[Lightning-dev] High level fee mechanics

[Benjamin Mord]

Thank you, ZmnSCPxj.

"... by adjusting the on-Lightning `fee_base_msat` and
`fee_proportional_millionths` of channels."

Yes, I agree these prices are a critical signaling mechanism that can have
substantial impact on expected channel lifetime and thus economic
efficiency of lightning operation overall. (As you may recall, I believe we
should allow negative prices - even if present day routing algorithms
choose to treat negative fees as zero for temporary simplicity.) You make a
good point it can also improve routing efficiency by hinting at capacity,
but for now they are unfortunately linear.

The following paper did not account for the improved efficiency that price
adjustment in response to channel state will likely enable, but one thing
which may be relevant here is the underlying power law assumption of
transaction size distribution (which is apparently drawn from actual data),
and the more general approach to estimating channel lifespan. In lieu of
advertising max capacity, perhaps we should instead permit a price exponent
which may optionally be set to something larger than 1. The cost to channel
operator of processing a transaction is largely the impact to expected
channel lifespan, which in turn is nonlinear with respect to transaction
size - and dramatically so as transaction size approaches (or exceeds)
remaining capacity.
https://arxiv.org/pdf/1712.10222.pdf

If we combine nonlinear pricing with your March 19 AMP proposal, I expect
economic efficiency could be greatly improved.

Thanks again,
Benjamin Mord


On Thu, Apr 12, 2018 at 12:49 AM, ZmnSCPxj <ZmnSCPxj at protonmail.com> wrote:

> Good morning Benjamin,
>
> Do (should) channels have the option of publicizing their balances, so as
> to improve routing performance / scalability in a large network, and for
> competitive differentiation among competing routes? This would allow
> channel owners to balance privacy with efficiency, and where the incentive
> to publish would go up in proportion to network scalability requirements.
> Brute force trial & error seems expensive at scale, and also reduces
> privacy of the sender - so it seems a useful hedge to leave this decision
> to the market (if technically practical).
>
>
> I think brute-force scales well enough, but perhaps we should see the
> network in action more.
>
> To an extent, it is possible to hint the suitability of a channel for
> routing in a particular direction, without completely leaking your balance
> in detail, by adjusting the on-Lightning `fee_base_msat` and
> `fee_proportional_millionths` of channels.  If you have a high balance on a
> channel, you reduce your side of the fee for that channel (i.e. the
> direction where you are the source for payments on that channel) to
> encourage others to use it and hopefully pay you on a depleted channel.  If
> you have a low balance, you increase your fee.  These fees are already
> propagated using `channel_update`.  No current node software implements
> this yet, however.
>
> Regards,
> ZmnSCPxj
>
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