# Hybrid Custody & Security

### Background

LN Exchange facilitates deposits and withdrawals using the Lightning Network for its rapidity and zero   or minimal fees. However, the Lightning Network has a significant drawback: it necessitates the opening of a Lightning channel by two nodes before funds can be transferred between them.

The setup and management of a Lightning node are arduous, prompting many retailers to opt for custodial solutions instead.

<figure><img src="/files/hpv8GQ9Y7VeJk0uk4H3E" alt=""><figcaption></figcaption></figure>

To tackle this challenge, LN Exchange introduces a hybrid custody framework:

#### ⚡Managed Custody

LN Exchange's current Managed Custody service, where users' funds are securely stored on LN Exchange's Lightning node, will continue. In the future, this service will support Pocket Universe, a system that requires both the node operator and the user to approve any fund movement requests, thereby enhancing security measures.

#### ⚡Self-Custody

In LN Exchange v1, users are only able to hold their assets in self-custody with their LN Nodes after withdrawing their assets upon completion of their trades. We are taking progressive steps towards partial and full self-custody trading whereby transactions are settled on Lightning Network automatically upon completion of their trades.

#### LN Node

LN Node is a Lightning node management solution powered by Nostr protocol, designed to abstract away the complexities associated with setup, management and provision of liquidity on the Lightning Network. Through LN Node, users will be able to manage their own nodes through natural language commands (similar to sending text messages) or a web interface, enabling self-hosting and interaction with Lnfi. They can also access node and account records, ensuring complete transparency.

> **Cloud Hosting**
>
> LN Exchange and [Lnfi Network](https://www.lnfi.network) have partnered with Voltage to offer a user-friendly cloud-based LN Node for establishing and managing Lightning nodes. Details can be found [here](https://docs.lnfi.network/lnfi-products/ln-node).

> **Hardware Devices**
>
> \[TBD]

Both solutions empower users to engage with LN Exchange and Lnfi while maintaining self-custody.

{% hint style="info" %}
Our hybrid custody model aims to decentralize and expand the Lightning Network's capabilities, further driving its adoption.
{% endhint %}


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