The counterparty risk for Custodial wallet and Cashu users is that the server operator might run away with the funds. Liquid users face the risk that multiple federation members might collude to steal the funds. Spark users face the risk that the service providers might collude with the previous sender to double-spend the received funds. The counterparty risk for Ark is that if the user stays offline for too long and their VTXO expires, the service provider may be able to take control of it. The counterparty risk for Lightning channel users is that if the channel counterparty broadcasts an old state (a settlement transaction favorable to them) on-chain, and the user fails to come online and publish the latest state within the dispute period to contest it. View quoted note →