Fee-Based Spam Prevention For Lightning

The Fee-Based Spam Reduction Protocol proposes a novel approach to handling payments across a network, specifically focusing on a 10-hop payment scenario involving 10,000 satoshis (sats). This protocol introduces three types of fees: Upfront Fees, Hold Fees, and Success Fees. Each node in the payment chain charges these fees with specific calculations based on fixed and proportional parts, aiming to cover various costs and risks associated with processing payments.

Upfront Fees are split into a fixed component and two proportional components. The fixed component is set at 10 millisatoshis (msats) per node to cover the immediate expenses of calculation, communication, and slot allocation for the payment. The first proportional component is based on the payment amount, designed to offset the costs and risks of allocating channel funds temporarily. The second proportional component addresses the risk of non-reimbursement due to delays caused by the node or potential loss from funds allocated to a failed payment.

Hold Fees are charged by each node based on the duration a payment is held before completion, calculated to provide a 19% annual return on the held funds. This fee aims to compensate nodes for the opportunity cost of locking funds in a pending state, which could otherwise be utilized in other transactions.

Success Fees are collected upon the successful completion of a payment, including both a fixed and a proportional component, incentivizing nodes to efficiently process transactions.

The implementation of matching fund requirements for burn outputs represents a safeguard against griefing attacks, ensuring that both parties in a channel have a vested interest in the success and security of transactions.

Comparatively, the current protocol relies solely on fixed and proportional routing fees without accounting for the additional risks and costs detailed above. It also lacks mechanisms to fairly distribute costs related to delays or failed payments among nodes.

In scenarios of successful payments, both protocols yield similar overall fee costs to users, albeit with the Fee-Based Spam Prevention protocol marginally higher due to its comprehensive risk and cost coverage. However, in cases of delayed or failed payments, the new protocol demonstrates significant advantages. It provides fair compensation to nodes for capital costs incurred due to delays instigated by any node, especially noticeable in scenarios where payments are delayed or fail due to unresponsive destinations. The Spam Prevention protocol efficiently mitigates the impact on nodes by ensuring quicker resolution and minimal capital lock-up, contrasting with the current system where nodes bear the brunt of delays through extended capital engagement and, in some cases, substantial on-chain fee burdens.

Furthermore, the Spam Prevention protocol showcases its robustness in situations of payment failure due to insufficient funds at a node, ensuring nodes that processed the transaction up to the point of failure are compensated for their involvement, a feature absent in the current protocol.

This comparison underscores the Spam Prevention protocol's potential to enhance network efficiency, fairness, and resilience against spam and malicious activities through its innovative fee structure and risk mitigation strategies.