From cjp at ultimatestunts.nl  Mon Oct 10 20:53:25 2016
From: cjp at ultimatestunts.nl (CJP)
Date: Mon, 10 Oct 2016 22:53:25 +0200
Subject: [Lightning-dev] Block chain fee proposal worked out in more detail
Message-ID: <1476132805.2158.26.camel@ultimatestunts.nl>

I can think more clearly when no one is talking, so I took advantage of
the evening to work out my fee proposal in more detail. :-)

A deposits into channel, as a way of paying B.
Amount to be paid to B:         1.000 BTC
Extra amount stored in channel: 1.997 BTC
Fee required for commit tx:     0.003 BTC

Anchor tx output size:          3.000 BTC
Commit tx outputs:
  to A:                         1.997 BTC
  to B:                         1.000 BTC
  fee:                          0.003 BTC


Next, A makes microtx to B:
Amount to be paid to B:         0.500 BTC
Extra fee required for HTLC:    0.001 BTC

Commit tx outputs while tx is locked:
  to A:                         1.497 BTC
  HTLC:                         0.499 BTC
  to B:                         1.000 BTC
  fee:                          0.004 BTC
Commit tx outputs when tx is released to B:
  to A:                         1.497 BTC
  to B:                         1.500 BTC
  fee:                          0.003 BTC
Commit tx outputs if tx were returned to A:
  (just like before tx was locked)


Next, B makes microtx to A:
Amount to be paid to A:         1.000 BTC
Extra fee required for HTLC:    0.001 BTC

Commit tx outputs (while tx is locked):
  to A:                         1.497 BTC
  HTLC:                         0.999 BTC
  to B:                         0.500 BTC
  fee:                          0.004 BTC
Commit tx outputs (if tx is released to A):
  to A:                         2.497 BTC
  to B:                         0.500 BTC
  fee:                          0.003 BTC
Commit tx outputs (if tx is returned to A):
  (just like before tx was locked)

So, summarizing the algorithm:
* Initially, the channel creator pays the fee (presumably, he has an
interest in creating the channel, and this is consistent with regular
BTC payments).
* Generally speaking, while using the channel, you're just shifting
around the non-fee part, without touching the fee itself.
* For as far as adding an HTLC requires extra fees (since it makes the
tx larger), that fee is deducted from the HTLC itself. Dust-sized txes
would create negative-size HTLCs; of course you'd just not create the
HTLC at even larger tx sizes (the fees of follow-up txes would not make
the HTLC worth the effort).

Not yet covered: how to change the fee size when on-blockchain fee
market conditions change.

Comments?

CJP