Oddbean new post about login | logout Running your own node is definitely a friction point but with lightning the bigger friction point seems to be liquidity management, particularly inbound liquidity. Many of the people using ‘non custodial mobile wallets’ such as phoenix still have to trust the company that is running the node and providing them liquidity. The concern I have is that we are onboarding a ton of people via custodial wallets and standardizing LNURL which has incentives pushing people toward custodial wallets. Eventually these custodians will rug pull or shotgun kyc. It is difficult to reverse this course after the fact.
does having multiple custodial wallets mitigate this risk?
Then you have to manage different pools of liquidity. You shouldnt have to say “oh, let me get my other wallet” all the time
If you have WoS and Muun, you pay from the one that hasn’t bent yet knee. When one goes down, you learn about how to open a channel real quickly.
because it is lightning, its all hot wallet risk 😅 might i suggest doing some homework on Liquid? It offers a tradeoff to keep off-chain funds offline without an on-chain footprint, it could help you wrap your head around what federation risk is as people explore fedimint
yes, and there’s that Why do you think a custodial Lightning wallet is more popular than a Liquid wallet?
I’ve never used Liquid or even seen it in action. Part of it could just be network effect and the proliferation and improving UX of Lightning wallets. What is Liquid currently used for that would make it appealing to new users?
I use it to swap for outbound/inbound liquidity on my lightning node using things like CoinOS, SideSwap, and Peerswap (p2p) . to be honest, it makes no economic sense to do it (which is why no one uses it) but after using lightning for a long time one tends to look for ways to mitigate hot wallet risk -- Liquid offers a solution to that
I believe the use case is still confidential transactions for large transactions
So…mainly for institutional use, whale traders, and exchanges?
That was who they were trying to market to I believe so. There were some efforts made for everyday use, but it just didn’t catch on.
Most people just want low cost frictionless money, and if they are being onboarded by buying $30 of BTC experimental spending money with their Debit Card via the getalby top up, they really don't even have to care about deeper issues. Don't make perfection be the enemy of the good enough.
💯 LNURL pushes people towards hosted/custodial wallets. It’s better than the alternative. I just wish bolt12 was more widely adopted. I dont hold lnurl against anyone. Its a tool that exists today and works. But the reliance on a clearnet webserver comes with tradeoffs.
Leaving KYC issue aside, since *all* my coins are KYC 😉 , am I right in interpreting a hot custodial wallet greatest risk is simply losing the coins in it? So a balance risk management problem.
it seems to me the major risk is that all your transactions are eventually linked to you pretty much publicly through chainalysis. This doesn’t leave aside KYC though, and since all your coins are KYC 😉 managing the data sharing and trusting custodians not to give away, sell or leak your data is the major issue for security in the future. Otherwise, yeah, losing your stack isn’t fun either.
I don't really know about Phoenix, is it same than Breez wallet (neutrino). If the devs want to rug pull, can they steal all the satoshis of their clients ? Neutrino makes spawm a node on your android, and you have private keys to spend on the channel, so they could prevent you from spending but I don't see how they can steal funds
Yes Phoenix is very much like breez. You can even force close your channels and back up from the on-chain seed phrase. However, Phoenix does allow ACINQ to publish an old channel state so that's one of the risks. Still a better model than full custodial in my opinion.
Yes Phoenix is very much like breez. You can even force close your channels and back up from the on-chain seed phrase. However, Phoenix does allow ACINQ to publish an old channel state so that's one of the risks. Still a better model than full custodial in my opinion.
Yes Phoenix is very much like breez. You can even force close your channels and back up from the on-chain seed phrase. However, Phoenix does allow ACINQ to publish an old channel state so that's one of the risks. Still a better model than full custodial in my opinion.
If fees are zero and transactions are instant, what prevents users from jumping ship? Is it just a race at that point?
CLBOSS fixes this.
Is there a way to like this tweet?