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I've read so far all official Muun articles about the submarine swaps and emergency kits, but one thing still has me confused.

Let's say I receive $500 worth of Bitcoin on-chain to my Muun wallet. These funds are stored on-chain and stay there for now as far as I understand. Now I make a payment via Lightning Network (LN) let's say worth $3. Now you do a submarine swap in the background as far as I understood.

But this is where I loose the plot. The party who sends the lightning payment need to get the BTC on-chain from my wallet or not? This would mean on-chain fees accure for every lightning payment?

Another question I have, if I receive e.g 100$ worth of Bitcoin via lightning to my Muun wallet, will I finally receive these on-chain aka is the whole balance that I see in a Muun wallet exclusively stored on-chain

Thanks a lot for your help!

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At the time of writing this, Muun does indeed store all balance on-chain. It does not open any Lightning channels and instead uses submarine swaps for Lightning payments, which means it has to make an on-chain transaction (and pay on-chain fees) every time you send or receive. It also means your Lightning payments might have to wait for a block confirmation (10 minutes on average) if Muun decides your transaction has too much risk of being replaced while unconfirmed.

This makes Muun essentially an on-chain wallet with some Lightning capability, but without enjoying the two main selling points of Lightning, which are low fees and instant payments. According to Muun themselves, this design is a result of prioritizing user security.[1] However, they know that it's less than ideal and plan to transition to an "off-chain architecture that doesn't compromise user security".[2]

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  • Is my understanding of atomic swaps correct that each time we make a Lightning payment with Muun, 2 onchain transactions are made in total (for which the Muun user would have to pay the fees)? One created by the user's Muun wallet to set up the submarine swap, and another one created by the Muun node to claim the funds, using the preimage from the LN payment they did for you and settling the swap? So that a Lightning payment with Muun would be more expensive than a normal onchain payment?
    – Lightlike
    Commented Nov 29, 2022 at 15:41
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    Correct. What I don't understand is how Muun doesn't charge fees with very low value transaction. I think they assume the cost and then charge more on higher transactions (of other users?). They should be more transparent about this.
    – bordalix
    Commented Nov 30, 2022 at 5:20

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