A few days ago our team released a new feature: Recurring Buys. For the first time ever, you can autobuy Bitcoin while still keeping your private keys. We at Sparkswap believe this has the potential to be one of the most interesting use cases so far of the Lightning Network — recurring DCA buys with no transaction fees and immediate self-custody.
What is Dollar-Cost Averaging?
There’s a lot of material out there already about why Dollar-Cost Averaging your Bitcoin purchases makes sense, so we won’t completely reinvent the wheel. That said, since DCA is so central to this new feature, we wanted to give a quick summary for those that are less familiar.
DCA is a strategy whereby you invest in an asset through frequent, smaller purchases rather than larger, individually-timed buys — for example buying $5.50 of Bitcoin every day for a year rather than $2,000 all at once. The primary reasons to use this strategy are that it allows you to:
- Eliminate timing risk: Despite the many predictions in the Twittersphere about how the price of Bitcoin will move, it’s fundamentally unknowable. Because of this, whenever you do a lump sum purchase of Bitcoin you’re exposing yourself to the significant risk that you’re buying at a peak. If you’re buying to hodl because you believe in Bitcoin’s long-term value (which you should be), Dollar-Cost Averaging eliminates this timing risk and smooths out your entry price.
- Manage psychology: Our emotions and subconscious biases likely impact us far more than we realize, and represent one of the most challenging parts of investing. The easiest and cleanest way to manage your own risky inclinations is to remove them altogether through DCA.
- Reduce stress and effort: While we at Sparkswap like to obsessively check the price of BTC as much as anyone, trying to take advantage of market movements is stressful and requires time and effort. With recurring buys, you can simply set it and forget it.
There are additional nuances — for example, the optimal strategy may differ if you’re deciding how to invest $20,000 that you’re sitting on vs. a portion of your salary each month — but this is the basic premise.
DCA and Lightning⚡
Despite its advantages, DCA has historically been challenging to actually use due to practical limitations: it involves conducting many transactions, which has meant that you either rack up on-chain fees with every single buy (👎) or use a custodial recurring buy product (👎👎👎), which also often charge high fees for small purchases. For those of us that care about self-custody (and if you don’t, you should), there haven’t been great options.
Then came the Lightning Network. As many of you know, Lightning is a Layer 2 Protocol; as a result, we only pay on-chain fees when we open and close a channel with you. We have no incremental fees for each individual time you buy Bitcoin from us, and we pass those savings on to you. The result is that you can buy every hour with no transaction fees, while keeping your private keys. Problem solved.
We believe the potential here is significant. Our goal at Sparkswap is to be a part of the (inevitable) shift of the broader Bitcoin community to self-custody, by making it truly as easy to keep your keys as it is to use a custodial exchange. Implementing recurring buys is a big step in the right direction.
Basic Tutorial: How to Create a Recurring Buy
If you want to try out this feature but haven’t yet set up Sparkswap, visit our website to download the app.
The feature is relatively straightforward and takes just a moment to set up. Follow these steps in your Sparkswap app:
- Click Add Recurring Buy: You should see this on the main page of the Sparkswap app, under the “Buy BTC” button. If you don’t, you may need to update your Sparkswap app (instructions for how to update are here).
- Specify the Amount: You can set an amount as small as $0.01 up to the max individual LND payment (~0.04 BTC or ~$350 based on the price at the time of writing, $8,762). Additionally, you can set your recurring buy as either USD (for DCA) or BTC (if you have a Bitcoin accumulation goal to reach).
- Specify the Schedule: Decide how often you’d like the recurring buy to happen. You can set this based on hour, day, week or month increments.
- Click Create Recurring Buy: Once you click to create the recurring buy, you’ll see it show up on the main page of the app under “Recurring.” You can see when the next buy will occur by hovering your mouse over the time increment. If you want to cancel a recurring buy, simply click the “x” next to it.
It’s as easy as that. Create your recurring buy and watch as your wallet fills up with sats.
For those that are interested, we wanted to touch on just a few more details of how the feature works, which will hopefully help you anticipate its behavior when you’re using it in the wild.
- Recurring buys pause when the app is closed: You have to keep the app open in order for the recurring buys to go through. This is a side effect of operating on the Lightning Network — as part of the same underlying architecture that allows your BTC transactions to be non-custodial and feeless, the LN also requires your node to be online to execute transactions.
- Recurring buys will resume when reopened: No need to recreate the recurring buy. Once your app is open and LND is active and synced, you’ll start autostacking again. The app won’t make up for missed buys — there is no catch-up element.
- It will not pull more USD from your bank: It will only use USD you’ve already deposited into the app. If your balance doesn’t have enough USD to fulfill a recurring buy, you’ll get an error message reporting that it failed for that reason. We’d like to add this in the future, but it’s a bit trickier.
- More frequent increments: We’ve debated internally whether to enable per minute increments, and we’ll continue evaluating this as users try out the DCA feature. We’ve also already seen some requests for a per second increment. You all are getting greedy 😏
- Additional features: We’d love to keep adding on to this feature and building it out, and we’ve already received a number of interesting ideas for related features to add. Keep them coming!
We’re looking forward to hearing your thoughts and, as always, we’d love to hear your suggestions for how we can improve. Thanks for reading, now get back to buying Bitcoin.