Company Name: Boltz
Founders: Kilian and Michael
Foundation date: Project started in 2019 | Incorporated in 2023
Headquarters Location: Remote | Incorporated in El Salvador
Amount of bitcoin held in Treasury: 100% of the treasury is btc.
Number of employees: 5
Website: https://boltz.exchange/
Public or Private? Private
Trading sats between bitcoin layers can be difficult, but Boltz makes it easier.
Boltz is a non-custodial exchange that allows users to send their bitcoins between the bitcoin base chain, Lightning Network and liquid network. The company likes to consider itself a trustless bridge between the layers of bitcoin.
While Boltz is now used by both everyday bitcoin users and institutions, the platform, which is almost as old as the Lightning Network itself, was born out of necessity and was instrumental in helping the Lightning Network work in its early days.
The Boltz story
“The idea for Boltz started in 2018,” Kilian told bitcoin Magazine.
“I was working on a Lightning-based decentralized exchange and quickly realized that it was very difficult to keep Lightning channels balanced,” he added.
“Boltz was really born as a band-aid to solve this problem, a service provider that would take care of your Lightning channel balances and keep them balanced for you.”
When creating Boltz, one of the main non-negotiables that Kilian and his team established was that it had to be non-custodial to better align with bitcoin's spirit of decentralization.
The Boltz mainnet launched in April 2019 and facilitated bitcoin to Lightning basechain swaps only until early 2023, when Kilian and Boltz's other co-founder, Michael, realized that Boltz needed more attention.
“We watched him grow organically and felt he deserved more,” Kilian said.
“In early 2023 we decided to go full time and that the next big 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 real business, rather than a passion project, as it had been up until that point. In doing so, they sought out a new user base and experienced some growing pains in the process.
Liquid exchanges
“In 2023, when we started Liquid Swaps, we were targeting more professional users, specifically for the channel rebalancing use case in a fee-sensitive (environment),” Kilian explained. “We launched it during the rate increase in May 2023.”
The fee increase Kilian referred to was a result of the introduction of Ordinals into the bitcoin base chain. bitcoin transaction fees had reached all-time highs in late April 2023.
As fees increased to 500-600 sats/vByte, resulting in transaction fees exceeding $100 in some cases, things started to break down and even Boltz felt the pressure.
“We had to close Boltz for three or four days,” Kilian recalled.
“Boltz was not available because we had all of our working capital locked in the mempool and we couldn't get it out because rates kept increasing. Many similar services had this problem,” he added.
Kilian then pointed out that Liquid was a solution for many companies facing this situation.
“If you imagine the typical use case of getting incoming liquidity on Lightning, you can do that multiple times with Liquid,” Kilian explained.
“You send via Lightning, thus obtaining incoming liquidity and recover Liquid LBTC. This actually made a lot of sense to users when we launched it. The launch was successful (and we) breathed some life into the Liquid ecosystem,” he added.
Kilian also shared that the Boltz exchange service supports the Aquamarine walleta wallet that allows you to exchange Liquid for Lightning that became popular in mid-2023.
Boltz – Behind the scenes
Aqua is not the only bitcoin-related product that Boltz employs on the backend.
technology/mobile/”>breeze walleta non-custodial Lightning wallet, it was actually the first bitcoin wallet to use the Boltz exchange service.
“Sometimes Breez users want to send to a normal on-chain bitcoin address because the merchant only accepts on-chain,” Kilian said. “So, Breez integrated our open, publicly available API to offer these exchanges directly within the app.”
For a Breez Wallet user to spend some of their sats in Lightning for an on-chain purchase, they simply have to scan a bitcoin QR code and the exchange of bitcoin from Lightning to the bitcoin base chain happens in the background via Boltz.
Kilian said Boltz plans to work with more companies to provide his behind-the-scenes service.
“It is crucial for a great user experience that users don't have to open our website, but can stay in whatever product/wallet they are using and move their bitcoins between layers right where they are,” Kilian said. “Our non-custodial API is something we pioneered and 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, partly because they didn't want to be regulated as an entity that custodians users' funds and partly because they didn't want users to have to trust intermediaries. . to execute transactions.
“You don't want to trust a random website, a random project that you find on the Internet,” Kilian explained.
“We also want to be available to users who say, 'Okay, I don't necessarily know you, but I hear these guys say it's not custody.' Probably some technician checked that it's not actually in custody, so I'm going to try it,'” he added.
The key technology that allows Boltz to be non-custodial is the Atomic Swap. And Boltz uses a subcategory of Atomic Swap called Submarine exchange.
Submarine exchanges employ Hash Time Locked Contracts (HTLC), which in simple terms, allows two transactions (both sides of the exchange) to occur simultaneously by cryptographically linking them within a smart contract. With this technology, there is no way for one exchange to occur without the other occurring at the same time.
This is the least reliable solution out there for moving sats between bitcoin layers.
And in January of this year, Boltz took this technology to the next level when he allowed Taproot Exchangeswhich has helped make issuing refunds on failed Lightning transactions more efficient.
“Until January, when a change to a Lightning invoice or Lightning destination failed, you had to wait until you could get a refund,” Kilian said.
“That is an inconvenience and, in the end, a bad user experience. With Taproot, there is a new way to spend coins. It's called the “key path.” And once we've gone down this key path, basically what we could do is issue refunds immediately,” he added.
Kilian added that Taproot Swaps also improve privacy as they do not reveal anything about the on-chain exchange.
“If a chain observer is looking at the chain, you can't tell that this is part of an atomic swap or even a Boltz swap,” Kilian explained. “There's no way to do that.”
A solution that “respects privacy”
After Kilian said the “P” word (privacy), I asked him whether or not he was worried that Boltz could end up in the crosshairs of authorities, especially after the US Department of Justice (DoJ) filed charges against the Samurai Wallet Developers.
“I'd be lying if I said we're not worried at all because everyone is worried and everyone was very worried, especially in the first few days after the Samourai incident,” Kilian responded.
However, he was quick to point out that Boltz itself is not a privacy solution but rather a solution that “respects privacy.”
“In no way can we compare ourselves to a coinjoin or a solution that is used for privacy,” Kilian said.
“When an exchange is made on Boltz, there is at least one party that has the information of the incoming and outgoing payments, and that is us. They should not trust that one day we will not reveal this information,” he added.
“That said, we respect privacy in the sense that we do not require more information than is strictly necessary (destination address or destination invoice) to perform this work. We do not need your email address. We also do not need your IP address. And you can access our service through Tor.”
The future of Boltz
Going forward, there is a major role that Kilian would like Boltz to play.
“Our vision really is to be the bridge between the layers of bitcoin,” he said.
“We are seeing bitcoin layer 2 sidechains, different types of layers are gaining traction and this box will not simply be closed. This is unstoppable now and we want to be the place that connects these layers,” he added.
At the same time, Kilian emphasized that Lightning will remain Boltz's main focus, as he sees it as the “connecting fabric” between bitcoin layers. In that sense, 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 Boltz team keep their eyes open for new opportunities, they will continue to repeat what they do best.
Regardless of what the future holds for Boltz, Kilian repeatedly said he will continue to focus on being “the easiest place with the best UX to move non-custodial (sats) between bitcoin layers.”
