Crypto glossary
Ark protocol
Ark is a Bitcoin layer 2 in which users share off-chain UTXOs coordinated by a server, making payments without channels while keeping a path to exit on-chain.
Proposed in 2023, Ark replaces Lightning's channels with virtual UTXOs. An Ark service provider periodically creates a shared on-chain transaction, called a round, whose tree of pre-signed transactions gives each participant a virtual output they can claim on Bitcoin on their own if needed. Users pay each other by swapping their virtual outputs for new ones in a later round, coordinated by the server.
The design aims to fix some of Lightning's usability problems: receivers need no inbound liquidity, users do not manage channels and many payments can be batched into a single on-chain transaction. It is also compatible with Lightning through the service provider. Several teams have released implementations and wallets.
Ark has its own trade-offs. Virtual outputs expire after a set period, so users must come online to refresh them or risk the operator reclaiming the funds. The provider must lock significant liquidity, and without covenant opcodes, current versions require more interaction and trust in the server's cooperation. Exiting unilaterally can be costly when fees are high.
Example
A user with an Ark wallet sends 20,000 sats to a friend who has never set up anything; the friend's wallet receives a virtual output in the next round without opening a channel.