How ILP Works
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The document explains how the Interledger Protocol (ILP) facilitates payments between different ledgers through connectors that relay and convert currencies. It outlines the process of sending payment instructions, holding funds securely until conditions are met, and the execution of transfers. Additionally, it discusses how liquidity curves and synthetic routes enable efficient currency exchange rates across various ledgers.
How ILP Works
- 1. How It Works Evan Schwartz & Stefan Thomas ILP Packet, Addressing, Routing
- 2. Ledgers Track Accounts and Balances Sender RecipientLedger 2
- 3. But Not Everyone Is on the Same Ledger 3
- 4. Connectors Relay Money Connector Alice 100 Chloe 0 Chloe 110 Bob 0 100 110 4
- 5. Connectors Convert Currencies Connector Alice 100 Chloe 0 Chloe 110 Bob 0 100 110 5
- 6. How do we ask a connector to pass on a payment?
- 7. We Need a Way to Send Instructions to Connectors Alice 100 Chloe 0 Chloe 110 Bob 0 7 Um, excuse me? ...hello there…? ZZZZZZ
- 8. address: "us.wf.bob" Interledger In One Slide Hierarchical identifier Decimal amountamount: "1023.20"
- 10. Sender Attaches Packet to Local Transfer Alice 100 Chloe 0 Chloe 110 Bob 0 100 10 us.wf.bob 1023.20
- 11. Connector Forwards the Packet via Another Transfer Alice 0 Chloe 100 Chloe 110 Bob 0 11 us.wf.bob 1023.20 110
- 12. Paths Can Be Short 12
- 13. Or Long 13
- 14. Uh oh... 14
- 15. Can we trust connectors?
- 16. If Connectors Fail, Would We Lose Money? Alice 100 Chloe 0 Chloe 110 Bob 0 ? 100 16
- 18. Ledgers Provide Hold Functionality Alice 100 On Hold 0 Chloe 0 Chloe 110 On Hold 0 Bob 0 18
- 19. Holds Are Dependent on Conditions + Expiries 19 EXECUTEROLLBACK
- 20. Condition Fulfillment Executes Transfer 20 EXECUTEROLLBACK
- 21. Timeouts Cause Funds to Be Returned 21 EXECUTEROLLBACK
- 22. address: "us.wf.bob" amount: "1023.20" expiry: "2016-07-06T09:00:10Z" condition: "cc:0:3:4a7DEpj8f9..." Interledger In One Slide (Really) Timestamp (ISO 8601) Crypto Condition
- 23. Funds Are Committed From Left to Right 23 Alice 100 On Hold 0 Chloe 0 Chloe 110 On Hold 0 Bob 0 COMMITMENT
- 24. Sender Puts Funds On Hold Alice 100 On Hold 0 Chloe 0 Chloe 110 On Hold 0 Bob 0 100 24 us.wf.bob 1023.20 cc:0:3:4a... 2016-07...
- 25. Connector Gets Notification of Funds on Hold Alice 0 On Hold 100 Chloe 0 Chloe 110 On Hold 0 Bob 0 25 us.wf.bob 1023.20 cc:0:3:4a... 2016-07... ?
- 26. Connector Puts Funds on Hold Alice 0 On Hold 100 Chloe 0 Chloe 110 On Hold 0 Bob 0 26 us.wf.bob 1023.20 cc:0:3:4a... 2016-07... 110 ?
- 27. Recipient Gets Notification of Funds on Hold Alice 0 On Hold 100 Chloe 0 Chloe 0 On Hold 110 Bob 0 27 us.wf.bob 1023.20 cc:0:3:4a... 2016-07... ? ?
- 28. Recipient Triggers Payment by Fulfilling the Condition
- 29. Transfers Are Executed Right to Left 29 Alice 0 On Hold 100 Chloe 0 Chloe 0 On Hold 110 Bob 0 EXECUTION ? ?
- 30. Recipient Signs Receipt Alice 0 On Hold 100 Chloe 0 Chloe 0 On Hold 110 Bob 0 30 ? ?
- 31. Signature Fulfills Condition, Ledger Releases Held Funds Alice 0 On Hold 100 Chloe 0 Chloe 0 On Hold 110 Bob 0 110 31 ?
- 32. How Does the Connector Get Reimbursed? Alice 0 On Hold 100 Chloe 0 Chloe 0 On Hold 0 Bob 110 32 ? ?
- 33. Connector is Notified That Funds Have Been Released Alice 0 On Hold 100 Chloe 0 Chloe 0 On Hold 0 Bob 110 33 ?
- 34. Connector Passes on the Recipient’s Signature Alice 0 On Hold 100 Chloe 0 Chloe 0 On Hold 0 Bob 110 34 ?
- 35. Receipt Releases Funds from Hold Alice 0 On Hold 100 Chloe 0 Chloe 0 On Hold 0 Bob 110 35 100
- 36. Sender Gets Non-Repudiable Proof of Payment Alice 0 On Hold 0 Chloe 100 Chloe 0 On Hold 0 Bob 110 36
- 37. 37 COMMITMENT Transfers Are Committed L2R, Executed R2L EXECUTION
- 38. (Now) Paths Can Be Short 38
- 39. Or Long 39
- 40. Or Long (And Still Secure) 40
- 41. The Interledger
- 42. address: "us.wf.bob" amount: "1023.20" expiry: "2016-07-06T09:00:10Z" condition: "cc:0:3:4a7DEpj8f9..." Enabled By a Simple Packet Format
- 43. How do those addresses work?
- 44. address: "us.wf.bob" ledger account Interledger Addresses
- 45. address: "us.wf.bob.mary" ledger subledger Interledger Addresses account
- 46. Connectors Convert Currencies Connector Alice 100 Chloe 0 Chloe 110 Bob 0 100 110 46
- 47. Where does this rate come from?
- 48. Liquidity Curves Determine Exchange Rates 48 Connie
- 49. Connectors Set Rates per Ledger Pair 49 Ledger A Ledger B Ledger C Ledger D A ⇒ B A ⇒ C A ⇒ D
- 50. Connectors Advertise Their Routes 50 A ⇒ B Ledger Z Carmine
- 51. Synthetic Routes Are Created 51 A ⇒ BZ ⇒ A
- 52. Synthetic Routes Are Created 52 A ⇒ BZ ⇒ A = Z ⇒ A ⇒ B
- 53. And Added to the Routing Table 53 Z ⇒ A ⇒ B Connie Z ⇒ A ⇒ C Connie Z ⇒ A ⇒ D Connie
- 54. Routing Tables Grow Quickly 54 Z ⇒ A Local Z ⇒ A ⇒ B Connie Z ⇒ A ⇒ C Connie Z ⇒ A ⇒ D Connie Z ⇒ C Local Z ⇒ C ⇒ E Chao Z ⇒ C ⇒ F Carl
- 58. First We Route Up us.wf.bob.car 1023.20
- 63. Some Ledgers Aren't Real Ledgers us.wf us.wf.bob us.wf.bob.car us.*
- 64. Questions?