Lightspark Open-Sources UMA Protocol
Lightspark, a Lightning Network (LN) service provider catering to institutions, has made an announcement that it is open-sourcing the code for Universal Money Address (UMA). This protocol functions similarly to email, but for money. According to Lightspark, UMA allows users of wallets, exchanges, and banks to have unique addresses that are easy to read and use for sending and receiving money in their preferred currency.
UMA offers several advantages compared to other money-transmitting protocols. It is available 24/7, features interoperable addresses, and provides low fees for currency conversion and transactions due to its utilization of LN technology. Additionally, UMA is open-source and can be implemented by various companies and wallet providers free of charge.
The protocol also enables institutions to ensure compliance with regulations, allowing them to conduct global, fast, and compliant transactions while leveraging existing infrastructure.
The Compliance Debate
The mention of “compliant transactions” sparked a debate within the community, with many expressing criticism towards introducing compliance at the protocol level. David Marcus, co-founder and CEO of Lightspark, emphasized the importance of compliance for the growth of LN.
Marcus argued against those who view anything related to compliance as “blasphemy,” stating:
If we truly want Bitcoin and Lightning to become the winning global settlement network for value on the internet, it must enable regulated entities to participate with the network and meet their compliance obligations.
However, many disagreed with Marcus’s perspective, asserting that compliance goes against the ethos of freedom associated with Bitcoin. Matt Ahlborg, a market research consultant at Bitrefill, expressed:
Compliance often means racism when you are required to block hundreds of millions of people based on the country they were born in. KYC/AML as it currently exists is an un-American guilty until proven innocent system.
Marcus clarified that UMA is backward compatible with LN-URL and that any wallet implementing the protocol, even without complying with KYC/AML measures, can still utilize UMA for transactions.
Hot Take: Balancing Compliance and Freedom in Crypto
The open-sourcing of the Universal Money Address (UMA) protocol by Lightspark has ignited a debate surrounding compliance in the cryptocurrency industry. While some argue that compliance is necessary for Bitcoin and Lightning Network to gain widespread adoption, others view it as a hindrance to the freedom and decentralization principles of cryptocurrencies.
The disagreement highlights the ongoing tension between regulatory requirements and the desire for financial sovereignty. Striking a balance between compliance and individual freedom will likely be a crucial challenge for the crypto industry moving forward.
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