The post Trustodial: An Ontological Dilemma appeared on BitcoinEthereumNews.com.

A lot of criticism has been circulating after the recent announcement that Wallet of Satoshi will be returning to the United States shortly thanks to the integration of Lightspark’s recent “Spark” system, specifically focusing around the issue of trust models and whether the new version of Wallet of Satoshi constitutes a noncustodial wallet or not.  Spark is a system based on statechains (explainer article there). Statechains don’t have the most clear cut trust model. Spark is essentially the channel factory version of statechains, with numerous statechains nested inside of a transaction tree built on a single on-chain UTXO.  Statechains are a Layer 2 system that allow entire UTXOs to be freely transferred off-chain with no liquidity constraints, but with the requirement of accepting some trust tradeoffs. You must trust that an operator, the service provider essentially, will delete private key material every time the statechain is transferred.  So let’s look at what makes something noncustodial.  A user has unilateral control over their funds, or the ability to regain it.  No other party (or parties) has the ability to prevent the user from spending their funds, or regaining their ability to, or to spend them without the involvement of the user.  The first quality definitively applies to statechains. Just like a Lightning channel a user has the ability to use a pre-signed transaction to reclaim their funds after a timelock period to ensure honest settlement. The second quality isn’t so clear cut in terms of applying or not applying.  The statechain protocol requires the operator and original user to collaboratively generate a key that neither party ever has full knowledge of. Using their shares they can collaborate to pre-sign the users withdrawal transaction. When the original user transfers it to someone else, the original user, new user, and operator all collaborate…

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Filed under: News - @ July 7, 2025 10:26 pm