RailsX: Yield for LPs & Seamless BTC-Stable Swaps | SLP747

**Stephan Livera** (0:00)
Hi, everyone, welcome back to Stephan Livera Podcast. Today we're doing the Fast episode. Joining me or rejoining me today is Jesse Schrader from Amboss.space, aka Jestopher.
Jesse, welcome back to the show. I know you guys have been doing some interesting stuff over at Amboss on RailsX. So let's just quickly start there. Give like a very quick overview. What is RailsX?

**Jesse Schrader** (0:21)
RailsX is the trading interface. So it's the combination of technologies allowing people to trade Taproot assets using their own Lightning node. And the way that we brought RailsX live is we added it to Thunderhub, which is the open source node manager that almost everybody that runs a Lightning node already uses to manage their channels. But now we're introducing the asset channels. So you've got USDT and USDC that are live on Lightning. And people are able to trade that on their own Lightning node by making circular payments.
So high level, RailsX is a trading interface for Taproot assets on Lightning.

**Stephan Livera** (1:09)
Excellent. And so let's now talk from the different perspectives here. So we have the user side of it, like let's say you want to do trading, and then we have, let's say, the liquidity provider side of this. And then maybe we'll talk about the costs and benefits for both sides. Let's just start on the trader side of the house. So let's say you are a trader who wants to use RailsX.
What does it look like? What are the costs and the benefits of doing it this way from the trading end user perspective?

**Jesse Schrader** (1:37)
Yeah. So for the end user, that means that they're keeping self custody for the entire trading experience. So that's one of the key benefits, and they're doing instant trades against specific counterparties.
So when you use RailsX and you go into Thunderhub and that trading view, you're looking at the different prices that your peers are quoting for moving between Bitcoin and stable coins.
And you choose those peers directly. Say, I want to trade with this person. And so you set up the lightning channels. So either creating a Bitcoin channel, purchasing a USDT channel, and then you're able to send a payment in a circle that goes out your Bitcoin channel and into your USDT channel, allowing you to effectively increase the USDT balance. So all in all, that means I want to purchase USDT or sell Bitcoin, or I want to buy Bitcoin and do the reverse trade. But you can do it instantly without ever giving up custody of your funds.

**Stephan Livera** (2:42)
And so the high level of it is the trader who wants to do this, he can set up Thunder Hub, he can put some Bitcoin onto his node, open some channels, and then use RailsX to effectively sell some of that Bitcoin into stable coin, either USDT. Now, as I understand, this is like the wrapped form or the speed wallet. Is it the kind of wrapped form because it's not like fully live from Tether itself?

**Jesse Schrader** (3:06)
Yeah, it's been slow going to get issuers to actually use Tapered Assets. And I think a lot of them are waiting to see the data that comes out of it. So what we did to shortcut that is let's give them the data.
And what Speed has been doing, they've already been using USCT and USTC on their own custodial wallet for a long time. So these assets have already existed, but now we're bringing it to a more decentralized framework where you've got the assets that Speed Wallet created that are backed one-to-one by the native asset on Ethereum or another chain.

**Stephan Livera** (3:46)
And so let's say these traders, what kind of fee are they paying to do that swap? So let's say in that example, you go from Bitcoin to Tether on Tapered Assets. What's a rough fee range that they're paying to do that?

**Jesse Schrader** (4:02)
8 to 15 bips is really the range. So it's incredibly tight spreads. That's the level that you would see at Binance, for example.

**Stephan Livera** (4:11)
And what kind of sizes can they do for this? Like, are we talking like, you know, anything from like a dollar all the way up or like, what's the rough ranges that are available?

**Jesse Schrader** (4:21)
Yeah, it's the only limitation is the size of your channels. So part of the experience is choosing, what is your max trade size that you want to do?
And then we'll create the infrastructure for you, and then you just do the swap. I mean, it's a circular rebalance. If you can fit a payment through these channels, you can execute a trade of whatever size you want.