[dlc-dev] DLC Factories

[Philipp Hoenisch]

Hi Conduition,

thank you for sharing this idea. The core concept sounds very similar to 
what we have built with ItchySats in the library Maia [1] and later on 
in 10101 [2] which was implemented in rust-dlc and spearheaded by Tibo. 
We wrote about it in [4] called DLC-channels. Tibo wrote about it in the 
great article about how to bring DLCs to Lightning [5].

The core idea was to be able to update/renew/settle DLCs off-chain - 
we've implemented it to achieve perpetual CFDs and on top of it, 
synthetic stable coins aka stablesats.

This sounds different to what DLC Markets proposed which is on-chain 
renewals and require an on-chain transaction.


Anyways, to your work :D

Can you elaborate the motivation for the `Settlement` TX.

If you were to remove it and add the timeout to the CETs you get the 
same functionality? The commitment transaction already locks in DLC and 
both parties can go offline until the attestation happens.



Cheers,
Philipp


[1] https://github.com/comit-network/maia
[2] https://github.com/get10101/10101/
[3] https://github.com/p2pderivatives/rust-dlc
[4] https://10101.finance/blog/dlc-channels-demystified/
[5] https://medium.com/crypto-garage/dlc-on-lightning-cb5d191f6e64

On 12/1/2025 5:25 pm, Kulpreet Singh via dlc-dev wrote:
> Hi,
>
> Nice write up there. Similar approaches have been suggested by Kuwahara et.al. [1, 2] and are in use by DLC Markets [3].
>
> I am using those approaches in Radpool's payout mechanism as well [4].
>
> Will be nice to add a section on how your approach compares to those approaches.
>
> Best regards
>
> -kp
>
>
> [1] - https://ieeexplore.ieee.org/document/9805512
> [2] - https://github.com/p2pderivatives/offchain-dlc-paper/blob/master/offchaindlc.pdf
> [3] - https://dlcmarkets.com/whitepaper.pdf
> [4] - https://www.radpool.xyz/1/payout-mechanism.html#_roll_over_contract_transactions
>
> On Sunday, January 12th, 2025 at 3:24 AM, conduition via dlc-dev <dlc-dev at mailmanlists.org> wrote:
>
>>
>> Hey DLC devs,
>>
>> I have an interesting concept I concocted recently which I call DLC Factories.
>>
>> I'm curious to know if you've seen anything like it before or if you have any
>>
>> feedback.
>>
>>
>> https://conduition.io/scriptless/dlc-factory/
>>
>> This is a way to create a kind of "rolling" DLC which can be endlessly renewed,
>>
>> as long as both parties can come online to sign new CETs before a certain deadline.
>>
>> Technically, it's more like a series of DLCs which can be funded only at specific
>>
>> times and by specific parties.
>>
>> It uses a punishment mechanism similar to lightning to deprecate outdated CETs,
>>
>> and so requires participants to be always online (or have a watchtower handle it
>>
>> for them).
>>
>> There's also the potential for a factory to enter a deadlocked state if neither
>>
>> participant publishes their commitment TX in time.
>>
>>
>> These drawbacks aside, it seems like a neat and relatively straightforward way
>>
>> to create things like american-style options, or flexible CFDs, which can be
>>
>> exercised or settled at arbitrary times. I wonder if there are new financial
>>
>> instruments we could implement on bitcoin using something like this, tailored
>>
>> to specific use-cases.
>>
>> Feedback appreciated and thanks in advance for any constructive improvement suggestions :)
>>
>> -c
>> dlc-dev mailing list
>> dlc-dev at mailmanlists.org
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