Bitcoin Lightning wallet Phoenix: the plus and minus points explained

Review – Phoenix is the second Bitcoin Lightning wallet of the French bitcoin company Acinq. Just like Blockstream and Lightning Labs, they have their own implementation of the Lightning network, namely Eclair. This was also the name of their first Lightning wallet.
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Bitcoin Lightning wallet Phoenix

Where Eclair focuses mainly on the experienced bitcoin users, Phoenix focuses mainly on beginners with little or no bitcoin experience. The fact that it’s a Lightning wallet doesn’t really matter.

As a user you want to have an easy to use wallet that can send and receive transactions quickly and cheaply. For example, the Phoenix wallet has only a limited number of settings that you can play with compared to Eclair.

Luckily you don’t have to run your own node anymore to use Lightning. Wallets such as Phoenix, BlueWallet and Breez have made the technology more accessible to the general public.

And just as with a number of other Lightning wallets, you no longer have to worry about managing your channels, taking backups or running the risk of your channels being abruptly closed by the other party.
Simple but effective

The wallet gives you only one balance. No more hassle with on-chain and off-chain balance totals. And although you don’t have a separate balance for on-chain transactions, you can still do them.

The conversion where you want to make an on-chain payment with your Lightning wallet, also called swap-out, is automatically done in the background in front of you.

For a small fee of 0.1% per transaction, this also works the other way around and you can receive on-chain payments. A swap-in is called this. The small fee has to cover the costs of opening a channel.

Also in taking backups there is no difference with traditional bitcoin wallets. This makes it more user friendly than for example Breez where the backup is stored in Google Drive and safer than for example Blue Walllet who still has access to your bitcoins (custodial).
Under the hood

The Phoenix wallet offers a number of smart features to keep the entry threshold to Lightning as low as possible. Some of these features are:

Pay-to-open: if you have just installed a Lightning wallet or if you have insufficient incoming liquidity you cannot receive payments yet. For this you first need to create a number of channels. Phoenix will take care of this for you. More details can be found here.
Spend-unconfirmed (aka. turbo channels): the concept of turbo channels has been known for a long time. Bitrefill was one of the first platforms to offer it. However, we haven’t seen it in wallets yet. This makes it possible to send bitcoins directly without waiting for a confirmation.
Peer backup: taking backups with Lightning is not that easy as it needs to be renewed with each new transaction. Phoenix came up with a handy solution where a backup of your seed (12 words) is sufficient.
Trampoline payments: Acinq calculates the quickest and cheapest way for your transaction over the Lightning network. As the network grows this becomes too complex for the memory of a smartphone. However, this means sharing certain transaction data with Acinq.
Swaps: Send and receive transactions seamlessly on-chain with a Lightning wallet.

User in control

It is always a matter of finding the right balance between user-friendliness on the one hand and security on the other hand. Acinq does not call the Phoenix wallet trustless, but trust-minized. Let there be no doubt about this.

The wallet is non-custodial so you as a user always remain in control of your bitcoins. Some compromises that have been made:

Phoenix only connects to the Acinq Lightning node: this makes you dependent on them for a limited number of actions, such as completing your wallet until the first confirmation is received and performing swaps.
Privacy: since all transactions are done through their node, they have visibility on both the amount and the final destination. Later versions will connect over TOR by default, providing more privacy.

Conclusion

Building a Lightning wallet involves a lot of challenges. With Phoenix Acinq wants to offer the same user-friendliness of a custodial wallet but still offer the same security as a full-fledged Lightning node.

Although the wallet is still in an early stage of development, they managed to bring a lot of technical aspects to the background.

As a user you just scan a QR-code and the wallet automatically does everything it’s supposed to do.