Introduction
Nowadays, businesses and individuals are adopting Bitcoin as a method of payment. It's no surprise, given the security, speed, and cost-efficiency associated with it, specially using the LN. However, despite the numerous advantages, Bitcoin still faces challenges in terms of privacy, fees, and scalability.
What is ARK?
A Layer 2 protocol for Bitcoin designed to solve some of the Bitcoin Network challenges, to improve its efficiency, security and scalability. The protocol aims to enhance the functionality of Bitcoin by addressing its current limitations by using a shared UTXO model that enables anonymous, off-chain payments through an untrusted intermediary called the Ark Service Provider (ASP). ASPs are always-on servers that provide liquidity to the network, similar to how Lightning service providers work but without the time consuming opening and close and balancing of channels.
Interoperability with the Lighting Network?
Ark will function as a liquidity network that operates like Lightning, but without introducing liquidity constraints or a direct link between the sender and receiver. It uses virtual UTXOs, to enable anonymous, scalable, off-chain payments. ASPs provide liquidity to the network and charge fees for their services.
ARK will address key issues with deploying capital into the Lightning Network providing a layer that settles transactions without the requirement for a specific infrastructure to remain online, as is the case with Lightning, while still providing assurances of the private custody of funds. How:
- Ark can interoperate with Lightning by attaching HTLCs (Hashed Timelock Contracts) and PTLCs (Point Time Locked Contracts) to a pool transaction. Attached HTLCs live under another shared UTXO called the HTLCs outputs, which expires after four-weeks.
- Ark service providers forward HTLCs to the broader Lightning Network the moment after HTLCs are attached to a pool transaction. This requires Ark service providers to run routing nodes on the Lightning Network with well-established outgoing channels. Ark users can also get paid from Lightning using HTLC-nested vTXOs.
Last but not least, the Ark Service Provider will serve not only as a liquidity provider but as a Coin-Join coordinator and a Lightning service provider.
How does ARK compares with the Lighting Network?
Conclusion
The ARK protocol is an exciting development, addressing many of the challenges faced by Bitcoin Network today. ARK promises to enhance, above all, privacy and scalability, making it a valuable addition to the rapidly growing Bitcoin ecosystem.
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