P2P Exchange Hodl Hodl Started Testnet of Lightning-powered Trades, Predictions Platform to Follow

by Frederick Ives

Hodl Hodl, a European peer-to-peer (P2P) cryptocurrency exchange, has started testing support of the Bitcoin Lightning Network on its platform, and such trades are now available on the exchange’s testnet version. The new feature allows trading operations directly from and into their Bitcoin Lightning wallet

Launch of the Lightning Network contracts on the exchange’s Mainnet version is scheduled for the end of May.

During each Lightning contract, Hodl Hodl generates an invoice for the seller, then he sends the funds from his Lightning wallet to the exchange’s one. In exchange, the buyer sends back the agreed amount of funds. When the seller confirms receipt of funds, the buyer specifies the invoice to obtain funds from the Hodl Hodl wallet, and the seller releases Bitcoins directly to the buyer’s Lightning wallet.

The administration underlines that the new option does not change how on-chain contracts work at Hodl Hodl. Regularly, funds are locked in a unique multisig escrow cryptocurrency address generated by the exchange.

Hodl Hodl is now leveraging two different exchange modes: Lightning and On-chain. Depending on the mode set, users either trade on the Lightning Network or the “basic” chain.

Bet on predictions

In addition to the LN feature, the exchange is planning to release the Predictions platform in the upcoming weeks, where users will be able to create contracts on the outcomes of different events using Bitcoin.

The company believes cryptocurrencies lack such products that are “essentially a marketplace where you can go to and create a contract with someone else where the conditions of the payout depend on an outcome of a certain event”.

In the Prediction service, a certain amount of coins is locked in the escrow, which transfers funds after the contract is executed. An “oracle”, being either a person or an entity, defines a winner. However, Hodl Hodl has worked out “a much more interesting scheme”:

“Because each party would lock funds in multisig 2-out-of-3 escrow, the oracle, in this case, is going to be sort of distributed: in a perfect case, both parties agree on the outcome, because neither party is able to return the coins locked in escrow unilaterally and, thus, they have nothing to win whatsoever by denying the outcome in favor of the other party. In fact, they risk losing their reputation on Hodl Hodl and future prospects for creating contracts.”

In case of a dispute, Hodl Hodl will allegedly leave a chance of interference with its third key, which can be used to sign the transaction in favor of the party, who guessed the outcome. Hodl Hodl called it “a peer-to-peer” prediction market. Escrow, where funds are stored, is reportedly not accessible by the exchange.

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