The best Sundays are for long reads and deep conversations. Earlier this week, the Let’s Talk Bitcoin! Show gathered to discuss Lightning Network technology and two innovative approaches at the wallet level which simplify the new-user experience at a tangible, but seemingly minimal cost.
In today’s podcast we zero in on the challenge of “Channel Management”, an until-recently-mandatory and manually-managed part of connecting to and utilizing the still-nascent Lightning Network.
A little context: The way Andreas (someone already using Lightning) sends a payment to Stephanie through Lightning is either through a direct channel to her or through a route of hops that can eventually reach Stephanie.
But if a user is brand new to the Lightning network, how do they go about receiving their first payment? – This question has been answered by both ZAP wallet and Phoenix wallet, using different techniques.
Phoenix wallet is made by ACINQ, the makers of Eclair wallet. Eclair offers more advanced/technical users a deeper look behind the hood of the inner workings with channel management being a manual operation.
With Phoenix, ACINQ has taken this away, with the aim of it being a more user friendly wallet for the end user – A more Mom and Pop style wallet.
When Stephanie, a new user of Phoenix wants to be paid by Andreas, she will create an invoice on her phone, just like any other wallet. Andreas will then scan that QR code, send the payment, and it will look just like any other Lightning transaction to Andreas.
If Stephanie currently has channels open with enough inbound capacity – Then it will complete successfully. But what happens when there is not enough inbound capacity, or no channels at all?
This is where Phoenix differs. Phoenix wallet offers no channel management to the end user, it is all done under the hood. The wallet ONLY connects to the ACINQ node, initially through a ‘fake channel’ and when an incoming payment is detected by ACINQ, the ‘routing hint’ that was contained in the QR code points to Stephanie’s wallet through this fake channel.
[Andreas → Node X → Node Y → ACINQ Node -*-*-> Stephanie]
Stephanie will then get notified that she has an incoming payment and be asked if she would like ACINQ to open a channel with her and push her the balance due (Turbo Channel). This comes at a cost though, 0.5% of the amount received. [Phoenix state that this is to cover the cost of opening the channel and allocating additional liquidity on their side]
- Is the ease of use factor worth the cost involved?
- If only connecting to the ACINQ node, will this create centralisation?
- What if ACINQ node goes down?
- Cheaper than using a Bitrefill Thor Turbo Channels?
- Phoenix is non-custodial
- Phoenix claims to be “trust-minimized, but not trustless”
- Lightning node runs directly on the phone
- Phoenix offers no on-chain balance. All monies on the wallet are contained in channels.
- There is also the ability to send and receive on-chain bitcoin using swaps (this also comes with a fee)
ZAP takes a different approach to onboarding new users. Their aim is for users to be able to use their debit card to have bitcoin sent to them on the Lightning Network, even when they have a fresh wallet with no channels. Then the user has the ability to make payments on the Lightning Network.
The creator of ZAP, Jack Mallers has started a new services which he calls OLYMPUS. This service is standalone and can be implemented by other Lightning wallets, with there being no requirement for the Lightning wallet used to be ZAP.
Quoting from the Zap blog on what Olympus is:
“Olympus is an external service that clients make requests to. The service is responsible for the hard parts: onboarding users, processing payments, managing market risk, streaming quotes, and delivering bitcoins.”
Once payment has been received by Olympus, it will then open a Turbo channel to the user, with the pushed amount that they have just purchased with their debit card. With the use of a Turbo channel, the user is able to spend straight away. Jack Mallers has also stated that in the future Olympus will not only push the amount to the user but will also have some funds on their end of the channel. The amount to be staked by Olympus will vary depending on the users usage.
Currently Olympus is in Beta and available to only a few select users in the United States with a plan to roll out publicly and eventually to other countries
- Olympus requires KYC/AML
- If you are a business using the Olympus service will this mean that when the channel is opened to you, Olympus will open a channel with much higher funds on their end as opposed to if you are only an individual?
- ZAP is non-custodial
- ZAP is available for Windows, Mac, Linux and mobile (iOS and Android)
- ZAP can connect through a remote node on Mobile – On Desktop offers remote node and own neutrino node.
- Using ZAP wallet does not require KYC/AML – But using Olympus does
- ZAP has the ability to offer a version of their wallet that doesn’t contain the Olympus feature
Missed last week’s episode? Want even more? Catch up on 7 years of Let’s Talk Bitcoin!
Music for today’s episode was provided by Jared Rubens, and Gurty Beats, with editing by Jonas.
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