Wallet of Satoshi Begins Beta Testing Non-Custodial Bitcoin Wallet

In July, the team behind the Lightning wallet Wallet of Satoshi (WoS) initiated a closed beta test of a non-custodial version of their application. This feature has been developed in partnership with Lightspark, the creator of the Spark protocol.

According to project representatives, the solution will allow clients to control their private keys while maintaining the simple interface of WoS.

“From the start, Spark seemed like the missing piece. It provided us with the foundation to seriously consider a non-custodial [version], abstracting away the complex parts so we could focus on the user experience,” they stated in a comment to Bitcoin Magazine.

How Spark Works

Spark employs Statechains technology to scale Bitcoin. Users deposit funds into a Spark Entity—a group of operators (Spark Operators) responsible for executing operations necessary for signing and removing old keys.

Users create a shared address with operators through a modified version of FROST signatures.

“Spark is neither a rollup nor a blockchain. There are no smart contracts or virtual machines. Spark is native to Bitcoin and relies on its payment-oriented architecture,” states the project’s documentation.

Essentially, Spark is a co-signing protocol built on Bitcoin without bridges, external consensus, or sequencers. Users retain control over their funds through pre-signed transactions for unilateral exit from the system. These serve as a security guarantee—they can be used to retrieve funds if fraud is suspected.

Like in the Lightning Network, Spark transactions work by delegating ownership rights of UTXO between parties. The difference is that Spark introduces a group of operators for signatures. They cannot move funds without the involvement of users, who are mandatory participants in any transfer.

On the main network, Spark’s state appears as a chain of multi-signatures from users and operators. On the second level, the network functions as a tree structure, displaying transaction history and balances in real-time. The protocol is open source.

Community Criticism

While WoS positions the solution as non-custodial, some members of the Bitcoin community disagree with this characterization. The protocol requires trust in Spark operators, as users cannot know exactly what code is running on their servers.

According to Bitcoin Core developer Matt Corallo, the project team is transitioning the application to Spark to avoid regulatory risks associated with fund custody.

“Spark is certainly much better than a classic custodial wallet—it allows the user to unilaterally withdraw funds if the operator shuts down and deletes keys. But you still need to fully trust the operator. If they modify the code on their server and start swapping users’ coins among themselves, they could eventually steal the funds,” Corallo asserts.

He noted that overall, it’s great to see WoS moving away from the traditional custodial model to something more advanced. However, one should not pretend that the security level here is the same as that of truly self-custodial wallets.

Earlier, fintech company Revolut, in partnership with Lightspark, enabled Bitcoin transactions on the Lightning Network for clients in the UK and several countries in the EEA.