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SuperScalar: Laddered Timeout-Tree-Structured Decker-Wattenhofer Factories

SuperScalar: Laddered Timeout-Tree-Structured Decker-Wattenhofer Factories

Original Postby ZmnSCPxj

Posted on: September 20, 2024 22:42 UTC

The document discusses a novel approach to channel funding within the Lightning Network, specifically targeting scenarios where inbound liquidity is required by a client without necessitating all participants to be online.

This method revolves around an internal mechanism facilitated by OP_CAT, enabling a Liquidity Service Provider (LSP) to allocate funds from a shared leaf node directly to a client in need, while ensuring trustworthiness through cryptographic commitments. This strategy, although necessitating a blockchain layer modification, offers a unique solution for reallocating liquidity efficiently within the network.

The mechanism proposes that an LSP can fund a new channel with a client who is online and in need of liquidity by using funds from a mutual leaf node, even if other clients associated with the node are offline. The primary challenge addressed is the potential for the LSP to double-spend transactions, which is mitigated by requiring the LSP to precommit to a single-use signature component. This commitment ensures that any attempt to sign multiple transactions would expose the LSP's private key, thereby disincentivizing fraudulent behavior.

To further bolster the system's integrity, the concept introduces a bonding condition tied to another output owned by the LSP. This bond acts as a security deposit, equating to the value of the liquidity initially available, ensuring that the LSP cannot profit from any deceitful actions without suffering equivalent losses. The intricacies of managing these channels highlight the need for separate, independent state machines for each channel, challenging the simplicity of channel splicing within this framework.

An interesting aspect of the proposal is the notion of internalized bondage, where the bond output does not necessarily need to be on the blockchain but must exist when relevant transactions are made public. This allows for a dynamic adjustment of the bond amount based on the online status of clients, optimizing the liquidity allocation process. The system is designed to offer flexibility in liquidity distribution, providing maximum support when all clients are online and adjusting offerings based on the availability of clients.

Despite its potential benefits, the model acknowledges the improbability of its adoption due to the required consensus change on the blockchain. This acknowledgment underscores the challenges of implementing significant structural changes within decentralized networks, despite the innovative solutions they might offer for existing limitations.