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Ark is a liquidity protocol developed by Burak Keceli, which aims to offer scalable and privacy-preserving off-chain transactions without introducing liquidity constraints. Initially, Burak wanted to improve both Blockstream’s Liquid sidechain and the Lightning Network. But in the process, he was dissatisfied with the permissioned federation model of Liquid and he wasn’t happy with limited privacy and liquidity conditions of Lightning either.
The result of Burak Keceli’s research is Ark: the second layer which seeks to become a more private and scalable alternative to the Lightning network, which also offers a user experience which resembles that of the base layer. In order to use Ark, users will not need to have channels or liquidity – this feature is delegated to a network of ASPs (Ark Service Providers) that ideally run on robust server-grade architectures.
Admittedly, Burak is not a fan of amateur transaction routing services in the Lightning network – instead, he thinks that this role should be played by participants that can provide reliability. This vision was brought into Ark, which aims to incentivize robustness and predictability. This may sound technically centralizing, though the design is still permissionless so Raspberry Pi operators will still be able to join the service providing game. However, it’s the end user who will be empowered to choose his ASP.
Ark is also non-custodial by design, ensuring that users have full control over their funds. It uses anchored time of contracts (ATCs) instead of hashed time-locked contracts (HTLCs) like Lightning, ensuring absolute atomicity and breaking automated double-spending attempts.
But what about the downsides? After all, there is no perfect system and there are always tradeoffs. While Ark is not as fast as Lightning to offer instant settlements, it does offer immediate availability of funds without waiting for confirmations. It also requires liquidity providers, though Burak believes that people will be willing to provide liquidity in a hyper Bitcoinized world to earn yield in Bitcoin.
By far, the most puzzling design choice concerns expiring VTXOs (virtual UTXOs) which give senders and receivers 2 weeks to claim their funds, while service providers get 4 weeks for this. As Burak mentions, after expiry there’s a new VTXO that gets generated and automatically performs a self-transfer in order to prevent any losses due to inactivity.
Ark is an interesting mix of the WabiSabi anonymization protocol (a modern-day Chaumian mixing service) and the payment features of the Lightning network. Nonetheless, it’s still in its early days and it can take a year or two until we see significant progress. Burak is optimistic and seems to be assembling a team of coders who are willing to make his vision happen. In its initial releases, the Ark project will have a Rust and a Golang implementation. Finally, the deployment will either happen on the Liquid sidechain (which already has covenants enabled) or on the Bitcoin main chain – with the main issue being that Bitcoin requires the BIP 119 soft fork in order to enable proper functionality.
It’s certainly an interesting proposal that improves on some of the shortcomings in Lightning, but comes with challenges of its own. It was an honor to be the first Bitcoin podcaster to do an interview in English with Burak Keceli – and it’s even more flattering to see that other podcasters are inviting him now.
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Time stamps for my interview with Burak Keceli, creator of Ark:
[00:00:50] Introduction to the podcast season premiere and guest Burak, discussing his presentation in El Salvador and his skepticism towards liquidity requirements for receiving money.What is Ark? [00:03:38] Burak explains that Ark is a secondary protocol for Bitcoin, similar to Lightning, but with better user experience and no liquidity constraints. It is a privacy-preserving, off-chain protocol that scales Bitcoin transactions.
Onboarding to Ark [00:07:12] Burak explains that onboarding to Ark is similar to onboarding to Lightning, where users lock their coins into a conditional contract before funding the address on Ark. He also compares Ark to a two-way pegged sidechain.
Ark’s Onboarding Process [00:07:55] Burak explains how easy it is to onboard to Ark by funding a Bitcoin address and how it allows for off-chain transfers.
Burak’s Journey to Ark [00:09:15] Vlad asks Burak how he transitioned from working on Lightning to creating Ark, and Burak explains his background in Bitcoin development.
Ark’s Design and Evolution [00:14:12] Burak describes how Ark’s design evolved from a Lightning wallet idea to a one-way liquidity model and how it mimics the on-chain UX.
Ark’s UX [00:16:45] Ark mimics the on-chain UX of the chain, making it convenient for users to transact Bitcoin without any interactivity requirements.
Improvements on Lightning [00:19:06] Burak improved on the shortcomings of Lightning, such as inbound liquidity assumptions and receiver privacy, while creating Ark.
Inbound Liquidity [00:21:05] Inbound liquidity is a bug that needs to be fixed, as it doesn’t work for end-users and doesn’t scale. Ark addresses this issue by offloading complexity onto service providers.
Ark vs. Wabisabi [00:25:15 – 00:27:33] Burak discusses the differences between Ark and Wabisabi, two CoinJoin protocols, and the trade-offs between on-chain and off-chain mixing.
Liquidity Management [00:27:33 – 00:29:27] Burak explains the liquidity assumption problem with Ark and how service providers are responsible for managing liquidity for CoinJoin sessions.
Professional Lightning Nodes [00:31:03] Vlad asks Burak about his belief that routing nodes in Lightning should be professional and not just run on Raspberry Pis in someone’s home.
Coexistence of on-chain and off-chain privacy solutions [00:31:44] Burak discusses the need for both on-chain and off-chain privacy solutions and how they can coexist with Ark as a layer two protocol.
Ark as a proper scaling solution with privacy benefits [00:33:02] Burak explains how Ark is a proper scaling solution with privacy benefits, unlike Wasabi, which is only a privacy setup.
Instant availability and settlement nature of Ark [00:38:25] Burak discusses the trade-offs of Ark, including the instant availability and settlement nature of the protocol, which allows users to spend received funds without waiting for confirmations.
VTXO Closure [00:46:41] The design of the VTXO closure section is discussed, where the recipient can claim funds within two weeks, the sender can claim within two weeks, and the service provider can claim after four weeks.
Liquidity Allocation [00:42:48] The liquidity requirements for liquidity providers in Ark are discussed, which are more extreme than in Lightning, and the capital allocation problem is introduced.
Penalty Mechanism [00:40:35] The penalty mechanism in Ark is compared to Lightning, where a user can forge their service provider’s private key to claim previously spent funds.
Minimal On-Chain Footprint [00:50:06] Burak explains how Ark achieves minimal on-chain footprint through nested channels and one input, three outputs every five seconds.
Holding Coins on Ark [00:51:46] Burak explains how users can hold their coins on Ark without paying fees and how they can reset the timer if their coins are about to expire.
Enabling Covenants [00:57:20] Burak explains how Ark requires BIP 118 or 119 to function and how covenants can make it non-interactive, allowing users to receive without being online.
Ark Prototyping and Deployment [00:58:23 – 01:00:09] Burak discusses the plans for prototyping and deploying Ark on Bitcoin, Liquid, or Inquisition, and the potential benefits for users.
Service Provider Incentives and Participation [01:01:09 – 01:02:54] Burak explains the incentives for running a service provider on Ark, and how anyone can participate, including individuals and businesses.
Choosing a Service Provider on Ark [01:04:18 – 01:05:15] Burak discusses how users can choose a service provider on Ark, and how the distribution of a user’s UTXOs is among different service providers, similar to Lightning.
Ark’s potential to onboard the whole planet [01:07:48] Burak discusses how Ark can onboard the whole planet to Bitcoin, unlike Lightning, which heavily relies on the base layer to operate.
Non-custodial solutions and UX [01:09:47] Vlad and Burak discuss the importance of non-custodial solutions and UX, and how they can be made as seamless as custodial solutions.
Hardware requirements for Ark service providers [01:14:42] Burak discusses the hardware requirements for Ark service providers, including the potential for prune nodes to work well with Ark.
Bandwidth requirements for Ark [01:15:23] Discussion of the potential bandwidth requirements for Ark, particularly in relation to CoinJoin and the need to coordinate with multiple participants.
Future of Ark and interoperability with Lightning [01:19:31] Discussion of the potential for building layers on top of Ark, including interoperability with Lightning, and the added privacy benefits this could bring.
Contributing to Ark [01:23:35] Information on how to contribute to Ark, including joining the Telegram channel, donating, and reaching out to the team for potential collaboration.
Ark timeline [01:25:45 – 01:27:25] Burak discusses the potential timeline for the release of Ark, aiming for a working prototype on either Signet or Liquid within this year.
Ark complexity compared to Lightning [01:27:31 – 01:28:07] Burak explains that Ark is less complicated than Lightning, as it is more like an off-chain CoinJoin protocol and simpler to build.
Ark team and website updates [01:30:06 – 01:31:45] Burak mentions that he is in the process of assembling a team for Ark and updating the website gradually. He also discusses his upcoming conference schedule.
BTC Prague Speaking Commitments [01:33:21] Vlad asks if Burak has any speaking commitments at BTC Prague and offers to host a panel on open source stuff to get him in.
Bitcoin Takeover 3: Breaking FUD Magazine [01:34:00] Vlad mentions that he wants to include Ark in the Bitcoin Takeover 3: Breaking FUD Magazine and provides information on where to buy a print version to support the project.
Following and Contributing to Ark [01:35:31] Burak provides information on how to follow and contribute to Ark, including joining the Ark community group and reaching out to them via email.
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