How does the Custodial Dollar Balance compare to stablecoins?

The Custodial Dollar Balance (powered by Stablesats) differs from traditional stablecoins in several ways:

• Interoperability: It operates over Bitcoin and Lightning, so users can transact with anyone on those networks without worrying about which blockchain or token their counterparty uses.

• No reserve assets: Unlike stablecoins pegged to fiat reserves, Stablesats uses derivatives positions — there are no underlying dollar reserves or collateral requirements in the traditional sense.

• Counterparty risk: Stablesats relies on the exchanges where collateral is deposited for perpetual inverse swap contracts. This introduces exchange counterparty risk, which can be mitigated by diversifying across multiple exchanges.

For risks and limitations, see What are the risks associated with the Dollar Balance? and the Terms and Conditions.