Author: Bastien TEINTURIER 2022-10-24 09:50:36
Published on: 2022-10-24T09:50:36+00:00
The current Lightning protocol requires users to specify a safety parameter called to_self_delay, which is typically about 2 weeks, and pay for routing but not for their partner's cost-of-capital. If a dedicated user (DLU) partners with a casual user (CLU), the DLU can only move liquidity to another Lightning channel by either getting the CLU to sign a cooperative close transaction that enables or directly implements the desired movement of funds or putting a non-cooperative close transaction on-chain and waiting approximately 2 weeks. However, this is set to change to allow LSPs to re-allocate their liquidity more frequently and efficiently. By leveraging a mechanism similar to splicing, mobile users would pre-sign a transaction that keeps the channel open, but lets the LSP get their balance (or part of it) out non-interactively. This transaction would need to be revokable and delayed, since users still need the ability to punish malicious LSPs.While the proposal would benefit casual users, it may not be acceptable for dedicated users as liquidity providers must be able to quickly move liquidity from where it's unused to where it may be better used. With the proposal, DLUs won't be able to quickly move liquidity around, so the only way to make up for this is to charge the CLU for the loss of expected revenue. The amount DLUs would need to charge CLUs will be prohibitively expensive for most CLUs. Currently, the disadvantage of the Watchtower-Free (WF) protocol to the DLU is the larger delay (1-3 months vs. 2 weeks). Refunding the remaining portion of the CLU's cost-of-capital pre-payment to the CLU makes sense in case 1, as that capital is now being made available to the DLU. In the long run, the cost of bitcoin capital may be low due to its deflationary nature, but liquidity providers will still compete to earn more return on their locked capital.
Updated on: 2023-06-03T10:08:28.458939+00:00