Why does Lava use digital dollars?
Digital dollars are a new payment rail to move dollars, similar to ACH or wire, but they have certain benefits such as being faster, cheaper, global, more private, and available 24/7. Lava makes use of digital dollars for two primary reasons:
To ensure a fast, trust-minimized loan, Lava uses smart contracts that require cryptographic compatibility. Fiat doesn’t support this, so we use digital dollars which are programmable.
To disburse loan capital instantly and to anyone in the world. Digital dollars are globally accessible and settle instantly. On Lava, they also settle for free. This enables us to offer our users a more seamless payment experience where they don't have to wait to receive their dollars once they create a loan. Instead, they receive them instantly. It also allows us to serve a global audience of people who don't want to sell their bitcoin but would rather borrow against it.
Lava makes it easy for users to transact digital dollars without any of the UX hurdles associated with using digital dollars on blockchain networks. Lava Free Pay trustlessly abstracts away all of the complexity so that users don't have to hold any gas tokens or pay any transaction fees on networks like Solana. For Lava users, digital dollars simply offer easy-to-use fiat rails.
Lava users have the ability to off-ramp their loan capital from digital dollars into their bank account anywhere in the world. We're also rolling out a card feature (in beta) that will allow users to spend their loan capital directly from the Lava app.
Currently, Lava uses the Solana network for processing digital dollar payments. We use Solana today as it offers the fastest and cheapest rails available as well as the best on-ramp and off-ramp support. In the future, Lava may add support for additional networks.
Philosophically, we will try to avoid adding support for stablecoins on bitcoin because issuance leads to centralization risk, which is a net negative for bitcoin as a decentralized network. Note, Lava is the first app where users can move digital dollars without having to interact with the blockchain tokens or any other blockchain complexity. Our users experience free and instant and global payments, which is not offered on any other dollar payment app.
Finally, Lava allows users to repay loans not just in digital dollars but also in BTC or directly from a bank account.