With the announcement of the open sourcing of the Universal Money Addresses (UMA), David Marcus, the former president of PayPal and the co-creator of Diem, a cryptocurrency project begun by Facebook, has made headlines.
Using the Lightning Network and LNURL, a protocol developed on top of HTTP that allows Lightning clients to connect, coordinate, and perform a broad range of operations in the lightning network, UMA enables bitcoin or fiat cash to be sent via an email address, much like PayPal.
“Our goal was to make transferring funds as easy as sending an email, therefore we built upon Lightning and LNURL to include support for regulatory compliance and foreign exchange. UMA-enabled exchanges, wallets, and banks will allow users to transfer and receive both cash and cryptocurrency”, as Marcus put it.
Bitnob, Coins.ph, Foxbit, Ripio, and Xapo Bank are all on board to provide UMAs to consumers and have waiting lists in place.
Bakkt, a bitcoin trading and storage platform, has also stated that they would be incorporating UMA, beginning with the alpha release of a Lightning service that is compatible with UMA.
Since the standard is backwards-compatible, these organizations will make it possible for UMA users to send and receive payments with nothing more than an email address.
The Lightning protocol also incorporates compliance, allowing users to secretly send and receive currency with just an email address.
“UMA improves standard Lightning abilities by adding the ability to check if the person receiving the asset is at a regulated Virtual Asset Service Provider (VASP),” Bakkt went on to say:
“Using integrations with widely used compliance transaction screening tools, it verifies whether or not the Travel Rule is in effect, the value of the transaction, and whether or not the end recipient has been validated via Know Your Customer (KYC) procedures.
Since UMA is an extension of LNURL, depending on the VASP’s risk tolerance, transactions may fall back to regular Lightning transactions.”
Many bitcoiners have criticized this compliance feature on social media, causing Marcus to respond, saying:
One member of the Bitcoin community said, “There’s this group of people who think that anything with the term ‘compliance’ in it is treason.
Bitcoin and Lightning must allow regulated companies to engage with the network while meeting compliance standards if they are to become the winning global settlement network for value on the internet.”
While compliance seems to be voluntary, this standard does improve usability by eliminating the need to remember complex LN addresses in favor of shorter, more remembered email addresses.
However, Lightning Network adoption has been slow, with the network’s total value remaining at around 3,500 Bitcoin for years.
One reason is that it has proven somewhat difficult to use on a non-custodial basis, and another is that it lacks the same degree of security and decentralization as the Bitcoin network itself.
However, progress is clearly being made, and Bitcoin address formatting in emails is one of the most significant UX gains since QR codes.
