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Bitcoin Scaling Solution Ark Protocol Promises Cheap and Private Transactions

A new Bitcoin scaling solution with Layer 2 technology attempts to make it easy for people to transact on off-chain payment channels for private transactions without the technical hassle.

Posted June 19, 2023

Illustration of global blockchain network
Illustration of global blockchain network

Bitcoin could perhaps be the modern world’s greatest innovation, but it won’t scale to the masses without extra help from Layer 2 networks.

A new scaling solution for Bitcoin called Ark Protocol was unveiled at the Bitcoin 2023 Conference. Its design will enable cheap and anonymous off-chain transactions while ensuring user privacy.

The protocol, named after the biblical Noah’s Ark, was “accidentally” invented during the development of a Lightning wallet.

The developer, who goes by Burak (@brqgoo) introduced Ark Protocol at one of the keynote sessions. 

Layer 2 solutions have become increasingly important for Bitcoin since the Taproot update in 2022, which opened up new possibilities such as creating NFTs and Bitcoin-based BRC-20 tokens.

These applications require a more scalable infrastructure, making Layer 2 solutions like Ark Protocol essential.

What is Bitcoin’s Ark Protocol?

Ark Protocol functions as a trustless liquidity network similar to the Lightning Network but claims to have a minimal on-chain footprint. Burak said in an interview by Bitcoin Magazine,

“I have always been a critic of Lightning mainly because of inbound liquidity issues, async receiving as well as its on-chain footprint. Inbound liquidity always felt like a bug to me, which made the user experience anything but pleasant.In addition to that, it would take more than a century to onboard the entire global population in a non-custodial fashion onto the Lightning Network, assuming each person has four channels that each consume a few hundred vbytes.”

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Fast and low-cost microtransactions are typically conducted through off-chain payment channels (in its own private ledger), and are not recorded on the Bitcoin blockchain until the channel is closed.

Once a channel is closed, the transactions are consolidated into one settlement, which is then settled on the Bitcoin blockchain.

Weaknesses of the Lightning Network

Despite having great potential to help Bitcoin scale, the off-chain payment channels on the Lightning Network often require users from both ends of the private network to “top up” Bitcoin liquidity.

This prompts many Lightning Network users to use custodial channels as they have potentially higher levels of liquidity than on non-custodial channels.

In addition, most channels also record individual user transactions within the channel prior to the final consolidation and recording on the blockchain.

“Ark can be best defined as a trustless e-cash or a liquidity network similar to the Lightning Network but with a UTXO set that lives entirely off-chain and it’s neither a statechain nor a rollup,” Burak said.

In the interview, he seems to describe the liquidity network as a system that blends the technologies of a liquidity pool and a decentralised non-custodial exchange.

Privacy is a growing concern in Bitcoin

Privacy has become an increasingly important aspect of Bitcoin transactions, as there is growing hostility towards financial privacy.

With various attempts to attack Bitcoin through malicious prosecution and predatory legislation, privacy-preserving tools like Ark Protocol have become essential.

However, establishing a network for truly private transactions requires developers to tackle key technical hurdles such as the aforementioned liquidity issues.

Illustration of Bitcoin BTC coin token

Additionally, the current iteration of the Lightning Network is not free of potentially exuberant fees when the Bitcoin network becomes congested.

Opening and closing payment channels on Lightning Network still requires users to pay Bitcoin fees. During May 2023, Bitcoin fees hit a two-year high due to the Ordinals NFT and BRC-20 token craze.

The transaction fee on 8 May, for example, reached as high as $20, at the cost of ordinary users like the Bitcoin-adopted El Salvador citizens.   

Not to mention, offline transaction risks, fraud, and malicious attacks also pose challenges to the success of the Lightning Network.

There is clearly a lot of work to be done for Lightning Network. While it has done well to serve Bitcoin users since 2016, it is still considered to be an experimental technology.

The takeaways

The introduction of Ark Protocol at the Bitcoin 2023 Conference offers a promising scaling solution for Bitcoin.

Designed as a trustless liquidity network, it enables cheap and private off-chain transactions while ensuring user privacy. 

While the Lightning Network has made progress, Ark Protocol addresses its weaknesses and presents an alternative approach for scalability and privacy.

With continued development, solutions like Ark Protocol have the potential to enhance the Bitcoin ecosystem and make it more accessible and secure for users worldwide.

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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Last updated June 19, 2023

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