Muun Wallet is a wallet that offers two quite new features in the field of Bitcoin wallets.

The first is the ability to handle on-chain (traditional) and off-chain (Lightning Network) transactions as a single amount. Second, there is a “different” backup method, which supplants the recovery seed, without neglecting security, even though it is a self-custodial wallet.

What is Muun Wallet
Muun Wallet is an open source and second generation Lightning wallet , with which you can use bitcoin both on-chain (on chain) , as well as through the second layer Lightning Network without any type of custodian and with a secure backup of money.

The reason why Muun is considered a second generation wallet is due to a small evolution that the wallets of this network have undergone. In the early days of this instant payment technology, light wallets (those that you installed on your mobile) had 2 major flaws: the first, and perhaps the most critical, is that they were custodians . The funds were actually stored in the node of whoever the wallet provider was, giving you only the freedom to manage the BTC through the payment channels.

The second failure came from the hand with the handling of funds. Using bitcoin on-chain and through Lightning required managing separate balances, either in the same wallet, or in two different ones : one for Lightning and the other on-chain .

With the passage of time, before the arrival of Muun, wallets began to appear that sought to improve these deficiencies in the use of Lightning purses.

One of the first to achieve this was Phoenix Wallet, of which we made a review in CriptoNoticias , this wallet used a methodology of trampoline nodes allowing a real backing of the funds (not custodian) and facilitating the management of on-chain and off-chain funds in the same portfolio. Although really all the funds were kept within payment channels of the Lightning network.

In the specific case of Muun, it allows handling both types of funds, but all are kept in on-chain addresses with the corresponding UTXOs .

The way Muun manages these funds is quite interesting, as it makes use of a novel feature of Bitcoin: underwater exchanges . These allow you to make chain payments between different users . Its application is quite practical for on-chain to off-chain fund exchanges .

The operation of the submarine exchanges is as follows: imagine that you want to send 0.5 BTC to Ivan, via the Lightning Network, but your funds are in an on-chain direction .

Traditionally, to carry out this process, you would have to create a payment channel in the Lightning network, in which you must send an on-chain transaction , which must receive at least 3 confirmations . The waiting time would be approximately 30 minutes, plus the commission you would need to pay .

In a submarine exchange, a third party would come into play, which for the purposes of the example we will call Hector. Héctor has a balance in Lightning payment channels and is willing to receive BTC on-chain to send off-chain .

Continuing with the example, the implementation of submarine contracts establishes that, so that Héctor does not have the motivation to keep the funds you send him, by not sending the BTC that correspond to Iván, a secret is generated, which is owned by the receiver final which in this case is Ivan .

When sending the funds to Hector, the condition will be established that, in order to claim the funds, you must know the secret. Now, so that Hector can claim his BTC, he will send Ivan the transaction, but on the condition that Ivan claims the BTC, as long as he reveals the final secret. Once Ivan claims his BTC by revealing the secret, Hector will be able to claim his BTC.

This is just one example of how submarine exchanges work. As a Muun user you really don’t have to worry about any of this. You should only use the wallet like any other. But then what is all this about? Well, this aspect is essential to understand how Muun stores your BTC . Although we are talking about a multiple format ( on-chain and Lightning), all BTCs are stored in on-chain addresses .

A recent improvement, and that came in the Muun 2.0 update , is the ability to receive payments through Lightning. The function is available immediately after the portfolio is created, without waiting times in the creation of a payment channel .

This is possible thanks to the fact that Muun implements a functionality known as turbo channels , which, in short, is a channel financed by a third party, in this case by Muun itself, which allows to receive funds instantly after having created the portfolio.

The pay channels, in a way, are an improvement on the original submarine exchange system used in Muun . These allow you to use Lightning exchanges faster, and avoid the lack of liquidity that exchange providers can suffer.

However, this utility suffers from a security flaw, since in a certain way the turbo channel provider can apply a double spending attack on a financed channel. This requires reliable providers, in this case Muun being the only one that provides turbo channels to its users.

Muun guarantees that, in the scenario of a double spending attack, it is totally public, and this type of action would lead the company to a total loss of credibility. However, given the crossroads that exists when using turbo channels, within the Muun Wallet settings you can disable this option, which is activated by default.

Muun doesn’t use a cloud backup if that’s what you’re thinking. This wallet is self-custodial and gives you all the power over the BTC you store. When we talk about being seedless, it literally doesn’t use a recovery seed, but it does use a similar backup model .

In the first place, as Muun explains in his blog , the developers decide to leave behind the recovery seed model for a crucial element, which is the seed-portfolio dependency. This means that, in most cases, when you have the recovery seed of your portfolio safeguarded, and the portfolio you used disappears, the situation can turn into a headache.

Cryptocurrency wallets generate their seeds based on a specific BIP (Bitcoin Enhancement Proposal) variation. One of the most used is BIP39 seeds . In some cases, seeds generated under this format, in different portfolios, are compatible with each other.

But, some wallets tend to implement customizations in their own seeds, which makes them incompatible with any other wallet. This leaves users with very few options, in a scenario where the portfolio that has generated the seed disappears from the face of the earth. Of course, it is not impossible to recover, there are platforms such as Wallets Recovery that help you in this process.

Now, to mitigate this, Muun uses a two-part multiple model . The first is the recovery code, something similar to a backup seed, but according to the Muun developers it has much more entropy than a recovery seed has, making it more difficult to replicate the code by brute force.

The second part is an Emergency Kit. This is a PDF document that contains the encrypted recovery codes for the private keys generated by Muun, along with the instructions that allow you to recover the funds. This kit is independent of Muun. So much so, that, if in the future the wallet were to disappear, you can always use this emergency kit.

The kit does not work by itself, it needs the restoration code. This allows you to download it and save it in the cloud without any kind of danger. You can even generate multiple copies and save them in different places.

The way both things work is quite interesting. The backup code allows you to restore your wallet whenever you want, that is, you must give the same attention and care to this code that you would give to a recovery seed. The emergency kit is only used in extreme cases, such as Muun disappearing from the face of the earth .

Another form of backup that Muun has is through an email and password. This is a type of account recovery that you may be more used to, but it is always recommended to generate the recovery code. Since it is not saved on any external server, and it is generated locally directly on your device, no one else will have this code.

Multisig addresses in Muun
All the addresses that Muun generates are multi-signature 2 out of 2. This means that you need 2 out of 2 generated private keys to sign a transaction. These keys are distributed as follows: one of them is stored on the phone or device on which you install Muun, while Muun owns the other on its servers. However, the Emergency Kit contains both private keys.

BTC cryptocurrency exchange value
The use of this model is currently unclear, as the actual functionality is not yet activated. However, on Muun’s main page, we can see that they plan to activate a security model that allows you to tell Muun that your phone has been stolen , and therefore not accept any outgoing transactions from your wallet. This, since they have the other key to sign the outgoing transactions.

With all these features, Muun has a very clear premise: security and ease of use. This can be seen in the main interface once we create the portfolio. There you will only have two buttons: send and receive, which have not been separated into receiving on-chain or off-chain . When you want to receive, you can choose between generating a BTC address or a Lightning payment invoice, but the balance you receive will be, as we already explained, in a BTC address with its UTXO. correspondent.

Within this premise of making life easier for the user, there is something in particular that most portfolios tend to fail, and we are talking about the correct calculation of commissions.

In general, a portfolio calculates the average of commissions paid in 24 hours, and estimates how much you can pay so that your transaction is confirmed quickly . It must be taken into account that the network may suffer from congestion variations, which make the amount to be paid per commission vary in a matter of hours.

It can even be the case that a block takes more than 40 minutes to be mined, causing a bottleneck that produces a momentary increase in commissions, which is usually ignored by commission estimators, causing you to pay unfair commissions.

To mitigate this, Muun creates an evaluation system that checks in real time the correct amount to pay for commission.

Basically it automates the process carried out by expert users, which is: checking a portal that allows you to see the status of the network, as is the case with mempool.space , and manually placing the commission to pay. This within Muun is done automatically , and with the freedom to choose the exact commission you want to pay.

Conclusions
Lightning is still a growing technology. Its operation cannot be considered perfect at all, but it does solve a crucial issue suffered by many users who use Bitcoin on a daily basis: waiting times and high commissions.

As we mentioned, Muun becomes part of that second layer of portfolios that solve the dilemma of managing on-chain and off-chain funds in a practical way , since you do everything in the same wallet. Also, as a mental exercise, Muun does not use the names on-chain and off-chain to denote where the funds are sent. You send bitcoins, and that’s it. With this they try to give the best possible user experience.

Of course, and this must be limited, Muun still has some flaws in its use , which we hope will be improved, perhaps, in a 3.0 version. One that we were able to verify is the commissions in the Lightning network when issuing a payment. In this case, the commission reached just over 5,000 satoshis, being well above the normal average of 1 satoshi in transactions on the Lightning network.

Finally, to conclude, Muun is a wallet that sets a goal: to use a single Bitcoin wallet, in which you can make on-chain and off-chain transactions without problems. Clearly this, considering the current state of development of Lightning and Bitcoin, seems a bit difficult to achieve.

However, there is the expectation that, with the new updates to come , such as Taproot , they will continue to improve the user experience in Muun.