing off-chain channels. These developments have already been started and will allow for unlimited growth of the crypto space.
Community Quiz
Congrats, you have made it to the end of this series! As we want to reward your interest and duration in the past weeks, we will run in the next days a quiz around Stakenet and the topics we have covered in the Stakenet’s vision series.
Join us on Discord and follow us on Twitter to stay up-to-date with our latest news and developments. Special thanks to the eager Stakenet community members.
