[bitcoin-dev] [Lightning-dev] Removing the Dust Limit

[Anthony Towns]

On Tue, Aug 10, 2021 at 06:37:48PM -0400, Antoine Riard via bitcoin-dev wrote:
> Secondly, the trim-to-dust evaluation doesn't correctly match the lifetime of
> the HTLC.

Right: but that just means it's not something you should determine once
for the HTLC, but something you should determine each time you update the
channel commitment -- if fee rates are at 1sat/vb, then a 10,000 sat HTLC
that's going to cost 100 sats to create the utxo and eventually claim it
might be worth committing to, but if fee rates suddenly rise to 75sat/vb,
then the combined cost of 7500 sat probably isn't worthwhile (and it
certainly isn't worthwhile if fees rise to above 100sat/vb).

That's independent of dust limits -- those only give you a fixed size
lower limit or about 305sats for p2wsh outputs.

Things become irrational before they become uneconomic as well: ie the
100vb is perhaps 40vb to create then 60vb to spend, so if you create
the utxo anyway then the 40vb is a sunk cost, and redeeming the 10k sats
might still be marginally wortwhile up until about 167sat/vb fee rate.

But note the logic there: it's an uneconomic output if fees rise above
167sat/vb, but it was already economically irrational for the two parties
to create it in the first place when fees were at or above 100sat/vb. If
you're trying to save every sat, dust limits aren't your problem. If
you're not trying to save every sat, then just add 305 sats to your
output so you avoid the dust limit.

(And the dust limit is only preventing you from creating outputs that
would be irrational if they only required a pubkey reveal and signature
to spend -- so a HTLC that requires revealing a script, two hashes,
two pubkeys, a hash preimage and two signatures with the same dust
threshold value for p2wsh of ~305sats would already be irrational at
about 2.1sat/vb and unconomic at 2.75 sat/vb).

> (From a LN viewpoint, I would say we're trying to solve a price discovery
> issue, namely the cost to write on the UTXO set, in a distributed system, where
> any deviation from the "honest" price means you trust more your LN
> counterparty)

At these amounts you're already trusting your LN counterparty to not just
close the channel unilaterally at a high fee rate time and waste your
funds in fees, vs doing a much for efficient mutual/cooperative close.

Cheers,
aj