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CryptocurrencyBetween Bitcoin Layers: Boltz Builds Trustless Transfers

Between Bitcoin Layers: Boltz Builds Trustless Transfers

Company Name: Boltz

Founders: Kilian and Michael

Date Founded: Project began in 2019 | Incorporated in 2023

Location of Headquarters: Remote | Incorporated in El Salvador

Amount of Bitcoin Held in Treasury: 100% of treasury is BTC

Number of Employees: 5

Website: https://boltz.exchange/

Public or Private? Private

Swapping sats between Bitcoin layers can be difficult, but Boltz makes it easier.

Boltz is a non-custodial exchange that lets users send their bitcoin between the Bitcoin base chain, the Lightning Network and the Liquid Network.

While Boltz is now used by both everyday bitcoin users and institutions alike, the platform, which is almost as old as the Lightning Network itself, was born out of necessity and was foundational in helping the Lightning Network function in its early days.

The History of Boltz

“Boltz as an idea started in 2018,” Kilian told Bitcoin Magazine.

“I was working on a Lightning-based decentralized exchange and realized pretty quickly that it was very tough to keep Lightning channels balanced,” he added.

“Boltz was really born as a band-aid to fix this, a service provider that would take care of your Lightning channel balances and keep them balanced for you.”

In creating Boltz, one of the primary non-negotiables Kilian and his team established was that it had to be non-custodial so to best align with the Bitcoin ethos of decentralization.

The Boltz mainnet launched in April 2019 and facilitated Bitcoin base chain to Lightning swaps only until early 2023, when Kilian and Boltz’s other co-founder, Michael, realized that Boltz needed more attention.

“We saw it organically growing and we felt that it deserved more,” said Kilian.

“We decided in early 2023 to go in full time and that the next major feature would be Liquid Swaps, which we then launched in May 2023,” he added.

It was around this time that Kilian and Michael turned Boltz into a proper business, as opposed to a passion project, which it had been up until that point. In doing so, they went after a new user base and experienced some growing pains in the process.

Liquid Swaps

“In 2023, when we started Liquid Swaps, we targeted more professional users, specifically for the channel rebalance use case in a fee sensitive [environment],” explained Kilian. “We launched it during the fee spike in May 2023.”

The fee spike to which Kilian referred was the result of the introduction of Ordinals onto the Bitcoin base chain. Bitcoin transaction fees had reached all-time highs by late-April 2023.

Bitcoin transaction fees hit all-time highs in April 2024 | Source: YCharts

As fees rose to 500-600 sats/vByte, resulting in transaction fees hitting over $100 in some cases, things began to break and even Boltz felt the heat.

“We had to shut down Boltz for three or four days,” recalled Kilian.

“Boltz was not available because we had all our working capital locked up in the mempool and we were not able to bump it out because fees kept on rising. A lot of similar services had this problem,” he added.

Kilian then pointed out that Liquid was a solution for many companies facing this predicament.

“If you imagine the typical use case of getting inbound liquidity on Lightning, you can do so multiple times with Liquid,” explained Kilian.

“You send out via Lightning, thus getting inbound liquidity, and get Liquid LBTC back. This really made a lot of sense to users when we launched it. The launch was successful, [and we] breathed a little bit of life into the Liquid ecosystem,” he added.

Kilian also shared that Boltz’s swap service underpins the Aqua Wallet, a wallet that enables Liquid to Lightning swaps that became popular in mid-2023.

Boltz — Behind the Scenes

Aqua isn’t the only Bitcoin-related product that employs Boltz on the backend.

Breez Wallet, a non-custodial Lightning wallet, was actually the first bitcoin wallet that utilized Boltz’s swap service.

“Sometimes Breez users want to send to an on-chain regular Bitcoin address because the merchant only accepts on-chain,” said Kilian. “So, Breez integrated our open, publicly-available API in order to offer these swaps directly within the app.”

For a Breez Wallet user to spend some of their sats on Lightning for an on-chain purchase, they simply have to scan a Bitcoin QR code and the bitcoin swap from Lightning to the Bitcoin base chain happens in the background via Boltz.

Kilian said that Boltz plans to work with more companies in providing its service behind the scenes.

“It’s crucial for great UX that users do not have to open our website but can stay in whatever product/wallet they [are using] and move their bitcoin between layers right where they are,” Kilian said. “Our non-custodial API is something we pioneered and we are very proud of.”

How Boltz Works — Atomic Swaps

According to Kilian, creating a non-custodial service — especially one that integrates well with other non-custodial services — was not an easy task.

As mentioned, keeping the service non-custodial was a must for Kilian and the Boltz team, partially because they didn’t want to be regulated as an entity that custodies user funds and partially because they didn’t want users to have to trust intermediaries to execute the transactions.

“You do not want to trust a random website, a random project that you find on the internet,” explained Kilian.

“We also want to be available to users that say, ‘Okay, I don’t know them necessarily, but I hear these guys saying it’s non-custodial. Probably some technical person checked that it’s actually non-custodial, so I’m going to give it a shot,’” he added.

The key technology that enables Boltz to be non-custodial is the Atomic Swap. And Boltz utilizes a subcategory of Atomic Swap called the Submarine Swap.

Submarine Swaps employ hash time-locked contracts (HTLC), which in layperson’s terms, enable two transactions (both sides of the swap) to happen simultaneously by linking them together cryptographically inside of a smart contract. Using this technology, there is no way for one exchange to occur without the other occurring at the same moment.

This is the most trustless solution that exists for moving sats between Bitcoin layers.

And in January of this year, Boltz took this technology to the next level when it enabled Taproot Swaps, which has helped make issuing refunds on failed Lightning transactions more efficient.

“Until January, when a swap to a Lightning invoice or to a Lightning destination failed, you had to wait until you could get your refund back,” said Kilian.

“That’s a drawback and just bad UX in the end. With Taproot, there’s a new way you can spend coins. It’s called ‘key path.’ And with this key path spent, basically what we could do is we could issue refunds immediately,” he added.

Kilian added that Taproot Swaps also enhance privacy, as they don’t reveal anything about the swap on-chain.

“If a chain observer is looking at the chain, one cannot tell that this is part of an Atomic Swap or even a Boltz swap,” explained Kilian. “There’s no way to do that.”

A “Privacy-Respecting” Solution

After Kilian said the “P” word — privacy — I inquired as to whether or not he was worried that Boltz might end up in the crosshairs of the authorities, especially in the wake of the US Department of Justice (DoJ) pressing charges against the Samourai Wallet developers.

“I’d be lying if I’d be saying we’re not worried at all because everyone is worried and everyone was very worried, especially in the first couple of days after the Samourai incident happened,” responded Kilian.

However, he was quick to point out that Boltz itself isn’t a privacy solution but a “privacy-respecting” solution.

“We are in no way to be compared with a coinjoin or with a solution that you are using in order to gain privacy,” said Kilian.

“When you do a swap on Boltz, there’s minimum one party that has the information of incoming and outgoing payments — and that is us. You shouldn’t trust us to not reveal this information one day,” he added.

“That being said, we are respecting privacy in the sense that we are not requiring more information than is strictly necessary — the destination address or the destination invoice — in order to do this work. We do not need your email address. We also do not need your IP address. And you can access our service via Tor.”

The Future of Boltz

Moving forward, there’s one main role Kilian would like for Boltz to play.

“Our vision really is to be the bridge between the Bitcoin layers,” he said.

“We’re seeing Bitcoin layer 2 sidechains, different sorts of layers are gaining traction, and this box won’t just close. This is unstoppable now, and we want to be the place that connects these layers,” he added.

At the same time, Kilian stressed that Lightning will continue to be Boltz’s primary focus as he considers it the “connecting tissue” between Bitcoin layers. On that note, he mentioned that Boltz recently launched a new client that automates the task of rebalancing Lightning nodes.

It’s clear that while Kilian and the team at Boltz are keeping their eyes open for new opportunities, they will continue iterating on what they do best.

Whatever the future holds for Boltz, Kilian said repeatedly that it will continue to focus on being “the easiest place with the best UX to non-custodially move [sats] in between Bitcoin layers.”


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