Amboss launches ‘Ghost Addresses’ to avoid dependency on managed Bitcoin Lightning wallets
Bitcoin Lightning Network payment solutions provider Amboss Technologies has launched “ghost addresses,” a new type of Lightning address that allows users to manage them directly rather than relying on a dominant custodial wallet.
The Lightning Network operates as a two-way payment channel network based on the Bitcoin blockchain and is designed to enable fast and cost-effective micropayments.
Lightning Address provides a user-friendly email format for receiving payments on the Bitcoin Lightning Network, such as “(email protected)”. Simplifies the process of receiving payments by providing static, reusable addresses so users don’t have to create individual Lightning invoices for each transaction. Lightning addresses are also often integrated with Nostr-based decentralized social media apps like Damus for user-to-user payments.
Users can already use Lightning Invoices to receive payments directly into self-storage without relying on an administrative solution, but this isn’t as convenient or automated as Lightning address payments. However, because setting up a self-hosted Lightning address server is more complex and requires a certain level of technical expertise, many users use a managed wallet service such as Wallet of Satoshi to generate and host Lightning addresses instead.
“Contrary to Bitcoin’s trustless ethos, many applications that use the Lightning Network for payments rely heavily on centrally managed Lightning wallet providers,” Jesse Shrader, CEO and co-founder of Amboss, said in a statement. “This is why we are so excited: the launch of Ghost Addresses, which solves this problem by allowing anyone to receive payments directly to their self-custodial wallet using what looks like an email address, without going through a centralized third party. announces.”
Amboss introduced Ghost Addresses after launching Hydro, a subscription-based auto-sourcing liquidity solution for Bitcoin Layer 2, in September.
What is a ghost address?
Ghost addresses merge the convenience of the traditional Lightning address format with the advanced features of the Lightning Network, providing increased security and privacy without the need for additional infrastructure. However, it is only suitable for users running their own custom or off-the-shelf Lightning nodes who are unlikely to use managed services from the start.
Users can receive funds directly to their self-managed Lightning nodes via a personalized ghost address ((email protected)) without running a separate Lightning address server. This is accomplished using phantom payments, which do not require additional node permissions.
More specifically, according to the Amboss website, the targets of ghost address bills are phantom nodes that do not actually exist. Instead, each generated invoice will include your node in the route hint provided by the Amboss API. This allows user nodes to intercept payments and instruct the payer to route the payment to the payee’s node through a specific phantom channel. Users must ensure that their channel capacity is sufficient to receive payouts.
Ghost addresses are intended to provide a more personal solution than managed Lightning addresses, which reveal payment sizes and subsequent transactions, Amboss said. Although paying to a ghost address reveals the theoretical payment amount, Amboss added that it cannot provide evidence of payments completed using a ghost address.
For even greater privacy, you’ll need a self-hosted Lightning address server. However, Lightning Address Server used in this way requires invoicing permissions from the node, increasing the attack surface, Amboss said.
Amboss added that Ghost addresses are compatible with all Lightning Network implementations through integration with the API. However, the only client that currently supports Ghost Address payments is Thunderhub, which uses the LND implementation.
Randomly generated Ghost addresses are available for free through an Amboss account, but custom addresses require a subscription, the company said.
existing alternative
Regarding existing alternatives, Shrader told The Block, “Users can already create their own Lightning address servers and grant invoicing permissions (Macaron), but very few users have set this up so far.” Citing the complexity and cost of doing so. .
“(Node infrastructure provider) Voltage offers a third-party Lightning Address solution for you, but it uses your invoice macaron. (Self-managed wallet) Zeus also offers a HODL invoice solution, which leaves payments pending for long periods of time and causes costly shutdowns (of payment channels) on the network,” he said.
“A bad actor could spam a node with invoice requests, essentially sending a DDOS to the node if they got hold of the invoice macaron,” Shrader added. “Another key benefit (of ghost addresses) is that payments either complete or fail within a second or two. There are no holds that can force termination or cause payments to fail later.”
“Custodial wallets are great until they’re not. Under no circumstances will anyone else hold your funds in a ghost address, eliminating the risk of losing your funds,” he said.
However, not everyone wants to run their own Lightning node, limiting the market for ghost address functionality. “Not everyone runs Lightning nodes, and that’s okay! There are several self-managed mobile Lightning wallets, such as Phoenix and Breez, that can eliminate management risk while delivering a superior, continuously improving user experience,” said Shrader. “Other scaling methods, such as Cashu and Fedimint, enable micro-custodians to enable shared infrastructure in a privacy-preserving manner. Of course there is storage risk here, but not on a systematic scale like FTX or Mt Gox.”
Risks of Centralized Lightning Network Management
Many users rely on custodial wallet providers to create Lightning addresses and hold funds on their behalf, exposing them to the possibility of service terminations or operational interruptions due to regulatory demands, putting the accessibility and privacy of their funds at risk. I lose.
Last month, major Bitcoin Lightning wallet provider Wallet of Satoshi confirmed that it had withdrawn from the US Apple and Google app stores and would no longer serve customers in those countries going forward. The popular Bitcoin Lightning app did not specify the reasons for its decision, but sought to reassure existing customers in the US that their funds were safe and could be transferred to other wallets.
“After the Binance lawsuit, it became clear that custodial wallets that do not perform KYC and AML could be at risk if they serve U.S. customers,” Shrader told The Block. “I expect managed wallets to be kicked out of the U.S. market if they don’t want to accommodate U.S. regulations and their growing political opponents in Congress. You can’t ban Bitcoin. You can only prohibit participation.”
However, there is also a risk that Amboss, as a ghost address provider, may change the node destination for payments. “This service involves trust that the provider will not steal from the user by rerouting the payment,” Shrader told The Block. “It is not in Amboss’ interest to do this. Even in just one case it would be suicidal.”
To be fair, custodial wallet providers would likely make the same claim.
The need for a layer 2 solution
The recent surge in inscription-related activity has led to a surge in Bitcoin fees, highlighting the importance of layer 2 solutions like Lightning. According to The Block’s data dashboard, the average number of Bitcoin daily transactions yesterday hit an all-time high of 621,000.
The increase in activity also pushed average transaction fees to $30 as of December 20, the highest since April 2021.
However, you still need to deposit funds before using the Layer 2 network, which incurs high fees, and in a hot wallet environment there is no incentive to send large amounts of funds.
“There are still countries that transport gold across their borders in large quantities to make payments. This is expensive and risky. By comparison, lightning is a no-brainer. It’s fast, cheap and low risk,” Shrader told The Block. “Lightning still has an interesting path ahead amidst high transaction fees, but it will necessarily operate at a larger scale than just consumer infrastructure and provide infrastructure for businesses and enterprises.”
The current capacity of the Lightning Network is 5180 BTC ($226 million).
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