Bitcoin and Lightning Mobile Wallet based in the U.S. Zeus Cashu has been integrated into the Alpha release of Cashu. It is the first time that Cashu and ecash Bitcoin adoption is likely to be boosted by integrating a popular Bitcoin wallet.
Cashu This is the latest implementation of Chaumian Ecash. It’s a digital currency invented by David Chaum in the ’90s It is incredibly scalable and has great privacy properties. The tradeoff, however, is that it’s fundamentally centralized.
Cashu’s integration into Zeus is a move that seems counter-intuitive, as Zeus has been the tool of choice for Lightning advanced users who want to connect with their nodes. “last mile” Lightning wallets have a difficult time distributing Bitcoin to the general public.
“We basically started off as the cypherpunk wallet, right? You got to set up your own Lightning node and connect to it with Zeus. The last two years, we put the node in the phone with one click, you can run it all in a standalone app without a remote node,” Bitcoin Magazine spoke with Evan Kaloudis. Kaloudis is the CEO and founder of Zeus.
“Cashu addresses uneconomical self-custody for small bitcoin amounts. On-chain, the dust limit is 546 satoshis, and Layer two systems like Lightning have costs for channel setup or unilateral exits that aren’t widely discussed,” Evan discussed a point of friction with non-custodial Lightning Wallets. This is the requirement for channel management and liquidity. Although these more esoteric Lightning Network features have been mostly abstracted, since its invention in 2016Even the most user-friendly and sophisticated wallets are not immune to these basic trade-offs.
For both Phoenix and Zeus Wallet — two of the top noncustodial solutions on the market — users have to pay up to 10,000 sats to unlock spending capability. The fees cover on-chain costs to create a channel between the wallet and its liquidity provider.
It is hard to explain the required upfront fee and it can be a difficult onboarding process for users used to receiving money from fiat applications to sign up. This has led to the rapid proliferation of custodial Lightning Wallets, such as Wallet of Satoshi. These wallets gained mass adoption by leveraging Bitcoin’s global settlement capabilities and the great user experience that centralized wallets provide. Zeus Wallet, which was developed seven years after Lightning Network’s conception, is pushing boundaries.
“With Ecash, we make it so easy that anyone can set up a wallet and start participating in our ecosystem, which I really think is going to become more and more prevalent,” Evan explained.
Today, at roughly $100,000 per bitcoin, 1,000 satoshis are equivalent to $1, transactions of these sizes are known as microtransactions — a popular example are Nostr social media tips known as zaps. It is difficult to find the perfect tool for this application. Phoenix, a self-custodied Wallet, charges transaction fees of hundreds of Satoshis even for open channels. And on-chain costs are usually the same, but settle slower. Custodial Lightning Wallets such as WOS or Blink are cheaper, but they come with significant privacy risks, including requesting phone numbers and, in some cases, more advanced KYC. Cashu aims to provide this market by offering lower privacy costs and the same speed, ease-of-use, and fees.
Evan explains that Cashu is a great way to integrate with your Cashu account. “For users this means being able to pick and switch between custodians in a single app. For developers this means being able to defer custodial responsibilities to third parties and not have to wire up a new integration when your current custodian halts operations.”
The Zaps reward system is a satoshi denominated rewards that are delivered to you as “likes” Nostr is a social media platform that allows you to share microtips and tips for your content. One satoshi is the minimum amount of bitcoin which can technically be transferred. This would be equivalent to a 10th of a cent today. “But I think if we look at Nostr and you’re seeing how many people are zapping and how big a part of that ecosystem it is. It’s like, people are willing to do it,” Evan explained.
“Cashu, while custodial, lets users accumulate small amounts — say, via Nostr zaps — without needing 6,000 satoshis to open a Lightning channel. ZEUS prompts users to upgrade to self-custody as their balance grows,” he explained that Cashu has made several design choices to reduce the potential risks.
Cashu challenges the traditional view of Bitcoin custody, which is that it’s either/or. Historically you were either a centralized — custodial — exchange, or you were a noncustodial Bitcoin wallet. Cashu is a new way to store bitcoins. Cashu is changing this paradigm with its bitcoin-denominated electronic cash notes. “nuts,” These are the bearer instruments which should have a bitcoin reserve of at least 80% and Lightning compatibility for an instant withdrawal.
As with fiat currency, these notes are subject to the same control and responsibility requirements, as well as counterparty risks. In the case of Cashu, there are certain things the issuing mint can theoretically do to exploit their users — akin to how a bank can run on a fractional reserve.
Cashu has a number of advantages over fiat money, including being open source and designed with user privacy in mind. It also scales well. The cost to run a bitcoin mint is lower with Cashu than any other alternative. This feature makes it easier for mints to compete, and in theory, counteracts the network effect of specific miners.
Finaly, Cashu tokens have been compared to well-known forms of Bitcoin Self Custody such as downloads of 12-words via various mechanisms. Though implementations are still different from wallets to wallets and the ecosystem in its initial stages, it is a promising start.
Cashu has created a variety of methods to automatically manage custody risk.
“Users can split risk by using multiple mints, switching between them in the user interface. Soon, ZEUS will guide users to select five or six reputable mints, automatically balancing funds to minimize exposure,” Evan elaborated on a specific approach called automated banking runs. Zeus rotates your value to reduce risk as certain Cashu mints hold more funds.
“I think the idea is going to be that we guide users to pick five or six reputable mints… And from there, users will be able to have the wallet automatically switch between those mints and determine which mint should be receiving the balance depending on the balance of all the mints presently. So you’ll be like, OK. MiniBits has way too much money. Let’s switch the default to one of the mints that doesn’t have a lot. So that way you can sort of mitigate or rather distribute the rug risk there,” Evan explained, adding, “Our Discover Mint feature pulls reviews from bitcoinmints.com, showing vouch counts and user feedback, like mint reliability or longevity,” He explained by describing how the risk management mechanism is layered on top of a reputation layer.
It is not known how to completely remove the custody risk from ecash Chaumian style. The scaling and privacy benefits become remarkable as long as there is a minimal risk in custody.
Microtransactions are one of the many opportunities that ecash opens up. The most common example is Nostr Zaps which often involve transfers of a single dollar amount, but it also applies to Lightning transactions. The use case raises an old technical question, which predates Bitcoin: do microtransactions make sense economically?
The friction that microtransactions cause to the users has been a subject of debate for a while. This term was coined in 1999 by Nick Szabo. He is considered one of the fathers of Bitcoin. “Micropayments and Mental Transaction Costs,” It is important to explain that when a payment becomes too small it can be difficult to calculate and it costs more mentally than it’s worth.
Szabo wrote in his paper that the design of the microtransactions interface was the most significant challenge for theorized uses. Szabo’s theory has been a leading explanation of why microtransactions failed to be adopted. Bitcoiners, however, have thought about this problem for some time and believe that they may have found a solution.
Zeus’s integration with Cashu may be a key moment for bringing Bitcoin into the mainstream through zaps. The proliferation of Facebook’s iconic emojis is akin to the emergence of Cashu. “like” Entrepreneurs like Evan, founder of Cashu and Calle believe that zaps can make bitcoin easier to use. Zaps offer a special opportunity. They are an alternative way to buy and use bitcoin, one that is not wrapped up in the traditional investment products of exchanges and brokerages.
Zaps work as an online tipping system, not a $100,000 asset. You can send a few satoshis as a reward to your friend for sharing a meme or creating high-quality content on the Nostr App.
Evan says that Nick Szabo’s warnings about microtransactions might have been taken into account.
“If it’s as mindless as one click, like pressing the heart button — you press the zap button, it doesn’t require you to fire up your wallet and choose the destination. If it’s just a press away, then I think a lot of that mental burden Szabo talks about gets pushed aside because you don’t have time to think about it. Nostr’s zap feature shows people are willing to send small amounts — like 1,000 satoshis for a good post — if the UX is seamless, with a single click.”
It’s not easy to deliver a Wallet of Satoshi user experience using a software stack that is open source and minimizes trust. In fact, this may be the hardest path.
WOS made waves when it launched in the Bitcoin universe. No 12 word seed download? No page for account creation? Receive and send sats, with immediate settlement and minimal transaction costs?
This wallet is so popular because it was a great experience. It was made possible by WOS’s closed source, centralized approach. Open source has now caught up to the standards and user experience that WOS set.
Zeus Wallet is a company that has managed to walk the fine line of working for public while also running a start-up with purely profit motives. So far, so good.
“The wallet is fully open-source, verifiable on GitHub, with 50+ external contributors. Open-source builds trust, attracts users to our paid services, and prevents black-box risks,” Evan explains why Bitcoin software is open-source.
While the downsides of open source are self-evident to many developers — others may copy your code and outcompete you, and the code has to be good enough that hackers can’t easily break it — the upsides have now started to snowball.
“We have a few employees right now that are hacking on the Zeus code every day, but we’ve got 50+ external code contributors that have worked on the project,” Evan added that when asked what the advantages of open source are, “being open source also allows you to iterate on the wallet and the feature set and that attracts more users too. And meanwhile, we’re able to plug in our paid services like the default options.”
They are adopting the business model of the Lightning Network, which is to become liquidity providers.
“Revenue comes from our LSP, where users lease channels for two weeks to a year, renewable indefinitely. Our White Glove service supports clients like PubKey with node management,” Evan explained.
However, Zeus’s greatest challenge came during the spring of 2024 with the arrest and prosecution of the Samourai Wallet developers — a shot across the bow that intimidated many Bitcoin entrepreneurs out of the U.S., inducing Zeus’ top competitors, Phoenix Wallet and WOS. Most companies have already incorporated offshore to hedge their bets. Zeus, which was built and founded in America, wasn’t one of those companies. going down with the ship.
“It was a scary time, with Wallet of Satoshi and Phoenix pulling out, causing panic. I was about to have my first kid and feared the consequences, but folding out of fear felt worse. We wanted to push back and give users confidence that ZEUS wouldn’t abandon them,” Evan recalled. It was worth it to have the courage to stay on in America despite the hostility. Bitcoiners seeking noncustodial applications and user interfaces with good usability had limited options because the leading competitors were based outside the U.S.
“It was insane — at the time the LSP was just getting started, but at that time, probably 250 to 300% growth in the first six months. So we saw a ton of activity on the LSP,” Evan recalled, “So looking back at it, I wouldn’t change a thing… That was peanuts. We are going to have to make some much more difficult decisions down the road, potentially. And we need to be prepared for when those days happen. So, I think, in a lot of ways, this was just like a trial run and we passed.”
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