The Difference Between Lightning Routing and Cashu Melting

Lightning routing and Cashu melting are different operations with different properties. They work together in the Cashu-on-Lightning architecture, but understanding the distinction matters for understanding the privacy and custody properties of the system. This post is the technical comparison.

What Lightning Routing Is

The Lightning protocol’s primary operation.

A Lightning payment travels from sender node to receiver node. The sender wants to pay the receiver; both nodes are on the Lightning network.

The payment routes through intermediate nodes. If the sender does not have a direct channel to the receiver, the payment hops through one or more intermediate nodes. Each intermediate node forwards the payment along their channels.

Onion routing obscures the full path. Each intermediate node sees only the immediate previous and next nodes in the route. The full source-to-destination path is encrypted in layers; each layer is decryptable only by the corresponding hop.

Each hop earns a small fee. The intermediate nodes earn fees for forwarding payments. Standard fees are 0.01-0.1% of the payment amount.

The payment is atomic. Either the full payment succeeds end-to-end or none of it does. Hashed Time-Locked Contracts (HTLCs) ensure atomicity across hops.

Settlement happens in seconds. A Lightning payment typically settles in 1-3 seconds end-to-end. Faster than most card networks; much faster than on-chain Bitcoin.

This is the standard Lightning operation. Used for any Lightning payment regardless of whether Cashu is involved.

What Cashu Melting Is

The Cashu protocol’s redemption operation.

A Cashu token holder wants to redeem the token. They want to exchange the token for a Lightning payment to a destination of their choice.

The token is presented to the issuing mint. The mint that originally issued the token is the only mint that can redeem it.

The mint verifies the token. Checks the cryptographic signature. Checks that the token has not been redeemed before (database of consumed tokens).

The mint pays a Lightning invoice for the destination. The token holder provides a Lightning invoice (typically generated from a Lightning address). The mint pays the invoice from its own Lightning balance, which is funded by the sats originally deposited when the token was issued.

The token is consumed. The mint marks the token as redeemed. Future redemption attempts of the same token are rejected.

The destination receives the Lightning payment. Whoever the invoice was for receives the sats. The melt operation is complete.

The melt operation is internal to the Cashu protocol. It involves a Lightning payment as a sub-operation, but the structural action is “redeem the token at the mint.”

How They Compose

The two layers in sequence.

Token issuance (mint). A user deposits Lightning sats at a mint. The mint signs a Cashu token. The user holds the token.

Token transfer (off-chain). The user gives the token to someone else (e.g., embeds it in an email). The transfer is independent of the Lightning network; the token is a string of text that can be moved through any channel.

Token presentation (start of melt). The recipient of the token presents it to the issuing mint along with a Lightning invoice for the destination they want to be paid.

Mint executes Lightning routing. The mint pays the invoice. Internally, this is a normal Lightning routing operation: the mint’s node finds a route, sends the payment, the routing happens.

Settlement at destination. The destination Lightning address receives the sats. Cashu melt is complete.

The Cashu protocol layer adds the unlinkability between issuance and redemption. The Lightning routing layer handles the actual movement of sats. Both layers contribute to the final outcome.

Privacy Properties of Each Layer

The differences.

Lightning routing privacy. Onion routing hides the full path from intermediate nodes. The destination is visible to the destination node (it knows it received the payment). Intermediate nodes know only their hop. Source IP at the sender side is visible to the first hop. Various network analysis attacks exist but require sophisticated capabilities.

Cashu melt privacy. The mint cannot link the issuance of the token to its later melt. Blinded signatures ensure cryptographic unlinkability. The mint sees that someone deposited and someone redeemed; it cannot tell which deposit produced which redemption.

Combined privacy. When a Cashu token is melted, the resulting Lightning payment has Lightning’s normal privacy properties (partial onion routing). The issuance-redemption unlinkability happens at the Cashu layer above. An external observer sees Lightning operations; cannot link them to specific tokens; cannot connect issuance to melt.

We covered the privacy properties at the privacy properties of Cashu (compared to on-chain Bitcoin).

Custody Properties of Each Layer

Where the value sits.

Lightning routing. The sats move from sender’s channel to receiver’s channel through intermediate nodes. Custody is held by whichever node holds the channel balance at any moment. Routing nodes have custody during the payment process but the payment is atomic; intermediate nodes cannot keep the funds.

Cashu melt. The mint holds the underlying sats while the user holds the token. The token is the user’s asset; the mint is the custodian of the corresponding sats. When the user melts, the mint’s custody ends and Lightning routing carries the sats to the destination.

Combined custody. The user holds tokens (asset). The mint holds underlying sats (custodian until melt). When melt happens, the mint pays out to a Lightning destination through normal routing. After melt, the user holds the destination’s wallet (which is custodial or non-custodial depending on the wallet).

For Rythm specifically, the user does not interact with the mint custody directly. Senders mint tokens at their own discretion. Rythm melts the tokens to the user’s Lightning address. The user’s wallet (and its custody properties) is what receives the final sats.

Why the Distinction Matters

Three reasons.

For privacy analysis. Understanding what each layer protects helps users evaluate the realistic privacy outcome. Lightning routing alone is partially private; Cashu melt adds unlinkability between issuance and redemption. Both layers contribute to the combined property.

For custody analysis. Understanding which layer holds custody at which time helps users evaluate trust assumptions. Mints are custodians until melt. Lightning channels handle short-term custody during routing.

For operational debugging. When something fails in the Cashu-on-Lightning system, knowing which layer failed informs debugging. A melt failure could be a Cashu protocol issue (token verification, double-spend prevention) or a Lightning issue (routing problem, channel capacity). The diagnostic is different.

For Rythm users, most of this is invisible. The architecture handles the layers; users see “cover charge arrived in my wallet.” But for users curious about the structural properties, the distinction matters.

How Rythm Uses Both Layers

The specific operation.

Sender mints tokens at a public mint. The sender pays Lightning sats to the mint; the mint issues tokens. This is mint operation, not melt. We covered mint operations at the cashu protocol explained for email use cases.

Sender includes token in email. The token travels with the email through normal SMTP. No Lightning operation at this stage.

Email arrives at recipient inbox. Standard email delivery.

Rythm processes the email. Reads the inbox via OAuth. Detects the Cashu token in the body. Identifies the issuing mint from the token URL.

Rythm initiates a Cashu melt. Presents the token to the issuing mint along with a Lightning invoice generated from the user’s Lightning address.

Mint executes Lightning routing. Pays the invoice. The Lightning payment routes from the mint’s node to the user’s wallet.

Sats arrive at the user’s wallet. Cover charge complete.

The full flow involves both Cashu protocol operations and Lightning protocol operations. Rythm orchestrates the Cashu layer; the mint and Lightning network handle the routing.

A Specific Honest Note

Lightning routing and Cashu melting are different operations with different properties. They work together in the Cashu-on-Lightning architecture used by Rythm. Understanding the distinction matters for understanding the privacy, custody, and operational properties of the system.

For typical users, the layers are invisible. The cover charge arrives in the wallet; the mechanics happen in the background. For users curious about the structural properties, both layers contribute meaningful properties to the final outcome.

For the related guides, see the cashu protocol explained for email use cases, how Lightning Network solves the micropayment problem, the privacy properties of Cashu, and the economics of a Cashu mint. For the broader frame, see non-custodial architecture and why bearer tokens are the right primitive for email payments. Rythm is $1.65 per month, cancel anytime.