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

The discussion revolves around the optimization of routing protocols, particularly focusing on the most pressing issues related to LSP+mobile cases. The approach suggested involves treating the transition from old to new vTXO states as a controlled "revocation," which is seen as beneficial primarily due to the reduction in worst-case overlap exposure, rather than reducing liquidity in general. This method relies on making the "new" allocation safe only after the "old" allocation has been rendered non-viable, economically and cryptographically. This strategy is underscored by a forfeit stage that prevents double-spending across trees or rounds, emphasizing safety through extra leaf-level waiting.

The conversation also explores the concept of a protocol's economic and operational dynamics, distinguishing between a protocol liveness requirement and an economic "liveness tax." It suggests that while there is a baseline refresh requirement at expiry, costs can often be mitigated through strategic batching and round design. The discussion highlights how the ASP (Application Service Provider) effectively sells a liquidity/responsiveness option to its users, suggesting that the cost pressures arise more significantly from service level demands rather than inherent protocol needs. This perspective opens up consideration for various pricing models derived from the required service levels, such as routing fees or explicit charges for faster service options, with a note on the potential to avoid pricing overprovisioning if users are willing to accept longer wait times.

Further, the dialogue touches upon the economic viability of long-lived on-chain channels versus more dynamic configurations, pointing out that balanced flows may not be a realistic expectation due to systematic depletion pressures and sender behavior. This leads to a broader discussion on the necessity of making reconfiguration both cheap and continuous, supported by an upcoming mathematical theory that includes explicit proofs regarding payment channel network dynamics.

Additionally, the exchange includes insights into practical implementations, specifically referencing a proof of concept shared by one of the contributors. Questions are raised about the potential for standardization and interoperability at the specification level, like a BOLTs extension, especially when considering LSP-like deployments and specific Ark implementations. The conversation identifies several critical aspects for further exploration, including the advantages over existing channel-management tools, and potential barriers to adoption, such as user experience concerns, script complexity, and challenges related to multi-operator interoperability and gossip.

This rich discussion not only delves into the technical nuances of optimizing routing protocols and managing state transitions in a secure and economically viable manner but also considers the broader implications of these strategies on service levels, pricing models, and the potential for standardization within the industry.