One example of where this issue crops up is the integration of Lightning into different applications and software tools. Lightning is a very complicated protocol stack to implement, involving numerous sub-protocols dictating how to coordinate and process updates to the state of a Lightning channel. This involves the transaction structure for each channel state and what it is enforcing, the order in which each step of crafting and signing new transactions is conducted to guarantee safety of user funds, and functions to watch the blockchain to react in the appropriate way automatically if invalid states are ever submitted to the blockchain.

This is a lot of complexity for a single application developer to take on themselves directly integrating to their project. The obvious conclusion if that requires too much effort is to depend on already produced software handling the problem of implementing Lightning, and simply build your application to talk to that external software. That leads to the next problem: what if your application’s users don’t use that particular Lightning implementation or wallet?

Even by outsourcing that functionality of an app the development team still hasn’t fully escaped the complexity problem. While they don’t have to fully implement Lightning on their own, a developer taking this route now has to handle incorporating API support for any Lightning wallet the user of their application could potentially be using. This necessitates keeping up with any changes or alterations to multiple Lightning wallets, their API, how the internal features of that wallet works and which ones they support. Not keeping up with any changes in a particular wallet would break their application for users of that wallet.

Some standardized mechanism needs to exist for software on both sides of that gap to simply be able to implement that one thing for all of these different tools to talk to each other. This would allow each application developer, and each Lightning wallet developer, to all simply integrate and maintain one single protocol that would enable their applications to communicate with each other.

Nostr Wallet Connect is a protocol making the attempt at being a truly generalized mechanism for fulfilling this need. When seeking to embed Lightning payments into Nostr, all of these complexity issues arriving from how to do it cropped up.

Lightning And NWC

The team behind Amethyst, a Nostr client, and Alby, the web based Lightning wallet, created NWC in order to solve the problem of Nostr users wishing to integrate Lightning into their Nostr experience without having to use a special purpose wallet. The application/protocol is based on Nostr’s identity architecture where every message (event) sent over Nostr is signed by a cryptographic keypair functioning as your identity on Nostr. This allows an application to simply generate a Nostr keypair, and from that alone have a cryptographic authentication mechanism to use in communicating with an external Bitcoin wallet to fulfill the functionality of the app.

Using the keypair to register the external application with the Lightning wallet, the application can now ping your wallet to initiate a payment. The specification currently supports paying BOLT 11 invoices, making keysend payments (invoiceless payments made to a node’s public key), paying multiple invoices simultaneously, generating an invoice to present to someone else to pay you, and a few other functionalities to allow payment history and wallet balance queries from the external application.

All of this is coordinated over Nostr, allowing for a very redundant means of communication not dependent on a single centralized messaging mechanism or the user needing to depend on complicated software such as Tor or other protocols to facilitate the network connection between an application and wallet software or infrastructure running on their home network. Nostr also supports encrypted direct messages, meaning the communication between the wallet and the application is entirely private, revealing no details about payments being coordinated to the Nostr relays used to communicate.

On the wallet side of the NWC bridge, security restrictions can be implemented to prevent the external application from having unfettered access to wallet funds in the case the Nostr key used to communicate with the wallet was compromised. Restrictions on the amounts allowed to be spent, as well as the frequency of payments, are configurable on the wallet side of the connection.

NWC is useful for far more than simply integrating Lightning into Nostr applications as well. The entire design philosophy of Nostr itself as a protocol was centered around keeping it simple enough that the entire protocol could be easily implemented correctly by any developer with minimal time and resources. Applications that have nothing to do with Nostr can easily integrate NWC or similar protocols with almost no overhead or complexity to address the underlying issues of how to connect a Bitcoin wallet with their application without having to build it directly into the app.

Beyond Lightning

The potential for a protocol like NWC to provide massive value to wallet and application developers goes far beyond integrating Lightning wallets into special purpose applications. The entire long term direction of interacting with Bitcoin, short of some mind blowing fundamental breakthrough no one has yet realized, is towards interactive protocols between multiple users.

Multiparty coinpools are a perfect example. Most of the specific design proposals like Ark or Timeout trees are built around a central coordinating party or service provider, which can easily facilitate a means of message passing between users wallets, but this hamstrings the design space with a single point of failure. If a hundred users are packed into a coinpool together on top of a single UTXO, the security model is based around each user having a pre-signed pathway to withdraw their coins unilaterally on-chain. This mechanism can be exercised in the event of any failure or disappearance of the coordinator to ensure their funds are not lost, but this is the least efficient way to handle such a worst case scenario.

If users were able to find a mechanism to communicate with each other in the absence of the service provider or coordinator, much more efficient on-chain exits could be achieved by using the larger group multisig to migrate their funds elsewhere with a much more efficient (and therefore cheaper) on-chain footprint. NWC and Nostr are a perfect fit for such a scenario.

Collaborative multisignature wallets between multiple parties could also benefit from such a protocol. In combination with standards like PSBT, a simple Nostr communication mechanism could drastically simplify the complexity of different wallets with multisig support coordinating transaction signing in a smooth and user friendly way.

Discreet Log Contracts (DLC) are another amazing use for such a protocol. The entire DLC scheme relies on both parties being able to access oracle signatures to unilaterally close a contract correctly if both parties will not cooperate to settle it collaboratively. Nostr is the perfect mechanism for oracles to broadcast these signatures, and allow for a simple subscription to their Nostr key in users wallets to automatically track and acquire signatures when broadcast by oracles.

As time goes on and more applications and protocols are built on top of Bitcoin with the requirement of interactivity between users, and between different applications, a general purpose communication mechanism to facilitate that without relying on a single point of failure is going to be sorely needed.

Nostr is the perfect underlying protocol to facilitate that given its incredible simplicity and the redundancy of a large set of relays to utilize. NWC is the perfect example of that being a viable solution. 

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Friday morning, the Securities and Exchange Commission (SEC) solicited comments on 21 Shares and Cathie Wood’s ARK Invest’s spot Bitcoin exchange-traded fund (ETF) application, further delaying the process.

This is the second delay in the listing process for this ETF, with the first delay happening earlier this year. The third deadline for the SEC’s decision is scheduled for later this year for November 11. If the SEC delays the application again, it will go to its fourth and final deadline on January 10, 2024. 

The race for approval for a spot Bitcoin ETF in the United States gained huge momentum earlier this year when the worlds largest asset manager, BlackRock, filed for one of their own. After that, big institutions including Fidelity, VanEck and WisdomTree among others, piled in and filed for their own spot Bitcoin ETFs.  

The first mover advantage of being the first to have its Bitcoin ETF approved and listed may prove to be vital in its performance. Galaxy Digital CEO and billionaire Mike Novogratz said in an earnings call earlier this week, “The news of both BlackRock filing ETF and quite frankly, Invesco plus Galaxy, we’re going to fight like cats and dogs to win market share there once it gets approved. It’s a big, big deal.”

Earlier this year on July 27, the SEC approved a leveraged, 2x Bitcoin futures ETF, which leaves many scratching their heads as to how that is safe for investors, but not a spot ETF. Grayscale, who is currently in a legal battle with the SEC over the denial of its spot Bitcoin ETF application, sent a letter to the U.S. Court of Appeals protesting exactly this. 

More information on the spot Bitcoin ETF race can be found here.

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WisdomTree, a prominent provider of exchange-traded funds (ETFs), has filed an application seeking approval for the launch of the WisdomTree Bitcoin Trust, to be listed on the Cboe BZX Exchange. This filing comes in the wake of BlackRock’s recent application for a spot bitcoin ETF, signaling the increasing interest and recognition of bitcoin within the traditional finance space.

In their filing, WisdomTree outlined their investment objective of gaining exposure to the price of bitcoin while considering the expenses and liabilities associated with the ETF’s operations. WisdomTree intends to value the shares daily based on the CF Bitcoin US Settlement Price, which aggregates trade flow from major bitcoin spot exchanges.

WisdomTree’s approach involves conducting “in-kind” transactions with Authorized Participants, enabling them to deliver or facilitate the delivery of bitcoin to the Trust’s custodian, U.S. Bank, National Association. Although the name indicates a trust, both WisdomTree’s filing and BlackRock’s filings function as spot ETFs, which is explained further here.

While the Securities and Exchange Commission (SEC) has rejected previous applications for spot Bitcoin ETFs, it has approved Bitcoin futures ETFs. The filings by BlackRock and WisdomTree reflect the industry’s push to provide investors with regulated options for participating in the bitcoin market, albeit at the cost of properties exclusive to sovereign bitcoin usage.

The consecutive filings by BlackRock and WisdomTree highlight the increasing recognition of Bitcoin’s potential in traditional finance. By applying for spot ETFs, these asset management giants are acknowledging the demand for regulated investment vehicles in the space. The filings may pave the way for broader adoption and a new wave of institutional investors entering the bitcoin market.

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BlackRock, the worlds largest asset manager, is reportedly on the brink of submitting an application for a Bitcoin ETF (exchange-traded fund), as disclosed by a reliable source familiar with the matter. 

In their pursuit of a Bitcoin ETF, BlackRock has chosen Coinbase Custody as their trusted custodial solution. Moreover, the asset manager will rely on Coinbase’s spot market data to ensure accurate and reliable pricing for the ETF. Coinbase and BlackRock have so far refrained from providing any official comments on the matter.

While the specifics of the upcoming ETF remain undisclosed, it is yet to be determined whether it will be based on spot or futures contracts. BlackRock, however, refrained from immediate comment, leaving investors eagerly awaiting further details.

It is worth noting that the Securities and Exchange Commission (SEC), the regulatory authority responsible for overseeing ETFs in the United States, has thus far rejected every application for a spot bitcoin ETF. Nevertheless, the commission has granted approval for several bitcoin futures ETFs, which have been successfully introduced for trading.

BlackRock’s imminent filing for a Bitcoin ETF signals a turning point in the industry, as a prominent player in the traditional financial space acknowledges the potential of Bitcoin. If approved, the Bitcoin ETF would open doors to a new wave of adoption and provide investors with an unprecedented opportunity to participate in the Bitcoin market through a regulated and accessible investment vehicle.

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Japanese tech giant Fujitsu filed a trademark application with the United States Patent and Trademark Office (USPTO), revealing its intent to offer brokerage services for cryptocurrency trading, among other crypto and non-crypto financial facilities.

Fujitsu’s trademark application aims to register a new mark which “consists of the stylized word FUJITSU with a sideways s shaped swirl over the J and I,” as evidenced in the official document filed on March 16. The branding is dedicated to offering financial services, which include acceptance of deposits, financing loans and financial management and exchange of crypto assets.

The image above represents the updated logo that Fujitsu intends to trademark for providing the said services. In addition, the snippet below provides an overview of the services Fujitsu disclosed with the USPTO, along with the trademark request.

Fujitsu’s growing interest in web3 became evident when it launched a Web3 acceleration platform for startups and partner companies in February. The platform aims to support the creation of a diverse ecosystem of Web3 applications across a range of use cases, such as digital content rights management, business transactions, contracts, and processes.

Related: Japanese prime minister says DAOs and NFTs help support government’s ‘Cool Japan’ strategy

At the beginning of 2023, financial regulators in Japan urged global regulators to introduce tougher banking rules for the crypto sector.

「当社におけるお客様の資産の管理状況等について（1月16日時点）」お知らせを掲載致しました。こちらをご確認ください。https://t.co/Y9D2RQAsgB

— FTX Japan (@FTX_JP) January 16, 2023

Deputy director-general of the Financial Services Agency’s Strategy Development and Management Bureau, Mamoru Yanase, acknowledged that the problem wasn’t with crypto. “What’s brought about the latest scandal isn’t crypto technology itself,” he said, adding that the blame lay with “loose governance, lax internal controls and the absence of regulation and supervision.”

Magazine: Samsung’s Bitcoin ETF, $700M bust, Coinbase exits Japan: Asia Express