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Ark fees

The Ark protocol is designed to make bitcoin payments affordable and predictable. Here are some of the considerations that are going into how we're designing our fee structure to achieve that goal.

When do you pay fees?

As an Ark user, you'll encounter Ark fees in three main situations:

  • Making payments: When you send bitcoin to another user (either on-Ark or off-Ark via Lightning)
  • Refreshing VTXOs: When you update your VTXOs to extend their expiry (required periodically to maintain your balance)
  • Off-boarding: When you withdraw your bitcoin from Ark back to an on-chain address

The frequency and cost of these fees depends on how you use Ark and the specific fee model your server implements.

Each Ark server will have its own fee model

The fee model for Ark will differ from Ark server to Ark server. Ark fees are a matter of policy, they're not hard-baked into the protocol.

Servers must cover their costs

While fee models may differ from server to server, one thing is for sure: any Ark server must charge fees (in some way or another) to cover their operational costs.

The primary costs an Ark server will incur are:

Direct costs

  • Liquidity costs: The opportunity cost of deploying capital for liquidity operations (e.g., refreshes, Lightning payments, and offboards).
  • On-chain fees: The on-chain transaction fees charged by the bitcoin network to get refreshes confirmed.
  • Lightning routing fees: For off-Ark Lightning spends, the server must cover the cost of the routing.

Indirect costs

  • Development costs: The cost of ongoing software development—adding features, optimizing performance, supporting integrations, and fixing bugs.
  • Server operating costs: The real-world infrastructure costs of running a high-performance, high-uptime server.

Approaches to charging fees

Ark servers can take different approaches to how they structure their fees. At one end of the spectrum, servers can charge fees that directly reflect the actual cost of each action. At the other end, they can abstract away these cost differences to create a more uniform user experience. Most servers will likely adopt a hybrid approach somewhere between these two extremes.

  • Direct cost-based fees: Each operation is charged based on its actual cost to the server. Payment fees would be low, while Lightning payments and refreshes would have variable fees based on VTXO age and current on-chain fee rates. This approach ensures the server cannot run at a loss since each action is priced to cover its true costs.

  • Abstracted fees: Servers cross-subsidize between operations to offer more predictable, user-friendly pricing. For example, charging higher fees for spending to subsidize lower refresh costs, or offering flat-rate pricing. This could help maintain a more familiar user experience (sender pays) but requires careful design to ensure a server's total costs are covered.

What will Ark cost users?

We're actively researching and modeling the expected costs for Ark users. See our liquidity page for some napkin calculations on liquidity costs, and check out our blog to keep up with our latest liquidity research.