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 obtains a copy of your browser’s or app’s data can try out the 6-digit PIN outside the app within a short time and so obtain your words, which are stored there in encrypted form. This is ruled out only with fingerprint unlock without a PIN fallback in the web app. In the browser, “fingerprint” may be confirmed with the screen lock, depending on the device.

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. You can save it as an emergency package, which becomes out of date with every payment.

Fraud

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

External bitcoin purchase

When buying via an external provider (under “Buy bitcoin”, currently Strike), the purchased balance first stays in your account with the provider; until payout its terms, checks, withdrawal locks or holding periods and its risk of failure apply. Its authorisation guarantees neither a bitcoin value nor the availability of the service or the repayment of funds used; there is no statutory deposit guarantee. Fake purchase pages and manipulated clipboards can send bitcoin to a wrong recipient. Open the provider via the wallet, check amount and recipient before sending and never enter your 12 words at the provider. The purchase is not anonymous.

Protocol

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

Beta and test versions

KAI-Pay is a beta; bugs are more likely than in mature software. Use only small amounts; above a balance of 250,000 sat the app reminds you to send the rest to a Bitcoin address of your own. The Android apps are only available as a test version outside Google Play; an app from another source may have been modified.

AI payment proposals

A source’s proposals may be wrong or unsuitable, and anyone who obtains a source’s key can create valid proposals. The wallet checks the signature, allowed recipients and budget, but not whether the stated purpose is true. If a source allows invoices, their recipient cannot be checked; then only the budget sets a limit. Check recipient and amount before every confirmation.

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 saves the data needed for it as an emergency package but does not currently carry out the exit itself; it has not yet been tested in practice with KAI-Pay. There is no such exit for an on-chain deposit that has not yet been credited: crediting and refunding require the cooperation of the Spark operators.

Privacy

Public blockchain records and network metadata can be linked; Lightning does not guarantee anonymity. Encryption hides content, not the payment itself.

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.