Introducing Ark: An Alternative Bitcoin Scaling Solution Focused on Preserving Privacy

This is an opinion editorial by Kudjai Kutukwa, a financial inclusion advocate and Mandela Washington fellow.

“When the use of strong cryptography becomes popular, it is harder for the government to criminalize it. Therefore, it is good to use PGP to maintain democracy. If privacy is outlawed, only non- Legal people will have privacy… PGP empowers people to take their privacy into their own hands. There has been a growing social need for this. That’s why I wrote this.

,Phil Zimmerman,”why i wrote pgp,

Case Roman Sterlingov, who is accused of running a custodial bitcoin mixer, “Bitcoin Fog,” is indicative of a number of situations in which individuals are targeted by law enforcement for protecting their financial privacy.

as mentioned”what did bitcoin doThe US Department of Justice relied on Chainalysis’ Reactor software to trace the purchase of the Bitcoin Fog domain back to an address associated with Sterling’s Mt. Gox account, establishing it as its operator. Reactor was designed to link cryptocurrency addresses with real-world identities. In spite of various irregularities present in ongoing caseOne can conclude that this sends a clear message of “you shouldn’t have financial privacy”.

introduction to arch

Given this growing hostility towards financial privacy for bitcoin transactions, there is an urgent need for the development of better tools. At the recently concluded Bitcoin 2023 conference, a potentially game-changing tool called arc protocolwas introduced.

announced during a main session by the developer on the open-source stage Burak, Ark is a Layer 2 scaling solution that enables cheap, anonymous and off-chain bitcoin transactions. The protocol also has a minimal on-chain footprint, which protects user privacy while keeping transaction costs low. In what can be described as an “accidental invention” when Burak was trying to develop a Lightning wallet, Ark is a different protocol that could potentially increase non-custodial bitcoin usage.

In what context did Burak name the protocol “Arc” Noah’s ArkWhich acts as a lifeboat that provides refuge from predatory blockchain surveillance firms and custodians.

During his presentation, Burak highlighted one of the most worrying trends for the Lightning Network today, which is that there are currently more custodial users of Lightning than non-custodial users. This is mainly due to the lack of liquidity on Lightning, which requires non-custodial users to obtain liquidity from someone else’s node before they can access their funds. Custodial wallets such as Wallet of Satoshi remove this problem from the user but at the cost of the user not being 100% in control of their funds as well as their financial privacy.

an alternative layer 2 protocol

I interviewed Burak to gain a deeper understanding of Arch and the inspiration behind its development. When I asked him what led him to develop the alternative Layer 2 protocol, he said:

“I’ve always been critical of Lightning, mainly due to inbound liquidity issues, async fetch as well as its on-chain footprint. Inbound liquidity always felt like a bug to me, which added more to a pleasant user experience Furthermore, assuming that each person has four channels, each consuming a few hundred Wbytes, it would take more than a century to onboard the entire world’s population to the non-custodial Lightning Network. It will take time.

As he set out to address these and other issues, his Lightning wallet idea eventually morphed into Ark.

Burak said, “Ark can be defined as a liquidity network similar to trustless e-cash or the Lightning Network, but with a UTXO set that remains completely off-chain and is neither statechain nor blockchain.” Same rollup.” “These UTXOs are called ‘virtual UTXOs’ or ‘vTXOs’, which have a ‘lifetime’ of four weeks. The core of Ark’s anonymous off-chain payments is powered by vTXOs.

During the conversation, Burak continued to emphasize his obsession with a frictionless experience for the end user, believing that sending a satsang should be as easy as pressing a button. This is one reason why Ark users do not need channels or liquidity, as it is delegated to a network of untrustworthy intermediaries known as Ark Service Providers (ASPs). These are always-on servers that provide liquidity to the network, similar to how electricity service provider They work, but with an added benefit: ASPs are unable to link senders with receivers, which adds another layer of privacy for users.

This is made possible by the fact that each payment on Arc takes place within a coinjoin round that obscures the relationship between the sender and the receiver. The best part about it is that CoinJoin is completely off-chain, settling payments every five seconds, which not only significantly reduces the on-chain footprint but also strengthens the privacy of users. The anonymity set is each party involved in a transaction and, theoretically, this creates much more privacy than is possible on the Lightning Network. Furthermore, Ark mimics the on-chain user experience in that users have a dedicated address to send and receive payments, but the difference is that it is a reusable address that does not compromise user privacy. does, it is possible in a way that is similar to silence. paid work.

business last

However, like any other system, Ark has its own compromises. While it may not offer instant settlement as fast as Lightning, it does offer immediate access to funds without waiting for confirmation in what Burak describes as “immediate availability with delayed finality”.

Lightning is still the better option for sellers when it comes to receiving payments. Additionally, liquidity providers are needed, but based on the assumption that individuals will be motivated to offer liquidity in order to earn a yield in bitcoin, Burak also thinks that this challenge can be easily overcome in the long term. can be done. This novel proposal addresses some of the shortcomings in Lightning, yet comes with its own set of challenges.

the road ahead

In summary, the Arc Protocol is a unique, second-tier scaling solution with unilateral exit capability that enables seamless transactions without imposing any liquidity constraints or interactivity, nor requiring a direct connection between sender and receiver. . Therefore, recipients can easily receive payments without the hassle of onboarding setup, maintaining a constant server presence, or compromising their anonymity to third parties. Designed to be a scalable, non-custodial solution, Ark allows users complete control over their funds and gives everyone the option to hold their money themselves.

Arc is interoperable with Lightning, but also serves as a complement to it. However, due to the complex process of self-custodial lightning and the varying levels of privacy for senders and recipients, as well as the imminent threat posed by blockchain surveillance firms, scaling solutions that prioritize privacy, such as Ark, have become necessary. . Various attempts to attack bitcoin through malicious prosecution, such as in the Sterlingov case, and coercive EU legislation such as micaDemonstrate the need for scalable, efficient, privacy-preserving tools to prevent future issues.

It is against this background that I think Arc is an interesting concept to keep an eye on as the protocol evolves. Of course, without code to review or battle-tested, working prototypes at this point in time, it’s still a long road away. Despite the unforeseen challenges ahead, Burak is optimistic about Ark’s potential and is confident that it is a breakthrough that strikes a balance between private bitcoin transactions and scalability in a user-friendly way. A sentiment I share as well, given the critical need for non-custodial, privacy-preserving tools.

This is a guest post by Kudzai Kutukwa. The opinions expressed are solely his own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.