• Burak Keceli, a 24-year-old self-taught Bitcoin developer and researcher, is proposing a new layer 2 protocol dubbed Ark to solve Lightning’s ‘inbound liquidity’ problem.
• This problem requires users to commit funds to the protocol even when they’re just receiving payments.
• Ark will make Bitcoin transactions cheaper and faster while eliminating the need for recipients to commit funds.
Introduction
Burak Keceli, a 24-year-old self-taught Bitcoin developer and researcher, is proposing a new layer 2 protocol dubbed Ark that he says will solve Lightning’s “inbound liquidity” problem. The aim of this project is to make Bitcoin transactions cheaper and faster while eliminating the need for recipients to commit funds.
What Is Inbound Liquidity?
Inbound liquidity is the ability to receive funds on Lightning – a layer 2 payment network introduced in 2016 that enables cheaper and faster bitcoin transactions. But that receiving capacity must first be established by committing funds and making outbound payments. This requirement burdens novice users who simply want to receive payments as they must pony up funds or acquire it through other means like liquidity marketplaces.
The Problem With Inbound Liquidity
Keceli says that requiring all Lightning users to acquire liquidity before using the system “simply should not exist” because it doesn’t make any sense for users who are just receiving payments. This objection was what inspired him to create Ark, which aims to eliminate this issue without sacrificing speed or cost of transactions.
How Will Ark Solve This Problem?
Ark’s goal is twofold: To make the dominant cryptocurrency’s transactions cheaper and faster while also eliminating the need for recipients to commit funds before being able to receive them on Lightning Network. It does this by allowing users with excess balance in their channels (outbound liquidity)to lend those balances temporarily in exchange for fees, thus enabling other users with insufficient balance (inbound liquidity)to receive payments without having to put up their own money as collateral upfront.
Conclusion
Ark has the potential of becoming an important part of how people use Lightning Network in order to transact more efficiently with one another while avoiding its existing problems such as inbound liquidity requirement which makes no sense from an economic perspective since it requires people pay money even when they’re just receiving payments on it.