Bolt, a private, off-chain scaling solution on top of the privacy-focused Zcash cryptocurrency, attracted significant investment from several key players in the crypto space. Among the crowd is the Electric Coin Company (the company behind the Zcash crypto asset), with its founder and CEO Zooko Wilcox, as well as Dekrypt Capital.
Wilcox sees Bolt as promising due to its added protection, he explained to me in an interview. The Bolt protocol is a scaling solution similar to bitcoin’s Lightning Network that makes it more feasible to send smaller amounts, except it differs in the privacy category. “Bolt uses cryptography to conceal, from unauthorized parties, the information about which users are sending micropayments to which other users,” Wilcox said.
In terms of the Bolt solution, Wilcox mentioned the topic of safety for users, as opposed to anonymity. “What matters to you is that you’re safe,” he said, pointing toward online scandals, and various hacks in which people saw their private information stolen. “This kind of technology is security technology. It just protects users so they can use these systems without fear,” he said.
At press time, Zcash (ZEC) is currently trading at $68, after falling from $851 in January 2018.[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Significant Investment In Bolt
The Electric Coin Company expressed significant interest in Bolt Labs, delegating Wilcox as an advisor to Bolt, in exchange for the Electric Coin Company gaining equity in Bolt Labs, Wilcox explained to me via email. Wilcox also has made one of his largest personal investments to date into Bolt Labs, reasoning, “because I believe in their mission and in Ayo [Akinyele].” Akinyele is the cofounder and CEO of Bolt Labs.
In addition to the Electric Coin Company, Bolt has garnered investment from several other big players, with $1.5 million total invested so far, Akinyele told me in an interview. Leading the investment is “Dekrypt Capital, which comes out of UC Berkley,” and is focused on privacy in the cryptocurrency and blockchain technology space as part of its investment thesis, he said. Bolt has been working with Dekrypt for a considerable amount of time already, Akinyele added.
Akinyele also mentioned several other important players participating in investment, including Kilowatt Capital, Access Ventures, Lemniscap, Vy Capital and Xpring from Ripple Labs.
With respect to Xpring, they are building not only XRP, but they also have their own payment channel’s implementation, and the Interledger Protocol, which is a way to connect blockchains, and so they are basically looking to use private payment channels as a way to stream payments accross different currencies.”
Bolt’s Private Scaling Solution
Akinyele explained to me that Bolt initially will launch on top of Zcash. The Bolt protocol will be similar in fashion to the Lightning Network on top of bitcoin, except with a privacy focus. “We’re building a Bolt node, which is equivalent to a Lightning node that people download and install that allows creating channels and executing payments off-chain,” Akinyele said.
Although, using Bolt provides added privacy that is not present on the Lightning Network, Akinyele said via an analogy to website protocols: bitcoin can represent HTTP and Zcash can represent HTTPS, with a similar comparison regarding the Bolt protocol.
We’re basically making that same analogy at layer 2, because if you were to take the Lightning protocol, as is, on top of bitcoin, and implemented it on top of Zcash, you would actually be losing privacy in the sense that the protocol doesn’t, by design, enable strong privacy guarantees as users make payments.”
“That’s the problem that we’re solving as a starting point,” he said.
Akinyele also mentioned future goals to enable the Bolt protocol to work on top of multiple different crypto assets, such as bitcoin and ethereum for example. He said Matthew Green and Ian Miers built Bolt utilizing conventional zero-knowledge proof methods, different from Zcash’s layer 1, giving the protocol the versatility to work on any other asset.
A Private Protocol On A Private Asset
With a private layer 2 solution such as Bolt, one might question the need for a privacy coin like Zcash if bitcoin simply could become private by utilizing Bolt.
Wilcox explained in the interview, however, the importance of privacy and data security at each layer. “You’ve got to have security at every part, in every component of the system, or else you’re being exposed,” he said.
“If you use Zcash layer 1, and then you have Lightning [Network] layered on top of it, that might be good for some things, but a lot of information about your activities is going to be leaked through the Lightning component,” Wilcox explained.
Depending on your use case, if you’re using it for business purposes, it might be unacceptable to have your business’s confidential data leaked that way, but if you use Zcash for layer 1 and Bolt for layer 2, then both of the layers are not leaking information about you to unathorized parties.”
On the flip side, utilizing Bolt on top of a non-private asset, such as bitcoin, will still give added privacy, but might expose amounts of user data at some point in the equation, making for a less secure option than Bolt on top of a private layer 1. Regarding Bolt on top of an asset such as bitcoin, Wilcox noted Bolt won’t expose micropayment data. Information might, however, slip out when users open and close those bitcoin payment channels, he said, due to the on-chain activity required.
That being said, Wilcox did express positivity toward Bolt’s use case on top of a variety of different crypto assets.
As far as progress and usage go, Akinyele said Bolt is currently in its early stages. “We’re still working on the node implementation on top of Zcash,” he said. The team is working on implementing Bolt’s private testnet at the moment, and is looking to unveil its public testnet “in the near future,” he said.
“We’re still some ways away from deploying our product,” Akinyele added. “There are a lot of usability challenges we want to address in our rollout, in terms of a user wallet that users can interact with.”
Akinyele also touched on another application for Bolt regarding crypto asset trading and exchange custody. Bolt is working on applications for Bolt that would allow for trading, without exchange custody over funds. “We want to basically enable users to trade crypto with exchanges, without having to trust them, and be able to do it using off-blockchain techniques,” Akinyele explained.
Akinyele said exchanges currently conduct trading off-chain, but they also hold custody of assets. “What we want to do is remove the requirement or the need for them to hold custody of the funds, and still be able to trade with users,” he added. The initiative will be similar to Arwen, which Akinyele said is “piloting the technology” in this area.
“Essentially, we’re just enabling a user experience with cross-chain trading,” Akinyele added. After Bolt integration is complete regarding Zcash and other assets such as bitcoin, he said the goal is for users to be able to trade these assets off-chain, removing the necessity to trust exchanges.
Disclaimer: I actively trade cryptocurrencies, as well as hold a small amount of BTC, ETH, LTC, XMR, NEO, ZEC, BEAM, BCH, Ethos, and various insignificant altcoin positions.