Our path to Bitcoin and self-custodial trading

Published in
10 min readJan 17


Bitcoin is self-custodial money — you are in control. But the trading solutions on top are controlled by powerful middlemen — they are in control. There’s a difference in accepting the market risk of a trade and the trading platform running away with your funds. The latter is platform risk, and it just should not exist when using Bitcoin.

We believe that Bitcoin is making the world a more open place where the financial system is not dictated by centralized players. We believe that trading Bitcoin should be and can be as secure as holding Bitcoin. Yes there is risk in trading itself, but platform risk and counterparty risk can be removed completely!

We made it our mission to build Bitcoin trading the Bitcoin way: without counterparty risk; platform risk free; and fully transparent.
If we don’t enable Bitcoiners to trade using Bitcoin we might lose them to a shitcoin or, even worse, they will lose their coins due to an exchange going bust.

This is our story.

Where it all began

Everybody loves a good story. This story begins in February 2014.

Unpleasant news: Something happened on Mt. Gox. I thought to myself — “how bad can it be?”
Turns out: Pretty bad. I will never forget that feeling when I tried to log into my account to learn that I could not withdraw. Not then, not ever.

Mt. Gox changed me as it changed many: I lost faith in Bitcoin.
But, after some reflection, I came to a different conclusion: Bitcoin is not the problem, but the ecosystem built on top of it. How is decentralized, censorship-resistant money supposed to work if it can only be used with a custodian’s permission?

That’s when I finally realized that self-custody was nonnegotiable for me.
That’s when I decided that my money would break free of the stranglehold of the exchange. I should never have to trust others with my money. Isn’t that the whole point of Bitcoin?

First steps: Take out the middle man in trading!

In 2018 the CoBloX research lab was born in Sydney. From its inception, it was all about:

Not your keys, not your coins

Initially, we focused on noncustodial trading between blockchains, powered by atomic swaps. The implement of our noncustodial trading protocols was bundled in COMIT.

Back then our mission was to “Connect all the blockchains — without adding yet another one”. We were Bitcoin believers all along, but we saw other ecosystems growing and flourishing — and wanted to make it safer for users to transition from one chain to another. Atomic swaps was the buzz, and we were riding it. We initially focused on BTC-ERC20 swaps because it was the time of the token boom on Ethereum. The only way to be a part of it with Bitcoin was to turn to centralized exchanges.

Even back then it was clear to us that the Lightning network would be a key player in the space. It would require some serious research and engineering, but we were determined to realize atomic swaps between LN-BTC and ERC20 tokens.

Atomic Swaps

And we did make it happen! After a few months of hard work, we unveiled a working prototype of Lightning-ERC20 swaps in December 2018.
Putting the inspiring Lightning prototype to the side, we continued to work on our mission to connect all the blockchains. We focused on building our extendable daemon for atomic swaps, with the goal to foster a community to build on top of it.

We eventually added a beautiful interface and a decentralized orderbook but user demand remained small. Other solutions offering a better UX, like cross-chain bridges, started to emerge and take over the market.

By the end of 2019, we realized that we would not make the Bitcoin and Ethereum communities fall in love with each other through atomic swaps — 😅

After reflecting on our work and our interactions with the community, we concluded that not enough Bitcoiners were willing to leave the Bitcoin ecosystem, unless they had a very good reason for it.
This convinced us to reconsider our mission and helped us pivot away from the project we were working on at the time onto greener pastures.

More privacy!

Arguably, Bitcoin is not particularly good at hiding your transactions. Through a research cooperation we started designing and implementing privacy enhancing protocols.

In late 2019, our collaboration started to reap benefits as we were able to implement a proof of concept of Anonymous Atomic Locks A²L on Bitcoin.
With A²L, users would be able to mix their coins for improved privacy, with even the tumbler unable to link coins coming in and out of the protocol.

Even though atomic swaps between Bitcoin and Ethereum had proven to be largely unwanted, we identified a promising niche in the case of so-called privacy coins. After all, swapping between Bitcoin and a privacy coin was more obviously useful, for those users who weren’t always satisfied with Bitcoin’s limited privacy.
We first started with a proof of concept for atomic swaps between Grin and Bitcoin, which marked our first foray with adaptor signatures. The concepts of the Mimblewimble-based coin remains fascinating to this day, but Grin never got the traction needed to start building a real product out of it. Monero was a different story — it had a community and they were longing for a way to swap in and out of Bitcoin.

It was clear from the get-go that a significant part of the Monero community was truly passionate about what we were building, so it was a lot easier for us to commit to working on Bitcoin-Monero atomic swaps.
This adventure was both energizing and challenging: we implemented novel cryptographic protocols; we saw people build things on top of our work; we heard from users who were always eager for more; we wrote technical papers and presented at conferences; and we even got to explore the very limits of Monero.

The xmr-btc-swap project was an obvious success for us. But Monero-Bitcoin swaps remain a niche. Having proven that there was a way to cater to that particular niche, we were able to hand over the project to community members who are maintaining it to this day.

Ultimately, we moved on from Monero swaps because we knew it was time to focus full-time on the orange coin. Bitcoin had remained central to everything we had done, but we hadn’t given ourselves a chance to explore what could be done just with Bitcoin.

“Just” with Bitcoin?

Only Bitcoin matters

Two years into building noncustodial trading solutions made us more aware of problems in the cryptocurrency world at large.

We were not convinced of privacy coins becoming mainstream — they are and will remain a niche.
As for Ethereum, the ecosystem attracts a lot of users, but for us the underlying blockchain was built on too much unnecessary complexity. Furthermore, with Ethereum 2.0 on the way we just could not believe in Ethereum being censorship resistant anymore. Removing the hurdle of having to buy hardware to reach consensus ultimately removed one layer of censorship resistance. On top of that Ethereum 2.0 is taking unnecessary complexity to a level never seen before (besides Polkadot maybe, but let’s not go there…).

We decided that we want to focus on Bitcoin, and Bitcoin only. Because Bitcoin is the only real censorship resistant solution that has an impact.
And Bitcoin has a great community. We believe that with the history, the design, the skill, the love and the care that the Bitcoin developer community puts into it, it’s truly unstoppable. We changed our goal from “connecting blockchains” to building noncustodial trading solutions on Bitcoin.

So what can you do with just the orange coin?
We knew that lending was quite a thing on Ethereum, and decided it would be great to have a lending solution backed by Bitcoin as well. Our research led us to the Liquid sidechain, where a few more incredibly powerful opcodes were available compared to Bitcoin. We started exploring lending on Liquid in early 2021, further motivated by its confidential transactions which were in line with our privacy-first values.
However, bringing DeFi to Liquid was short-lived. The technology was exciting, and we would love to see parts of it replicated on Bitcoin one day, but we couldn’t find the users we were looking for. It is still unclear to us if regular Bitcoiners will ever be willing to accept the Liquid federation.

Liquid is not Bitcoin enough.

*Really* only Bitcoin matters

So what can you do with just the orange coin — and really just the orange coin?
The answer is: Derivatives!

A derivative is a financial instrument that derives its value from an underlying asset. Options, futures, CFDs are all derivatives. We decided to focus on CFDs. A CFD, or contract for difference, is a type of derivative that allows traders to speculate on the price movement of an underlying asset without actually owning the asset itself.

Here’s how it works: Let’s say you believe the price of Bitcoin is going to increase. You can open a long CFD position, which allows you to profit from a price increase. If the price of Bitcoin does indeed go up 📈, you can close your CFD position and realize a profit. On the other hand, if the price of Bitcoin goes down 📉, you will lose some funds. CFDs allow traders to speculate on the price of an underlying asset, but they do not convey ownership of the asset itself.

BitMEX was one of the first big central exchanges figuring out the usefulness of Bitcoin-backed derivatives, offering users the possibility to trade numerous asset pairs by only holding Bitcoin.

We like BitMEX’ idea of using Bitcoin as the underlying asset for derivatives trading. The problem with BitMEX is the same as with other exchanges though: it is centralized and custodial. And we know we don’t need that.

And with that, ItchySats was born: To bring self-custodial CFD trading to Bitcoin 🎉

ItchySats — Noncustodial Bitcoin Derivatives

When we started with ItchySats we had been exposed to the latest research in cryprographic protocols for the last two year. So it seemed pretty obvious that we would need to use DLCs to bring CFDs to Bitcoin. We were confident that we could get this up and running in a short timeframe.

After hacking together a proof of concept in two weeks, we were convinced that we would be able to bring self-custodial CFD trading to Bitcoin using this technology.
ItchySats went live on mainnet in December 2021 and launched in the Umbrel app store shortly afterwards. With implementing perpetual CFDs based on Layer2 concepts we reached another big milestone.

ItchySats is a revolutionary trading platform where users can trade without having to cede custody of their funds at any point. It truly is:

Your keys, your coins!

ItchySats is still available on Umbrel, RaspiBlitz, Citadel and as desktop app. But it was never designed for the masses — it was designed for a very specific user group.

Initially focusing on the niche of self-sovereign Bitcoin platforms was a conscious decision: We saw an overlap between users who cared about self-sovereignty and those who wanted self-custodial trading. This allowed us to test our solution with users that understood the constraints of self-custody.
Now it’s time to bring self-custody to everybody. We need something bigger. We need something faster. We need Lightning!

When we started designing ItchySats we already discussed being compatible with the Lightning Network. However, we decided to implement our own Layer2 protocols fist, and focus on compatibility because compatibility needs time.

Lightning, Lightning, Lightning!

The Lightning Network is an exciting development in the world of Bitcoin because it has the potential to significantly increase the scalability and usability of the Bitcoin blockchain.

It is almost a no-brainer that self-custodial trading has to be on Lightning.

In November 2022 we decided to put ItchySats on a short break and join the Legends of Lightning Tournament with a new idea: bringing self-custodial trading to Lightning.

After just 8 weeks we had a Lightning wallet which allowed users to send and receive payments from anyone in the Lightning Network and trade with zero counterparty risk using DLCs.

We were blown away by the great feedback we got from our users.

10101 was born!

10101 — One app, all things Bitcoin

10101 combines the power of a self-custodial on-chain (Bitcoin) and off-chain (Lightning) wallet with the vast world of self-custodial trading.

10101 is like ItchySats on speed 🚀⚡️

The 10101 app has all the bells and whistles a good Bitcoin wallet needs with an extra level of self-custodial trading pizzazz:

  • Your keys, Your coins: You and only you control the keys of the on-chain and off-chain wallets.
  • Self-Sovereignty: The app runs a Lightning node on your phone. You can configure it to plug in your own Electrum Server instance.
  • Trading secured by DLCs: The app enables you trade CFDs, options and other derivatives secured by Bitcoin. Funds are locked in a multisig for the duration of the trade and go right into your wallet afterwards.
  • Stable Sats: The app allows you to hedge into a stable USD position with your bitcoin. This synthetic stable coin is then transferable via the Lightning Network.
  • Payments: You can send transactions on-chain or pay anyone on the Lightning Network off-chain. You can receive on-chain payments or payments from anyone on the Lightning Network.
  • Cross-platform, Mobile first: The app will be available on iOS and Android. Other platforms may follow.

We have a 👉 beta testing program👈 where you will get early access to the 10101 mobile App.

This is the future of Bitcoin trading — Stay tuned for more details!

Join the journey:

— Written with ❤️ by the 10101 team —

Some final trivia…
The name 10101 is a numeral palindrome and the binary representation of 21 — as in 21 million possible bitcoin. The vision of 10101 embodies what Bitcoin stands for: Decentralized and censorship resistant money.



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Non-custodial CFD trading directly on Bitcoin. DLCs make it possible. No middleman. No account. Just you and your keys. https://www.itchysats.network/