[Lightning-dev] Fee Ratecards (your gateway to negativity)

Tue Sep 13 21:15:21 UTC 2022

Hi all,

I've been talking about them for a bit[^1], now[^2], but here's a more
formal proposal for fee ratecards.

Spec PR + implementation to come.

## What is a fee ratecard?

A ratecard is a set of four values, positive or negative, that price different
bands of available liquidity for a channel.

A ratecard replaces the current `fee_proportional_millionths` and
`fee_base_msat` currently used to calculate the owed fees for
forwarding a payment on the
lightning network.

Instead, with ratecards, a channel operator may specify four different
rates for a channel's liquidity, that will automatically be updated
depending on the current channel capacity. The four capacity bands are fixed
at 0-25%, 26-50%, 51-75%, and 76-100%.

Currently, all payments are priced equally. Fee ratecards update this such that
payments can be priced differently, depending on the current available
capacity in a channel. This allows node operators to dynamically price
their liquidity, without needing to continually issue gossip updates as
the balance changes (which may leak payment flow timing).

## Spec Changes + Implementation Notes

To the `channel_update` gossip message, we add a TLV with one defined
type, `ratecard`. The ratecard contains 4 16-bit signed integers, one
for each quarter of channel capacity. (0-25, 26-50, 51-75, 76-100%).

```
1. `tlv_stream`: `channel_update_tlvs`
2. types:
    1. type: 1 (`ratecard`)
    2. data:
        * [`s16`:`fee_basis_0_25`]
        * [`s16`:`fee_basis_26_50`]
        * [`s16`:`fee_basis_51_75`]
        * [`s16`:`fee_basis_76_100`]
```

If a node is advertising a `ratecard` in their `channel_update` for
that channel, a routing node SHOULD pick the rate to pay based on
their current guess of the channel's capacity as well as priority for
the payment.

If a payment is high priority, it is recommended to pay at the highest feeband,
to ensure delivery (if possible).

On payment failure, the response is the same (you return a copy of the
`channel_update` in the onion). You MAY give an additional hint as to
what the current
acceptable feerate is for a payment.

If the feerate card entry is set, the rates there take precedence over the
`fee_base_msat` and the `fee_proportional_millionths`.

The `feerate` card effectively removes the ability to set a `fee_base_msat`.

To minimize payment routing failure, it is recommended to set the
`fee_proportional_millionths` to the same rate as the highest `ratecard`
rate. (Most likely the `ratecard`.`fee_basis_0_25`).

Note that `ratecards` unit is in basis points, not millionths. As basis points
are 1/10,000, they're 100x less than the same value expressed as millionths.

- A `basis_point` value of 5 is a fee of 5msat on a 10k msat payment.
- A `fee_proportional_millionths` of 500 is a fee of 5msat on a 10k
msat payment.

The current expected price for sats to be pushed to the other side of the
channel is to be priced by the lowest ratecard capacity band that that payment
will push the balance into.

For example, if a payment moves 50k through a 100k channel which is currently
at a total available capacity of 75k sats (which means it'll move the capacity
from 75k to 25k), that payment will be expected to pay a rate equal to the
0-25% band, as it'll push the available capacity into the 0-25% range.

Using this rule, HTLCs consuming significant portions of a channel's
total capacity are more likely to pay higher fees.

### Motivation and Rationale
At the last in-person spec meeting, it was noted that channel capacity is
often of variable value depending on the amount of capacity currently
available in that channel.

It was also noted that we'd like to allow node operators to experiment
with negative fees.

You can't easily allow for negative feerates with our current gossip messages,
as it would give gossip an economic value which may have an adverse impact
on the ability of nodes to stay up to date with the current lightning channel
topology; it also stands to greatly increase the volume of gossip
updates issued by any one node, which should scale with payment volume,
as nodes update their gossip to change their current fees on any one channel.

Note that some nodes already automatically update their channel fees based on
the available capacity in a channel; fee ratecards should be a more succinct
way for node operators to express more fine grained prices of their existing
capacity, with a much reduced bandwidth burden.

### Feerate Cards, Frequently Asked Questions

#### Why four evenly spaced buckets? Why not X function?

1. Expressibility
	Fees are calculated by the node creating the route for a payment, using
	parameters set by the channel node operator. These paramters must be
	communicated via gossip to every node, and then used as inputs to the
	routing function.

	Parameters need to be uniform and well understood such that
	routing algorithm designers can make efficient use of them.

	Four buckets is wide enough such that payment should
	be able to find/pick a current channel capacity with good
	probability, yet hopefully expressive enough for routing
	operators to be able to price their available liquidity
	with sufficient granularity.

	Four evenly spaced buckets also make it much easier to
	reason about information leakage (binary search).

2. Predictability for payment success.
	Feerate cards don't introduce any new risk to payment failure,
	as the current fee rates of a channel may currently differ
	from a node's gossip information.

	Rather, feerate cards offer a way for your routing algorithm
	to dynamically decide on what level of capacity it estimates
	the channel to be at, and its tolerance for failures.

#### Won't this leak my channel balance?

At most, feerate buckets reduce the total number of payment attempts
required to find an exact channel balance by 2.

It does, however, provide a much lower 'cost of capital' mechanism
for discovering which band of payment is likely to succeed.

Currently, to discover if a 100k channel has capacity for a 75k sat payment,
you'd need 75k sats of available liquidity in the node leading up to
that channel (or 25k in the opposite direction) from your probe node, in
order to discover if that bucket is available.

This ties up available liquidity along the entire probe route.

With feerate cards, you could do a 1k sat payment at each feerate card
fee band, and discover the approximate bucket without tying up
as much of your own own outband capital.

This makes probing more feasible for any node that wants to make a payment,
while reducing the capital tied up to discern the same amount of information.

#### More data in the channel_update message! Just what we need, more gossip.

It's anticipated that feerate cards will greatly reduce the number of
`channel_update`s issued by a node, by allowing node operators to dynamically
price their liquidity by available capacity via a single, static
`channel_update`.

This should reduce or remove the need to rebroadcast a `channel_update` when a
channel's capacity changes.

#### How do negative fees work?

Astute readers may notice that the proposed feerate card bands can be expressed
as negative numbers. This allows node operators to price the liquidity
available in their channel at a discount.

Here's a good way to think about the impact a negative fee will
have on your channel balances.

A feerate of 5 basis points means that, in order to push 10k sats from
one of your channel balances to the peer, another of yours must push
you 10,005 sats. This means you always need more inbound than outbound
in order to route a payment (unless you're using zero fees, in which case
you'd need an equal amount).

Negative fees reverse this. At -5 basis points, you'd only need to receive 9,995
on an inbound channel to cause you to push out 10k sats. This allows you
to reallocate your inbound capacity at a slight discount to the party
who's responsible for moving the capital.

#### What happened to payment base fees?

They're going away (they do not work with negative rates).
Hopefully ratecards will give you enough expressivity to figure out
good rates for your channel capacity without them.

### Credits

This proposal is a marriage of Clara Shikleman's push to start thinking
about negative fees, and ZmnSCPxj's comments on the variability of
value of a channel's liquidity based on current capacity.

~niftynei

[^1]: [Slides on liquidity +
lightning](https://docs.google.com/presentation/d/1gK5_JvDl6aR8EqEKIxfdIHMR2vNIgHUS5tydP2kB_gA/edit?usp=sharing)
[^2]: [Presentation of slides at btcpp in
Austin](https://www.youtube.com/watch?v=voEbAeS_B5w)
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