At dawn I was checking this DLC comparison chart, and I got stuck—because in the whitepaper for @BabylonLabs_io Trustless Bitcoin Vaults, there’s a section that really feels like a face-slap, so I’ll share it.
Most people think the pain point of Bitcoin lending is “the technology can’t do it without trust.” Turns out, projects like Lendasat and Side that follow a DLC route can technically already settle without trust. The real bottleneck is the repayment step.
In a DLC mechanism, Bob can only recover the collateral by obtaining a secret that is revealed by “only after repayment.” The issue is that the party controlling the right to release this secret is Larry. Larry can simply refuse to reveal the secret unilaterally even after Bob has already repaid—thereby freezing the redemption. In protocol design this is called a “free option” (free option). In effect, the lender gets a right they can revoke at any time, while the borrower can only wait. Side’s protocol tries to sidestep this problem by introducing a committee for holding in trust, but it ultimately circles back to the old path of “trusting a third party”: the borrower must trust that the committee will honestly expose the issue. #baby
Let me give an analogy: it’s kind of like you’ve transferred your rent payment, but the landlord still holds the key to the deposit refund—yet they can just pretend they’re not going to give it back whenever they want. For TBV, the solution here is to change the “revealing the secret” action into a setup where each side holds an obfuscation circuit that can extract the other side’s secret. If someone cheats, their secret gets exposed and caught—no longer dependent on whether a single party is willing to cooperate.
In this comparison chart, the detail that Larry’s settlement path is actually trustless is the easy-to-miss part. Most explanations only focus on the risk that the borrower gets stuck. I couldn’t find an article that specifically dissected why the lender’s path is naturally safer. This kind of bottleneck—“the technology can do it, but nobody wants to do it”—have you seen other similar cases? #baby $BABY $AEON
Most people think the pain point of Bitcoin lending is “the technology can’t do it without trust.” Turns out, projects like Lendasat and Side that follow a DLC route can technically already settle without trust. The real bottleneck is the repayment step.
In a DLC mechanism, Bob can only recover the collateral by obtaining a secret that is revealed by “only after repayment.” The issue is that the party controlling the right to release this secret is Larry. Larry can simply refuse to reveal the secret unilaterally even after Bob has already repaid—thereby freezing the redemption. In protocol design this is called a “free option” (free option). In effect, the lender gets a right they can revoke at any time, while the borrower can only wait. Side’s protocol tries to sidestep this problem by introducing a committee for holding in trust, but it ultimately circles back to the old path of “trusting a third party”: the borrower must trust that the committee will honestly expose the issue. #baby
Let me give an analogy: it’s kind of like you’ve transferred your rent payment, but the landlord still holds the key to the deposit refund—yet they can just pretend they’re not going to give it back whenever they want. For TBV, the solution here is to change the “revealing the secret” action into a setup where each side holds an obfuscation circuit that can extract the other side’s secret. If someone cheats, their secret gets exposed and caught—no longer dependent on whether a single party is willing to cooperate.
In this comparison chart, the detail that Larry’s settlement path is actually trustless is the easy-to-miss part. Most explanations only focus on the risk that the borrower gets stuck. I couldn’t find an article that specifically dissected why the lender’s path is naturally safer. This kind of bottleneck—“the technology can do it, but nobody wants to do it”—have you seen other similar cases? #baby $BABY $AEON