Risk warnings

This page describes risks associated with using KAI-Pay.

General information

Bitcoin is volatile. Its value can fall substantially and total loss is possible. BTC held in a self-custody wallet is not a bank deposit with KAI-Pay and is not protected by a KAI-Pay deposit guarantee. KAI-Pay promises no return and provides no personal investment recommendation.

Specific risks

Key loss

Loss or disclosure of your keys or your 12 recovery words may cause permanent loss. The 12 words can be used to restore your wallet on another device; this requires the Spark operators to cooperate. KAI-Pay cannot replace lost words.

As long as your wallet can be unlocked with a PIN, anyone who gains access to your browser’s data can try every 6-digit PIN and so obtain your words, which are stored there in encrypted form.

The 12 words alone are not sufficient for a unilateral exit without the Spark operators’ cooperation (see “Spark”), because it also requires transaction data stored on your device.

Fraud

QR code, clipboard, link and invoice manipulation can substitute a recipient.

Protocol

Software bugs, blockchain reorganisations, fee spikes and network outages can delay or endanger payments.

Lightning

Availability of Lightning payments depends on connectivity, routes, liquidity and counterparties, among other things. Insufficient liquidity and offline periods create additional risks.

Spark

The KAI-Pay wallet uses Spark via the Breez SDK. Spark transfers bitcoin outside the Bitcoin blockchain. Payments require the cooperation of the Spark operators; Lightning payments as well as deposits and withdrawals via the Bitcoin blockchain additionally require the cooperation of a Spark service provider. Using the wallet therefore involves trusting these operators and service providers to that extent. If they fail or do not cooperate, payments may be delayed or impossible.

For this case, Spark provides a unilateral exit that can move funds back to the Bitcoin blockchain without the Spark operators’ cooperation. It does not succeed in every case, can take considerable time, costs network fees and requires your own on-chain bitcoin to pay those fees. For small balances, the fees can exceed the balance itself. The KAI-Pay wallet does not currently offer its own function for this.

Privacy

Public blockchain records and network metadata can be linked; Lightning does not guarantee anonymity.

Tax

Payments may have tax consequences. Exports do not replace individual tax advice.

Statutory rights

Acknowledging these warnings does not waive statutory rights. General risk warnings do not replace due care or excuse our own breaches.