How does Muun even make money?
1313 sats \ 21 comments \ @snufon 25 Jul lightning
I know Muun is not a real lightning wallet (I use Phoenix for that), but I've found Muun perfect to reduce withdrawal fees from exchanges who support Lightning (Kraken).
Withdraw from Kraken to Muun for free using LN (avoiding the jacked up Kraken L1 withdrawal fee), then withdraw from Muun to your hardware wallet only paying the real mining fee.
Since Muun is all submarine swaps, they have to pay L1 mining fees everytime you withdraw to Muun. Since I was testing it for the first time, I did 4 such withdrawals to Muun. Then, you have to pay the L1 fee yourself when you withdraw from Muun.
So I made Muun pay 4x L1 mining fees (I checked the blockchain) and they did not impose any fee to me during the entire process outside of the normal L1 fee, so they got 0% of my money.
Am I missing something or did I made them lose money? When does Muun even make money from their users? Thanks!
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42 sats \ 6 replies \ @didiplaywell 25 Jul
I think they run their own node. It's possible that they have a deal with a company like Kraken to subsidize withdrawals. For instance withdrawals from Muun to Belo are free, for Belo subsidizes those withdrawals.
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21 sats \ 5 replies \ @snufon OP 25 Jul
But I checked the blockchain and the 4 transactions are there on L1!
It's far more logical that Muun payed for them: Kraken would not want to encourage this convoluted usecase which allows me to avoid paying them the current 0.0002btc (13usd) L1 withdrawal fee.
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21 sats \ 4 replies \ @didiplaywell 25 Jul
It makes sense. Maybe their scheme is to make money on withdrawals only (as many platforms do). I do know they run a node, they have to collect through it in some form or another. They might use the pool of funds to provide liquidity to LN too, since while your transactions are on L1, the submarine swap scheme means that equivalent funds were traded on LN.
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20 sats \ 3 replies \ @snufon OP 25 Jul
I can say that they make 0 money if you withdraw from them on L1 (I checked on the blockchain and my entire fee went to the miner). So I would assume that they only make money if you withdraw from them on L2 but they lose money on users like me.
So they only win when someone uses it send L2 payments. But since it's not a real Lightning wallet I feel like this would not be a good choice anyway: just use a real L2 wallet instead of paying high L1-like fees! So I don't see how their business model would work long-term...
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31 sats \ 2 replies \ @didiplaywell 25 Jul
For instance, they have acknowledged publicly that the use of submarine swaps was never a long-term strategy. But regarding the "real L2 wallet" part, which is true, they made other conscious trade-offs which I myself, as any other Muun user, consider appropriate, which is in regard to safety and flexibility, since it's a pleasure to freely come and go from L2 to L1, and fees are not always that high, and transactions are always instant. Will see how they adapt, but for now it's a really useful wallet as is
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20 sats \ 1 reply \ @snufon OP 25 Jul
Interesting, thanks! Yes I'm loving the wallet right now, which is normal since I'm literally being a parasite to them with my specific use case 😄
Maybe they could somehow combine the "real L2" missing part with the existing submarine swap features which are awesome. That could help them be sustainably profitable as I suspect Phoenix is right now
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21 sats \ 0 replies \ @didiplaywell 25 Jul
I'm sure they are on it!
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31 sats \ 7 replies \ @snufon OP 25 Jul
Update: Muun refuses incoming Lightning TX when L1 fees are high. This kinda confirms that they do lose money on every deposit because they pay miners every time. I'll simply use the normal Kraken withdrawal instead in those cases.
So Muun never loses too much money at once, but I still do not get when they win money...
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31 sats \ 6 replies \ @ek 25 Jul
Why don't you withdraw from Kraken to Phoenix for free?
I think Muun makes money from transaction fees. So when you send, you pay a higher fee which includes all fees they incurred for you.
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10 sats \ 5 replies \ @snufon OP 25 Jul
In my use case I'm withdrawing thousands worth of USD to my hardware wallet (want large UTXO for future-proofing high fees). In Phoenix, I'd have to pay 1% of that for liquidity. And this 1% liquidity fee would need to be done every time because when you send an L1 from Phoenix this reduces your liquidity (splice-out). So it would be very expensive to use Phoenix on such large transactions (that's not what L2 is for after all)
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10 sats \ 0 replies \ @ek 8 Aug
because when you send an L1 from Phoenix this reduces your liquidity
You can also swap out and keep your liquidity using boltz.exchange or swap.deezy.io. This method has its own fees though.
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21 sats \ 3 replies \ @didiplaywell 25 Jul
Impressive. Would you mind making a post detailing this workflow? I'm sure many (as me) are not aware of any of this
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20 sats \ 2 replies \ @snufon OP 26 Jul
This Muun blog post was super informative, as well as this Phoenix blog post.
I don't think this convoluted Kraken -> Muun -> hardware wallet strategy is going to be worth it in the long run. That's because it's exploiting both:
  • the fact that Kraken is "too nice" with users who withdraw with Lightning (they should have a small % L2 fee like everyone does). Especially considering they're not nice at all with users who withdraw on L1, the contrast is too strange
  • the fact that Muun is "too nice" with users like me who literally make them lose money
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31 sats \ 1 reply \ @didiplaywell 26 Jul
Thank you for all the information Sr. I'm not going to use Muun that way but it's always constructive to know what's possible :)
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20 sats \ 0 replies \ @snufon OP 26 Jul
My pleasure friend! 🤝
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21 sats \ 1 reply \ @Satosora 25 Jul
It wouldnt stay open unless it was making money in some way. Might be subsidized by another source.
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21 sats \ 0 replies \ @snufon OP 25 Jul
Probably subsidized by users doing the opposite of what I'm doing: depositing on L1 which costs nothing for Muun, then withdrawing on L2 which Muun can tax
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0 sats \ 0 replies \ @BitcoinAbhi 26 Jul
I would recommend you not to touch Munn.
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0 sats \ 0 replies \ @cyberpunk02 26 Jul
Muun probably stack enough bitcoin
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0 sats \ 1 reply \ @IamSINGLE 26 Jul
They will takeaway all the funds and will cover up all their losses and the time they are giving right now.
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1 sat \ 0 replies \ @snufon OP 26 Jul
Don't think they really can, it's a 2 of 2 multi-sig with one key inaccessible to them
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