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Paralelní Polis Lightning NFC Card

🔍 Last analysed 17th May 2022 . Custodial: The provider holds the keys

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Do your own research!

Try out searching for "lost bitcoins", "stole my money" or "scammers" together with the wallet's name, even if you think the wallet is generally trustworthy. For all the bigger wallets you will find accusations. Make sure you understand why they were made and if you are comfortable with the provider's reaction.

If you find something we should include, you can create an issue or edit this analysis yourself and create a merge request for your changes.

The Analysis 

Background

Rather than a company, Paralelní Polis embraces cypherpunk culture and is a socio-political movement. The ideals of decentralization and cryptoanarchy are emphasized in this group thus, it aligns with some core tenets of Bitcoin.

They hold an annual event called the HCPP (Hackers Congress Paralelní Polis).

Description

A more thorough description could be found in Mário Havel’s Github repository.

NFC badge contains 2 fields: LNURL-withdraw for paying and LNURL-pay for receiving sats. These are static codes which are created and uploaded only once. To receive funds, user approaches a badge/reads a QR code with LNURL-pay to receive funds from a Bitcoin ATM. Received funds can be immediately spend by reading LNURL-withdraw for example by point of sale terminal.

LNURL pairs are created using LNbits. Each pair represents a user in LNBits instance. With a web address and user ID, user can easily access web interface of the wallet and manage badge funds there.

Yes, this solution is custodial and involves trusting the LNURL server provider. However, compared to the previous model, it offers the same level of trust. Users can easily withdraw all funds to their own non-custodial wallet, which takes minimum fees and is easy thanks to LNBits feature Drain funds. It also offers security benefits because LNURL-withdraw can be limited to a maximum withdrawal amount, number of uses, and time between them. Privacy benefit - avoiding address reuse and not putting all data onchain is obvious.

You can see the device in action here:



You can find 3 different QR codes on your card. Two codes on the front (white) side are used for payments – sending and receiving. Content of these is also on your NFC badge which you can use to interact with ATMs and payment terminals.

Black button allows you to receive funds – tap it on ATM while receiving or scan to receive.

Red button – send can be used to withdraw funds. Single payment with send code is by default limited to 100k sats (~40€). For bigger payment, you have to use web wallet interface or withdraw money to your own wallet.

Third code on the black side of the card is address of your wallet. Scan it and open in your browser to access web application which can be used as Bitcoin Lightning wallet. Application is hosted by Paralelní Polis which is provider of Lightning infrastructure and liquidity.

Analysis

The provider describes the service as custodial since the wallet is hosted on a server. If it wasn’t custodial, it would still lack a screen to check what is being signed, which is clearly a concern of the provider as they limit payments to 0.001BTC by default.

(dg)

Verdict Explained

As the provider of this product holds the keys, verifiability of the product is not relevant to the security of the funds!

As part of our Methodology, we ask:

Custodial!

Is the product self-custodial?

If the answer is "no", we mark it as "Custodial: The provider holds the keys".

A custodial service is a service where the funds are held by a third party like the provider. The custodial service can at any point steal all the funds of all the users at their discretion. Our investigations stop there.

Some services might claim their setup is super secure, that they don’t actually have access to the funds, or that the access is shared between multiple parties. For our evaluation of it being a wallet, these details are irrelevant. They might be a trustworthy Bitcoin bank and they might be a better fit for certain users than being your own bank but our investigation still stops there as we are only interested in wallets.

Products that claim to be non-custodial but feature custodial accounts without very clearly marking those as custodial are also considered “custodial” as a whole to avoid misguiding users that follow our assessment.

This verdict means that the provider might or might not publish source code and maybe it is even possible to reproduce the build from the source code but as it is custodial, the provider already has control over the funds, so it is not a wallet where you would be in exclusive control of your funds.

We have to acknowledge that a huge majority of Bitcoiners are currently using custodial Bitcoin banks. If you do, please:

  • Do your own research if the provider is trust-worthy!
  • Check if you know at least enough about them so you can sue them when you have to!
  • Check if the provider is under a jurisdiction that will allow them to release your funds when you need them?
  • Check if the provider is taking security measures proportional to the amount of funds secured? If they have a million users and don’t use cold storage, that hot wallet is a million times more valuable for hackers to attack. A million times more effort will be taken by hackers to infiltrate their security systems.
The product cannot be independently verified. If the provider puts your funds at risk on purpose or by accident, you will probably not know about the issue before people start losing money. If the provider is more criminally inclined he might have collected all the backups of all the wallets, ready to be emptied at the press of a button. The product might have a formidable track record but out of distress or change in management turns out to be evil from some point on, with nobody outside ever knowing before it is too late.