Author: Antoine Riard 2022-11-26 02:23:39
Published on: 2022-11-26T02:23:39+00:00
Antoine Riard discussed the economic aspects of new tokens and their secondary markets with Clara Shikhelman via email. He believes that in an open market like the Lightning Network routing one, routing hops would bump the liquidity value of their credentials to increase their forwarded HTLC traffic volume until the failure rate downgrades their routing income beyond their opportunity costs. However, it is a good research question to determine how the market of HTLC senders would react to the liquidity value bump of their credentials and how a routing node should pick up this bump to reach their income target. Furthermore, the credentials themselves are subject to the classic double-spend problem, which means secondary markets are expected to only happen between LSP and their spokes, where "trust" relationships already exist, making it harder to formalize. Antoine Riard proposed a solution for the monetary paradigm, where staking/reputational credentials help save on unconditional fees paid by HTLC senders. They benefit from their past HTLC routing success in terms of more credentials allocated to them and minimize the overhead cost of their future HTLC sends or allow them to lock liquidity for longer periods. On the other hand, from a routing node viewpoint, a 0-risk HTLC forwarding acceptance can be maintained by requesting strict binding between credentials acquisition cost and channel liquidity routed. If higher returns are sought, the ratio credentials to liquidity can be adjusted, but it comes with higher risks. Clara Shikhelman asked if there is a clear benefit to using a token compared to unconditional fees and local reputation, to which Antoine Riard responded that a simple recommended policy is needed to devise a credential shown to the routing hop covering for full routing fees. Then, the routing hop benefits from a zero-jamming risk situation. The policy could be refined over time once solid foundations are established. A timeline was not given for presenting such a policy, but the proposed credentials architectural framework needs to be refined. Antoine Riard also mentioned that dynamic routing policy in function of channel congestion rate and combining it with reputation to do active risk-management are far more advanced questions than a recommended policy.
Updated on: 2023-06-03T10:49:45.676347+00:00