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According to https://www.arkpill.me/, a vUTXO owner is able to:

  1. Send the vUTXO with ASP collaboration.
  2. Unilaterally redeem the vUTXO using the pre-signed set of redeem transactions.

If the vUTXO amount is really small, the redeem transactions would be either invalid (due to dust output) or more expensive than the value redeemed. If the ASP is malicious, what's preventing him to ignore every send requests in order to wait for the end of the contract (and then claim the small vUTXO) ?

Is it a possible scenario ? Or something in the redeem path lets to redeem small UTXO ?

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I don't think there is a way for the Ark protocol itself to make it safe to own very small vtxos. "Very small" meaning smaller than the cost to claim the vtxo on-chain.

An important first thing to note is that in the scenario where the ASP just disappears and thus starts ignoring all users at the same time, then all users will have to get their unilateral exist confirmed and naturally we can expect holders of larger vtxos to be the first to pay fees for their exits. This means that a user with a smaller vtxo will no longer have to pay fees for all of the txs in their unilateral exit branch, because part of that branch might already have confirmed. Thus in a mass-exit scenario, owning smaller vtxo values is not necessarily a problem.

There is a problem though if the ASP starts to selectively censor a certain vtxo with a small value. In that case, the owner of this vtxo would have to pay fees for all the transactions in his unilateral exit.

The main strategy we can use to avoid scenarios like this is game theory and incentives. If an ASP is earning money from the service it providers, it will have an incentive to provide a good service. If a user can proof that the ASP is censoring one of his vtxos, this would certainly hurt the reputation of the ASP and this might cause users to leave the Ark and join another one.

It is a hard problem to proof that you are being ignored or censored, though. This is definitely one of the active topics of research still being done on the Ark protocol.

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  • "This means that a user with a smaller vtxo will no longer have to pay fees for all of the txs in their unilateral exit branch, because part of that branch might already have confirmed". if the vUTXO is below dust value, it won't block other users to broadcast the branch ? because of the change output containing small vUTXO, nodes will raise a "dust output error" isn't it ? Commented Oct 11, 2023 at 8:26
  • vtxos below dust value can obviously not exist, that is correct. Commented Oct 12, 2023 at 13:47

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