What are the risks associated with Stablesats?

Stablesats is a promising feature that allows Lightning users to hold, send, and receive dollars without the need for stablecoins or fiat integration. However, as with any financial product, there are risks associated with it that users should be aware of.

One of the risks of using Stablesats is counterparty risk with the exchange. If the exchange goes under, the collateral may be unrecoverable. This risk is inherent to any product that involves a third-party custodian, which is why it is important to choose a reputable exchange and conduct due diligence before using any financial product.

Another risk to consider is the auto-deleveraging feature of derivatives exchanges for perpetual contracts. The position could be closed despite being in profit, which can lead to an under-hedging situation. This risk is specific to the use of derivatives products, and users should be aware of the potential for auto-deleveraging when using Stablesats.

Funding is another potential risk associated with Stablesats. Historically, there have been more longs than shorts on derivatives exchanges, meaning that funding is revenue-generating for short positions. However, this may not always be the case, and funding could go negative for an extended period of time. Users should be aware of this risk and monitor the funding rates when using Stablesats.

It is important to note that Stablesats is a relatively new feature, and its risks and benefits are still being studied and evaluated by the Bitcoin community. To learn more about Stablesats and its associated risks, users can view the GitHub repository, read relevant resources such as Luna Bros, Inc. (Bitcoin-Backed Stablecoins section) and thoughts from Kollider, and consult with financial professionals. By understanding the risks and benefits of Stablesats, users can make informed decisions about whether to use this feature for their financial needs.