Introducing Ark Labs: A new venture to bring seamless and scalable payments to bitcoin

Today, we’re proud to unveil Ark Labs, a new company dedicated to building bitcoin layer-two solutions based on the new Ark protocol.

New alternatives to bitcoin scaling are required

We’ve hit a watershed moment in bitcoin adoption — weeks of block congestion are becoming the norm…and will continue to get worse as adoption continues to grow.

This has led to rapidly increasing demand for scalable, lower-cost payment solutions. While the Lightning Network has made significant strides, it’s unfortunately posing serious UX challenges for users, particularly when it comes to managing inbound liquidity.

As a result, a significant and growing portion of Lightning users are turning to custodial solutions, which, in many ways, defeats the point of using bitcoin in the first place.

Ark was experimental — until now!

Enter Ark, a layer two protocol proposed in May 2023, designed to offer speed and scalability without the burdens of liquidity management (for end users, at least!). And no compromises when it comes to self-custody.

Until now, Ark has been a theoretical solution to bitcoin’s scaling issues. But with the launch of Ark Labs, we’re making Ark a reality.

You can find a working Ark implementation on GitHub today (let us know if you’d like help firing up your own Ark Service Provider or wallet!) and we’ve already started work on the first Ark-based services.

Ark what?

For anyone relatively technical, let me briefly describe Ark’s mechanics:

Ark is a novel approach to bitcoin transactions, combining elements of payment channels, ecash, and bitcoin itself. The network is made up of Ark Service Providers (ASPs), which consumers and merchants connect to with light (e.g., mobile) wallets.

Comparing the structure of the Lightning and Ark networks

Each ASP is a trustless server that issues virtual transactions (VTXOs) to users upon deposit. Those VTXOs can be traded between users of the ASP off-chain at low cost, sent between users of different ASPs over Lightning, or redeemed on-chain at any time. The last point is crucial — users can withdraw their Ark funds at any time, even if their ASP goes offline or ceases to exist. True self-custody.

Transaction flows between ASPs and the Bitcoin network

Some key ways Ark stands out:

• Frictionless onboarding: Unlike Lightning, users don’t need some existing bitcoin to open a channel and start making payments. Instead, after setting up an Ark wallet, a user can start receiving any amount of Ark transactions (VTXOs) right away.
• Inbound, schminbound: Also unlike Lightning, users never need to worry about inbound liquidity, they can receive as many virtual transactions as an ASP can support.
• Offline receive: Users don’t have to worry about their wallets going offline — they can receive their Ark transactions at any time.

Like any system, there are some trade-offs. The burden of liquidity management doesn’t just disappear, it’s simply offloaded entirely to ASPs. However, ASPs are incentivised by transaction fees to take this burden on. Also, it’s important to note that to withdraw funds from an ASP, a user must be able to afford at least one on-chain transaction.

I’ve tried to keep things simple here, but you can find more detailed explanations at Ark Developer hub.

A complement for Lightning, not a replacement

All that said, we need to emphasize that Ark is not a replacement for Lightning! Instead, our view is that Lightning will, over time, take on more of an enterprise role, handling settlements between larger entities such as exchanges, federations, and ASPs, with Ark preferred by consumers for digital payments and remittances.

Our dual mandate

Ark Labs is committed to two main objectives:

• Maintain an open implementation of the Ark protocol: Our team is dedicated to developing and maintaining an open-source implementation of the Ark protocol (GitHub). If you’re interested in contributing, we have a developer grant program launching soon (can’t wait for the announcement? Drop us an email!).
• Building services for the Ark protocol: We’re already working on a handful of commercial services enabling bitcoin users to leverage the Ark protocol. Stay tuned as we have some exciting announcements in store for the upcoming weeks.

All aboard the Ark

Ark’s finally here, and we’re excited to pioneer new possibilities with Bitcoin payments. If you’re interested in becoming an early adopter, we’d like to work with you! Whether you’re looking to integrate Ark into your app, shape the protocol’s development, or make some of the first Ark payments, drop us an email or subscribe to our newsletter.