Non-Custodial Node

This page describes the non-custodial part of our Bitcoin Invoicing & Payments offering.

Overview

BlockSpaces offers a non-custodial node as part of its Bitcoin Invoicing & Payments offering. In simple terms, โ€œnon-custodialโ€ means the seed phrase to the node (and therefore access to the bitcoin in the nodeโ€™s wallet) belongs solely to the customer. BlockSpaces does not have access to customer funds at any point in time. This ultimately protects BlockSpaces users from errors, bad actors, and other scenarios where customer funds can be lost or stolen. While it provides protection from adverse events that could result in a loss of funds, non-custodial solutions put the responsibility on the user to secure their seed phrase. For some best practices on securing a seed phrase, check out this Vault12 article on the topic.

Node Setup

At the center of Bitcoin Invoicing & Payments is a Lightning node. Lightning nodes are Bitcoin nodes that are connected to both the main Bitcoin blockchain and the Lightning network, which allows for both on-chain and off-chain transactions.

For more information regarding on-chain and off-chain transactions, please see our user documentation here.

Once a BlockSpaces user initiates the Bitcoin Invoicing & Payments onboarding process, a Lightning node is automatically turned on and associated with the userโ€™s account. During onboarding, the user is shown their nodeโ€™s seed phrase (more on that below), asked to specify their liquidity needs, and connects their new BlockSpaces Dashboard to their Quickbooks account. Once onboarding is complete and inbound liquidity needs are established, the node is funded and synced to the Lightning Network. This typically takes three block confirmations (~30 to 45 minutes) on the Bitcoin network to complete. Once finished, BlockSpaces opens channels from our corporate nodes to the newly established client node to connect it to the broader Lightning Network. This process is how BlockSpaces is able to set up and maintain a Lightning node while also not having control of it.

For more information regarding channel management and liquidity, please see our user documentation here.

Seed Phrase & Node Password

During Bitcoin Invoicing & Payments onboarding, BlockSpaces users are shown a seed phrase that gives them access to the funds on the node wallet. Immediately after confirming the seed phrase, the customer is then asked to create a node password. Please note that seed phrases and node passwords are not the same things. The seed phrase serves as a backup in case of emergency. The node password is used more routinely to unlock the node in certain instances, like in the event of a node software update.

It is highly recommended that seed phrases are kept in as secure a location as possible. For some best practices on securing a seed phrase, check out this Vault12 article on the topic.

Important Note: In the event of a node being locked, it is important that the node be unlocked within two weeks. The Lightning Network punishes inactive nodes by making them invisible on the network, which will prevent functionality from restoring. In the event of this happening, a re-onboarding into Bitcoin Invoicing & Payments will be required.

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