CoinOS V3 Hands-On: ARK Layer 2, Lightning Integration & Unilateral Exit Guide

Coinos has been my favorite web-based Bitcoin and Lightning wallet for a while, but it's been custodial and I've only ever used it for custodial reasons. And V3 CoinOs is now out and ready to be tested. It is early days, so expect things to be changing. If there are any bugs, any issues, you can have direct contact with the developers of CoinOs to resolve those.

But CoinOs version 3 is incredibly unique because it uses ARC at the back end to enable and allow you to use the lightning network. So the ARC server actually communicates and facilitates the lightning transactions of your balance held in the ARC server. Now, this uses onchain Bitcoin in a taproot transaction as a part of the ARC protocol, but it also allows you to have a unilateral exit, which means that you can take your seed phrase and you can exit out of the ark at any time.

The reason that's important is because that is self-custody, being able to own your Bitcoin. When you unilaterally exit out of ARC, you have an onchain Bitcoin balance at the end of the day and you can do whatever you want with that Bitcoin, of course, because it's Bitcoin onchain. So, ARC is attempting to facilitate lightning transactions and to allow users to hold VTXOs, virtual transaction outputs, as opposed to UTXOs in a way that is much more self-custody than the other solutions out there to communicate with Lightning. Unless you were to operate your own Lightning node and channel and balance liquidity and all of that, that is self-custody lightning. This is self-custody arc and the ARC server communicates to the lightning network for you.

It's a pretty big innovation and a piece of infrastructure that begins to build out the technology and the use case of Bitcoin, especially as medium of exchange. So, in this video, I'm going to be funding a Coinos V3 wallet. I'm going to be spending over the Lightning network, and I'm going to be performing a unilateral exit back to Onchain. And again, a warning to anybody else that wants to try this. This should be treated as almost a beta wallet in my opinion. You should be very careful with the amount that you have on there and you should probably just test for now until things look more finalized and then we can use this as potentially our lightning wallet.

So, we'll get into the video in a second, but first I want to introduce myself. My name is Forest Hodddle. I'm the Bitcoin educator and I provide tons of free content here on YouTube as well as I have a one-on-one private coaching service which you can reach out to me through my website path to bitcoin.xyz which is linked in the description and I can help you one-on-one make sure that you have the best security practices for your own personal Bitcoin as well as answer any bitcoin related questions you might have.

Here we are at v3.coinos.io. If the URL changes, I will update it in the link in the description. This is developed by Adam Sultes, the same developer that made CoinOs. Right now, I'm just going to show you how to set this up. So, I'm going to create a new wallet. You can generate a seed phrase. You're allowing CoinOs to do this. I haven't done the deep dive on how this system works and has adequate entropy, but you can check out the GitHub here and if you understand what to look for, you could look into that.

Now, when you put a seed phrase in here, you don't want to be using this seed phrase for anything else. You are putting this into a website on an internet connected device. So, you should really only use this for not a lot of money to begin with and have expectations that it's not going to be nearly as secure as an offline generated and stored seed phrase using either a hardware wallet or the airgapped laptop with core. Or you can even use the entropy generator here. But I would basically treat this the same as generating a new seed phrase. So to import you would put your seedwords and you can add a passphrase as well. So right now I'm going to actually just create a new but if I was to use this for myself I would import a bip 85 seed phrase.

So we're going to go generate seed phrase. And these are your 12 words. The best way to do this is to write this down and then verify backup. And when you verify backup, it's just going to randomly select some words that you're going to have to put in. So the second word would be divorce and and so on, right? So we're just going to skip verification for the sake of this. And this brings us into our wallet. Now things might change as as again this is in beta but you can see here you can receive bitcoin and this is to your savings. So you can see here that this says set up a spending account. So right now we have a savings account here and this is an onchain address and we can also send an onchain address. What we're going to do is we're going to set up a spending account and we are going to create a username for this. So, I'm going to go spending test and I'm going to claim this. And we can create an avatar or we can upload a photo if we wanted. And we're going to press continue. So, I'm going to enter CoinOs.

Now, what we have is we have two different accounts. We have a spending and a savings. And if we go into the spending, which is what we have activated now, right? We can go to receive. We have an address here that is a ln URL. It's a human readable spending at coinos.io and we can send lightning Bitcoin over to here. Now, there's a couple interesting things here. If we go to the settings wheel, we can go to wallet and we can look at our recovery phrase if we needed to. You can go to payments. You can create a point of sale so that you can use this as a business. You can add in your own lightning node and you can also set up a auto withdrawal. you can send a certain payment over lightning or npub once this gets to a certain balance. So if you have some sats just acrewing to this wallet, you can send that over at some point just automatically.

If you go into this chat button here, you can actually chat with Adam or the 46 other members of this community so far. And you can go on here and chat and ask questions or suggest different changes and so on. So this is a way to be involved in the development of this app. So let's go to the how it works here. If we press this, so the spending wallet sends and arrives instantly free or nearly free and is still only yours. It runs on ARC, a new layer on top of Bitcoin where every coin stays locked to your key and it speaks lightning. So, you're requesting a lightning transfer even though you might have a Bitcoin balance and you can unilaterally exit out of an ARC position or when you have a balance of Bitcoin in a large ARC server.

The other option was always sort of using a custodial lightning wallet like CoinOs version I guess it was version two that I've been using and that's really effective and really cheap but has its problems of being very fully trusting in the custodial situation whereas ARC is a lot more trust minimized. Let's actually send some Bitcoin over here. I want to send Bitcoin in two different ways. So we're going to go here. We're going to go to receive. I'm going to send some Bitcoin to this spending account. So, we can just see here that happened immediately. I sent that and it immediately transferred over. So, now we have 10,000 Satoshi's.

So, I'm also going to send some Bitcoin to my onchain address here. That's also been received, but it is pending. So, we're going to wait for that to settle. And if you go in here, you can actually see this pending address here with the transaction ID and everything else. If we go back to the savings, we can see this as well, but there's a lot less information because this was a lightning transfer. We have our first confirmation here. We paid a fee and we have all the data and information on here as well as the transaction ID if we wanted to look further into it.

So, we still have the same unilateral exit and we don't actually need to unilaterally exit out of the Bitcoin savings because that's already Bitcoin in self-custody. We already have the keys to that and the ability to move that anywhere we want. So, I sent the balance out. I was doing a test transaction here. So, I sent some Bitcoin out using my Lightning balance. Now, what we have here is we have the ability to move the Bitcoin from our savings into our spending. So, if we just press cancel here, it says top up from savings. So, we're going to go into spending and we're going to hit max. This is going to create an onchain transaction and then we will be able to spend from the spending wallet. So, let's try this. We're going to press move. So, this needs three confirmations before it'll be spendable in the Lightning wallet.

Okay. So, we're going to try a unilateral exit, which I think is one of the most exciting aspects of this. Right. So, we have zero bitcoin in our savings, which is onchain. We have 29,613 satoshi's in our spending, which is onboarded to ARC. So, all of this is being held in an ARC transaction. If we go to manage here, this transaction expires in 51 days and will be automatically renewed near the expiration here. Our exit cost is 1,484 Satoshi's. Not too bad. We can actually renew now for 60 days, which is going to cost a little bit. So, it's based on these percentages right here. And then our unilateral exit should be about 1,060. So, we might as well renew for 60 sats. Okay, so that's in progress. So we'll just allow that to happen. So it's in a round. The fresh coin arrives once the rounds transaction has a confirmation about a block from now, the next time this wallet syncs. So the way that ARC works is it uses taproot transactions and it refreshes them when there's a renewal. So there needs to be an onchain transaction to do that. So, we're just going to wait and then once this confirms, we're going to try the unilateral exit.

Our exit cost is roughly the same after having done that. So, that didn't reduce the cost actually. So, not sure if that's a bug or just a Yeah, probably just a bug because this is in beta, but we're going to try exiting now. Savings can't cover the exit mining fees. Okay, so we actually need to load some value. This is paid from savings. We need to load some Bitcoin into our savings right now. So, I'm going to put 10,000 Satoshi's into the savings and try this process again. So, what I've done is I've loaded this savings wallet with 10,000 Satoshi's. We have our 29,000 Satoshi's here. And we are going to go to manage and we're going to go exit now.

So, what we have here is this begins to talk about the unilateral exit. We have one coin. We have the amount. We have the fee. And this is going to be minused from our savings. So, let's start the exit. All right. So, this has begun moving to savings. We have 600 Satoshi's taken out of here and we have this moving to savings in progress. So, moving to savings onchain about 25 hours until it lands. So, we will check back tomorrow and see how this is doing. We'll go into this wallet here. We move to this transaction and we can view in block explorer. So, this brings up mempool.space and we can see this transaction and you can see BC1P that's a taproot address and eventually it will be confirmed long enough that it will move over to my savings and we have spent a little bit. It hasn't fully shown how much we've spent here yet, but we had started with 10,000.

All right, so now we have zero satoshi's in our spending. So this says move to savings. This just happened 2 hours ago. But we have a transaction ID. We can look this up on the block explorer. This last transaction cost about 236 sats. So it ended up being around 1,400 Satoshi's. And we can see this transaction here. It moved from this taproot address to this Segwit address BC1Q. And if we go back to our CoinOs wallet, we can go into our savings. We can see it here. And if we go into this move to savings, this is the same transaction here. So this worked all within here and this used ARC to facilitate this.

So what's interesting about this is you have Bitcoin in here in this spending wallet in an ARC server, but you can unilaterally exit to onchain. Yes, this all exists here in this interface, but you have a seed phrase, right? We started here. If we go into our wallet, we can reveal the recovery phrase. We have 12 words. And if we input these 12 words into another wallet, we will be able to see our Bitcoin onchain. We're going to import this into a few wallets to view it. The first one we're going to import it into is Sparrow. So, we're going to press new wallet. We're going to name this wallet ARC coinos test. Press create wallet. And we are going to do a new or imported software wallet. Mnemonic words. We have 12 of those. And we are going to paste in our words and press create keystore and press import keystore. And we are going to press apply. And we're going to go no password.

Now, what we should see here if we go to the transaction tab is all of our transactions that we did on the CoinOs interface, which are all right here. So, this is just a regular old software wallet on CoinOs. You can see the same information right here, right? Received 10,000, spent 10,000, received 10,000, and then we received 29,000. We go to Sparrow. What do we see here? Received, sent, received. Here's some fees that were associated with the ARC transaction that aren't showing on CoinOs, but still exists nonetheless. And we have this receiving here. And again, that is the ARC transaction.

So hopefully you guys found that interesting. Again, I want to reiterate for the third time here that I would treat this wallet as a new wallet. I wouldn't really put a bunch of money on there, but being able to use ARC in a serious way, unilaterally exit to onchain is a massive development for the use case of Bitcoin as a medium of exchange, but also as a store of value. You're not trusting this in a custodial way. In this scenario, you are just using the software of CoinOs to hold your VTXOs and to hold your UTXOs. And then you can move this to offline cold storage at some point if you ever wanted to. To me, this is beginning to look like a very, very good spending wallet that balances things very nicely and allows you to use the infrastructure of ARC and Lightning. So, thanks everybody for watching. There'll be some links in the description to check out CoinOs V3 yourself. And again, if you want some additional one-on-one help or with anything Bitcoin related, you can book a session with me through my website, path to bitcoin.xyz.