No, they are using Spark to swap in and out of Lightning.
It’s fast and works for micropayments but it doesn’t offer any real privacy.
You hold your own keys, but not for on-chain funds. There’s still a trust assumption.
Discussion
Long story short: It will be very popular with Chainalysis.
How is onchain not self custody? Because typically the issue is with LN. Which part is self custody? Very confusing
You don’t have ownership of UTXOs as you would in self-custodial Lightning if you’re running your own node or using Phoenix, Zeus, etc. Spark is built on bitcoin but you can’t just settle on-chain directly without trusting the Spark network operators.
Here’s how they explain it in their docs:
Spark operates under a “moment-in-time” trust model, meaning that trust is only required at the time of a transaction. As long as at least one (or a configurable threshold) of the Spark operators behaves honestly during a transfer, the system ensures perfect forward security. Even if operators are later compromised or act maliciously, they cannot retroactively compromise past transactions or take money from users.