lightning-dev

Liquidity Ads and griefing subtleties

Liquidity Ads and griefing subtleties

Original Postby Bastien TEINTURIER

Posted on: December 13, 2023 12:59 UTC

In a recent conversation in the developer community, there has been an agreement on the complexity inherent in determining what kind of inbound liquidity guarantees are most beneficial for different scenarios within the Lightning Network.

It is understood that the matter of inbound liquidity cannot be addressed with one-size-fits-all solutions, as various situations require tailored approaches.

The discussion moves away from the use of timelocks as a method to secure inbound liquidity. The consensus leans towards a more dynamic strategy where the incentives of liquidity providers align with the needs of the users. If a user is actively generating fees through their usage of the Lightning Network, it becomes advantageous for the liquidity provider to consistently add inbound liquidity to this user. This process, however, should not be rigidly timed or forced, as such an approach could clash with the ever-fluctuating nature of on-chain fee conditions.

Instead, the strategy should be flexible, allowing for the purchase of excess liquidity when the on-chain fees are low and waiting for favorable mempool conditions to opportunistically re-allocate funds. Liquidity providers are thus encouraged to manage their resources in a manner that benefits the network as a whole rather than focusing solely on individual buyers. Despite their best efforts to satisfy every participant, the priority should be the greater utility and efficiency of the network.

This ongoing dialogue encapsulates the broader community's interest in formulating effective strategies for liquidity management in the Lightning Network, with a focus on adaptability and maximization of utility for all parties involved.