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Atomic Swaps Carry Hidden 688 bps Option Cost for Longer Settlements

By PulseAugur Editorial · [1 sources] ·

Atomic swaps, a method for direct peer-to-peer exchange of assets without intermediaries, come with a hidden cost related to the embedded option for one party. This option arises because the party holding the secret can choose not to reveal it if market conditions move unfavorably before the settlement time. The value of this option, estimated using the Brenner-Subrahmanyam approximation, increases significantly with longer settlement periods, reaching 688 basis points for a 30-day swap, far exceeding typical transaction fees. AI

RANK_REASON The item discusses a financial mechanism and its associated costs, rather than a new release or significant industry event.

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Atomic Swaps Carry Hidden 688 bps Option Cost for Longer Settlements

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  1. dev.to — MCP tag TIER_1 English(EN) · Baris Sozen ·

    A 30-Day Atomic Swap Is a Free 688 bps Option. That Is the Honest Price of Forward Settlement.

    <p>Forward Settlement is one of the five primitives we have been designing toward: two agents agree a price today for an exchange that completes later, with no clearinghouse, no novation and no margin call in between. The mechanism is not exotic. It is a hash-time-lock with a del…

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