Out-of-Round Payments

Ark rounds are infrequent and they require liquidity to be provided by the ASP, which will mean the users will be charged a fee for locking up this liquidity. Therefore, regular Ark payments, while still a lot cheaper than on-chain transactions, are still slow and might have a non-trivial cost.

This page introduces an optional alternative payment method in Ark: out-of-round (OOR) payments.

OOR transaction

To make an OOR payment, we will re-use the forfeit clause in the VTXO policy. Instead of entering a round, a user can create a transaction, looking very similar to a forfeit transaction, that sends the VTXO to a new VTXO output of another user. It then asks the ASP to co-sign that transaction and can then pass on the transaction to the receiving user.

At that point, the receiving user has an actual VTXO as well. It looks a bit different than a regular VTXO created in an Ark round, it is one transaction longer, but it has the same properties. And a user that received an OOR VTXO can use that VTXO to do all the things one could do with a regular VTXO: use it as an input in an Ark round, or send an OOR transaction.

Trust Model

While OOR payments are very convenient, they are instant and don’t require liquidity, they do change the trust model a little bit. The chain of off-chain transactions now no longer only contains covenant links, it also includes a regular multi-sig spends between the ASP and each of the sending parties. So as a receiver of an OOR transaction, you’re relying on these two parties to not collude and double spend the transaction.

In a reasonably-sized Ark, the ASP will promise to never make such a double spend, and has a strong incentive to keep that promise. In the case of a double spend, the signatures for both spends become known to the cheated user and this user can trivially proof to the public that the ASP has broken this promise. Since the ASP has a financial incentive to keep their business, they have a strong incentive to break this promise.

Additionally, the OOR model is optional, a user receiving an OOR transaction can immediatelly submit the OOR VTXO to the next Ark round and swap it for a regular VTXO that has the fully trustless property. As such, OOR payments make for faster Ark payments and optionally allow users to avoid paying the liquidity fee.