Mitigating Channel Depletion in the Lightning Network: A Survey of Potential Solutions

The Lightning Network (LN), a critical component for scaling Bitcoin transactions, faces challenges with channel depletion due to selfish routing behaviors. A recent analysis highlighted that most channels on the LN are expected to become depleted over time, reducing the likelihood of successful payments significantly. To address this issue, several potential solutions have been proposed, focusing on two main strategies: protocol changes and voluntary node behavior changes.

Protocol modifications aim to tackle the core issues at the system level, requiring updates across the network. Among the suggested changes is the extension of the gossip protocol to include liquidity information sharing. This could be implemented either locally or network-wide, potentially making routing easier by reducing uncertainty. However, these proposals come with downsides such as privacy concerns, the challenge of ensuring honest signaling, and increased bandwidth usage. The idea of centralized routing coordinators was also floated, offering global optimization possibilities but raising questions about trust and decentralization. Other approaches include moving towards distance-vector or opportunistic routing to allow nodes to make forwarding decisions based on real-time liquidity data, enforcing symmetric channel fees to encourage balanced flows, implementing partial forwarding of HTLCs to enable link AMP, and exploring multiparty channels to increase capital efficiency and reliability.

On the behavioral side, nodes can adopt various practices to mitigate liquidity issues voluntarily. Dynamic pricing mechanisms, already in use by some, adjust fees based on local network conditions, although their effectiveness is limited by delayed reactions and reliance on local information. Other suggestions include using the htlc_maximum_msat field as a flow control valve, introducing congestion control via routing request buffering, and reverse logistics strategies for relocating liquidity both off-chain and on-chain, as well as through liquidity markets. Additionally, reorganizing the LN into hierarchical topologies, akin to real-world transport systems, could improve efficiency by maintaining a core network connected by peripheral nodes through strategic links.

This overview presents a starting point for addressing liquidity challenges in the Lightning Network, inviting further feedback, refinements, and critiques. While these strategies offer pathways to enhance the network's reliability and efficiency, they also involve trade-offs related to implementation complexity, privacy, scalability, and the decentralized nature of the LN. It's important to note that while these solutions could help alleviate channel depletion and support quicker liquidity finding for sending nodes, they do not fully resolve the issue of payment infeasibility without additional on-chain transactions.