Author: ZmnSCPxj 2020-01-31 03:42:08
Published on: 2020-01-31T03:42:08+00:00
During LNConf 2019, Jack Mallers presented a proposal for creating a futures market on onchain feerates. According to him, hedging of onchain fees is necessary to have a smooth experience interfacing between onchain and offchain. The proposed mechanism involves miners taking short positions on fees while users take long positions on fees. This creates an insurance policy against increases in feerate. ZmnSCPxj proposes a specific mechanism for fee rate insurance against onchain feerate spikes. The mechanism involves Alice and Bob having a fee insurance provider Ingrid. Ingrid assures Alice and Bob that 600 satoshi is sufficient to confirm the payment from Alice to Bob within 4 blocks. At current block height B, Alice and Ingrid arrange a series of transactions with different locktimes and fees. The transactions are designed such that if the first transaction is included in the next block immediately, then Ingrid can earn the most of the fee paid by Alice. However, if the transaction is not confirmed, Ingrid pays out significantly to ensure the payment goes through.The proposed mechanism cannot be used for Lightning closes as it requires absolute locktimes, which would impose a maximum lifetime on channels. For Lightning closes, a mechanism is required where Ingrid assures Alice and Bob that the close transaction can be confirmed at any time, for only N satoshi. The proposed mechanism might be useful for onchain transactions to help reassure users. Overall, the proposal aims to create a smoother experience when transferring funds between onchain and offchain.
Updated on: 2023-06-13T23:20:01.101338+00:00