SandMan on Nostr: I don't think a majority of sBTC to BTC volume will be peer to peer but rather will ...
I don't think a majority of sBTC to BTC volume will be peer to peer but rather will involve a swap provider.
Consider.
1. Anyone can deposit into the side using an M5 Deposit transfer of BTC from-main-to-side.
2. M6 Withdrawals take time and require bundles be proposed and accepted.
This results in a situation where sBTC to BTC pressure can build but BTC to sBTC pressure cannot build. From this I assume sBTC -> BTC fees will be higher than BTC -> sBTC. The fees will attract service providers to arbitrage. They will need BTC to swap for sBTC. To transfer back out to have enough BTC to continue the arbitrage they need to wait for a withdrawal. They are effectively locking up BTC as sBTC to earn the withdrawal fee.
Consider.
1. Anyone can deposit into the side using an M5 Deposit transfer of BTC from-main-to-side.
2. M6 Withdrawals take time and require bundles be proposed and accepted.
This results in a situation where sBTC to BTC pressure can build but BTC to sBTC pressure cannot build. From this I assume sBTC -> BTC fees will be higher than BTC -> sBTC. The fees will attract service providers to arbitrage. They will need BTC to swap for sBTC. To transfer back out to have enough BTC to continue the arbitrage they need to wait for a withdrawal. They are effectively locking up BTC as sBTC to earn the withdrawal fee.