Yes - pretty much. With the addition that at each point, the current owner has a backup to go back on chain of the coordinator (server) is shut down. 

tptrevethan

BlokchainB

bitcoin

Mercury layer AMA

Here's how I understand it right now:

I make an onchain transaction to a new address that has the following properties:

- The private key of this new address is broken into two chunks.
- I only get to see one of the chunks.
- A coordinator knows the other chunk.
- Neither of us can spend the utxo without both chunks...
- Except, if we collaborate, we can create a new set of key-chunks that have the property that I now don't know any of the chunks of the key and Bob (my intended payee) knows one chunk (while the coordinator still knows one chunk). This is how we have transferred the utxo from me to Bob without an onchain transaction.

Is this how it works?