The recent decision by Wallet of Satoshi to no longer serve customers in the United States forces us to reconsider the role of Lightning as a consumer tool. Although trusted and custodial, Wallet of Satoshi has been instrumental in providing casual users with a reliable tool for small value payments made across the Lightning Network. The absence of this service for U.S. users will leave a significant void in the Lightning toolbox for American Bitcoiners.
While custodial tools are not ideal for larger amounts, they do have a place in the ecosystem, especially for lower value transactions. Given the inevitable reality of increasing fees and the potential exclusion of lower value users and use cases, custodial arrangements may become more common due to economic pressure. However, using these tools comes with risks, as users relinquish control over their money and sacrifice privacy. This compromises the fundamental principles of Bitcoin.
The lack of a solution for this problem emphasizes the need for limited covenant additions to Bitcoin. In the absence of that, trust in third-party entities becomes necessary, which is far from ideal. Simply creating more custodians or embracing self-custodial channels may not be the most practical option.
However, the development of distributed solutions that allow groups of friends, families, and social circles to share a single Lightning node offers a potential way forward. This would make it practical for individuals to have self-custodial channels without incurring high costs. This approach could provide the cost-effectiveness needed to address the current limitations of Lightning.
The government may be able to regulate larger operations, but it would be challenging to enforce regulations on thousands of individuals running small Lightning nodes to serve friends and family. This decentralized approach would also be viewed unfavorably by the public.
While the current state of Lightning presents challenges for self-custodial use, strides are being made to simplify the process and reduce costs. Node in a box solutions and software like LNBits, LNDHub, Cashu, and Fedimint are already available, making self-custodial use more accessible.
Uncle Jim can step in and fill the void left by Wallet of Satoshi’s departure from the U.S., offering a more decentralized alternative to custodial tools.
This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
