Ark as a Channel Factory: Compressed Liquidity Management for Improved Payment Feasibility

The exploration into improving Lightning Service Providers (LSPs) and mobile client interactions within the blockchain space focuses on leveraging the architecture of Timeout Trees and the concept of "teleporting" end-channels between these trees to optimize the economics of inbound liquidity. The assumption is that routing nodes are already well-provisioned, which allows for a pivot towards addressing the challenges faced by end-nodes, such as mobile clients, in maintaining efficient and cost-effective connectivity.

This approach introduces a multi-step process designed to enhance the operation of channels within a network by efficiently transitioning them between different Timeout Trees without necessitating significant changes to existing consensus mechanisms or the mempool. This method encompasses several key steps beginning with normal channel operation within a tree, followed by a request from the client and LSP to refresh to a new tree. Predictive generation and confirmation of trees with refreshed vtxo (virtual transaction outputs) precede the quiescence of old channels and the setup of new tree vtxo channels. This process involves the revocation of old channels and the establishment of new ones through the exchange of hash preimages, ensuring the new channel is under the control of the client and LSP before unquiescing and resuming operation in the new tree.

An important aspect of this proposed architecture is its ability to nearly instantaneously refresh client channels, potentially even if the client unlocks their mobile phone only once before the expiry of the old tree. This stands in contrast to connector-based architectures, which could introduce more complexity and potential downtime during round refreshes due to increased interactivity requirements.

Moreover, user experience considerations are highlighted, noting the difference between the immediate visibility of fully signed transactions in today’s Lightning Network (LN) with 0 conf channels and the possible delay introduced when waiting for batching rounds in the new model. This reflects an ongoing concern with how best to balance the need for efficiency and liquidity optimization against the need for seamless and user-friendly operations. The proposal suggests that LSPs can manage this balance by ensuring the timely emission of transactions that would generate new channel vtxos following the agreed-upon structure, thus maintaining operational continuity and user trust.