An analysis of the functioning of the non-custodial wallet just launched by the JAN3 company.
On January 3rd, the company Jan3, led by its CEO Samson Mow, launched Aqua wallet, a non-custodial wallet that allows on-chain, Lightning, and Liquid transactions with the aim of facilitating interaction between various layers of Bitcoin. The application can be downloaded for iOS from the App Store and for Android by downloading the .apk file.
The wallet enables the conversion of on-chain Bitcoin into other assets such as L-BTC (Liquid Bitcoin) or USDT (Tether).
How it works
Aqua aims to be a tool usable even by non-experts and apparently integrates Bitcoin on-chain, Lightning, Liquid, and Tether into a single environment. The accounts displayed by the app are three: Bitcoin, Tether USDt, and Layer 2 Bitcoin. The Layer 2 account encompasses both the Lightning network and the Liquid network. Some users criticize this approach. In essence, Aqua is not a Lightning wallet since it does not allow direct sending and receiving of instant payments but continuously swaps with Liquid.
In particular, when a user wants to receive a Lightning payment, the invoice is created by Boltz Exchange, which, upon receiving the funds, performs an atomic swap and automatically converts them into L-BTC.
David Coen, Software QA Tester and Support for Edge Wallet, explained to Atlas21: “The Aqua solution is interesting because it allows users to send and receive Lightning payments without the need to build the entire infrastructure for managing a Lightning wallet. Aqua does not have a Lightning wallet internally, it does not handle the creation of Lightning invoices (Bolt11) as it uses the APIs of Boltz Exchange, and the wallet does not perform on-chain swaps on Bitcoin, avoiding high fees associated with spam.”
In practice, therefore, what happens when an Aqua Wallet user wants to receive a Lightning payment?
“Technically, what happens is that Aqua makes a call to Boltz, which in turn generates the invoice. The person who wants to send satoshis pays the invoice, and immediately Boltz performs an atomic swap on Liquid, sending the L-BTC to the user, minus the mining fee and the service fee. Therefore, the funds arrive in the user’s Liquid wallet, who simply needs to back up the seed and will always have those funds. When the Aqua user wants to make a payment, they essentially send the funds to Boltz via Liquid. Boltz performs an atomic swap and pays the recipient of the payment.”
Coen continues:“Currently Boltz does not support transaction batching, so the user must spend a minimum of around 460 satoshis for both receiving and sending. With transaction batching, fees could approach those of a normal Lightning Network transaction, making them suitable for micropayments as well.”
Is Liquid a Layer2? Criticisms of transparency
On X, the debate then opened up on the transparency of the company in describing the wallet’s operation, particularly due to the inclusion of Liquid in the definition of Layer2.
“Liquid is a sidechain and not a second layer. The better term for Liquid would be ‘BTC surrogate,'” wrote BTCPay Server founder Nicolas Dorier.
David Coen specifies that “as of today, there is no shared definition of Layer 2: it is not a standard. However, Bitcoin’s Layer 2 has characteristics that Liquid does not have. I don’t think it’s correct to promote Liquid as a layer 2 of Bitcoin alongside Lightning. Liquid is a sidechain and requires transferring ownership of your UTXO to a federation in exchange for L-BTC tokens that can be moved on an alternative chain to Bitcoin, with different rules and features that are not yet (or may never be) released on Bitcoin. Lightning does not involve losing ownership of your UTXO, as it essentially boils down to a multisig transaction on Bitcoin on-chain. So, it is decidedly misleading to group Lightning and Liquid (which is effectively just Liquid) under the ‘Layer 2 Bitcoin’ umbrella.”
Furthermore, Coen concludes, “it would have been better to release the software as open source, while now it is still closed source. They will provide it, but it’s something that needs to be highlighted.”
