Bolt Labs Raises $1.5 Million Seed Round to Boost Lightning Privacy

Academic researcher Dr. Ayo Akinyele is working on a cryptographic solution to boost privacy across second-layer blockchain solutions like the lightning network for bitcoin.

Akinyele just announced the formation of Bolt Labs, named after the BOLT protocol that aims to give lightning hubs shielded addresses for anonymous payment channels. The startup is launching with a $1.5 million seed round led by Dekrypt Capital and support from Ripple’s investment arm, Xpring, plus Lemniscap and Access Ventures.

Furthermore, Electronic Coin Company CEO Zooko Wilcox is advising Bolt Labs and helping the startup create its first proof-of-concept this summer for the privacy coin zcash, which doesn’t use lightning like bitcoin.

“Ultimately, interoperability is the goal,” Akinyele told CoinDesk about why the startup is working on compatibility for both bitcoin and cryptocurrencies without comparable scaling solutions. “Our design is independent of the underlying currency.”

Stepping back, BOLT is still an experimental software idea that theoretically applies directly to the cryptocurrency node, which communicates payment information to the broader network. Whether the software is integrated directly into a Layer 2 node like a lightning client or a Layer 1 node like zcash’s, the intention is always to protect information about the account, including who sends payments to it and how much the channel holds.

“The initial balance of the channel is hidden,” Akinyele said. “And now when you make a payment from this channel no one can link you to that payment unless you disclose the information.”

Dekrypt Capital co-founder Howard Wu told CoinDesk these types of features will be essential for cryptocurrency payments to spread without proliferating surveillance capitalism, a term coined by sociologist Shoshana Zuboff in 2014 to describe omnipresent surveillance and data collection online.

“A lot of credit card companies today, and advertising companies, acquire data from outlets like Best Buy or Overstock and sell this data to traders or other companies,” Wu said.

Referring to compliance requirements such as the European Union’s General Data Protection Regulation, which prohibits companies from immutably storing some types of personal data, he added:

“We see that as being a risk, fundamentally, to privacy and compliance. Being able to have shopping sites integrate wallets [with BOLT] in the future would absolutely be interesting for helping to protect users.”

Dekrypt Capital co-founder Jon Allen also said that cryptocurrencies will only reach their decentralized potential for empowering individuals if there are options to spend crypto in ways that are closer to cash, without names and addresses.

“We also need a private, money-like currency,” Allen said.

Speaking to why Xpring invested in Bolt Labs, a Ripple spokesperson told CoinDesk:

“We’re believers that the combination of Layer 2 solutions like Bolt and interoperability technologies like Interledger will improve the experience for both developers and end users, thereby paving the path for the mass adoption of crypto.”

Baby steps

Akinyele told CoinDesk there’s still a long way to go before the first BOLT mainnet experiment launches later this year.

“I would liken [BOLT] to infrastructure that makes it possible to have instant, cheap and private payments for everyday purchases,” he said.

Lightning Labs engineer Alex Bosworth, who is partially responsible for the LND implementation Akinyele is modeling BOLT after, told CoinDesk that more privacy features are already being built into lightning itself.

“We’ll try to make private channels less identifiable,” Bosworth said. “We’re going to change it so that a two-of-two multisig on-chain looks like a single multisig, just like a normal spend. That will use more of a cryptography solution.”

This strategy of making payment hubs look like normal wallets, obscuring the individual payments that pass through them, will also use a cryptographic solution. Only time will tell how BOLT’s cryptographic solution will fit in with these lightning updates.

In the meantime, the nonprofit Zcash Foundation, separate from Wilcox’s startup, gave Akinyele more than $40,000 worth of grants in 2018 as the researcher geared up to launch Bolt Labs. Bolt Labs eventually plans to generate revenue by offering services to institutions involved in activities like over-the-counter trading, that require both significant scale and discretion.

Comparing the potential of BOLT-enhanced nodes to standalone lightning nodes, Zcash Foundation executive director Josh Cincinnati told CoinDesk: