use cases - create ordinal lending example

[dantrevino]

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Use Cases - Ordinal Lending

Creating an Ordinal lending protocol using Bitcoin Discreet Log Contracts (DLC) involves designing a trust-minimized system that enables borrowers to access loans while maintaining the security and trustlessness of the Bitcoin blockchain. In this protocol,lenders and borrowers engage in DLC smart contracts, allowing borrowers to lock up Ordinal collateral in a multisignature address while receiving a loan in return. The terms of the loan, such as interest rates and repayment deadline, are be encoded in a DLC contract. Conditions are established to define the contract outcomes (ie repayment amount and repayment deadline date). This mechanism ensures that borrowers meet their repayment obligations and that lenders are appropriately compensated. By leveraging Bitcoin\'s native scripting language, as well as Tapscript, and the Schnorr signature scheme, this protocol would provide a novel way to create trustless lending agreements while minimizing the need for intermediaries. This system offers the first secure and transparent solution for ordinal lending within the cryptocurrency ecosystem.

Architecture

Workflow

1. Borrower locks their Ordinal into a Loan Request Covenant. Bitcoin transaction fees apply. These are the covenant inputs.
2. The Loan Request Transaction has the following outputs:
   1. The Ordinal Lock Covenant
   2. The miner (transaction) fee
   3. The borrower's change
3. The ordinal lock output and lender funding input create a funded loan request (Loan Funding Transaction).
4. Outputs from the Loan Funding Transaction are:
   1. The Lender Funding Covenant
   2. The miner (transaction) fee
   3. The lenders' change
5. Finally, the borrower signs the lender funding covenant and receives the Funding amount

Scenario

When combined with the Deep Lake Oracle, the above scenario provides a trust-minimized process for enabling markets for many different Ordinal protocols.

Potential use cases

• Ordinal Marketplaces for many Ordinal protocols
• In-game trading for games using the Ordinal Gaming protocol
• trust-minimized p2p Ordinal swaps

Considerations

Security

Try this scenario

Here we include a link to a graphql collection with some preset values

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