Some questions about the Lightning Network

[miguelmorales85]

I have found a series of question on reddit about the Lightning Network and I found out they were the same doubts I have about it.

The source link to the question is here:
https://www.reddit.com/r/lightningnetwork/comments/6uo5ck/lightning_network_noob_questions/

I wonder if someone has an answer to all (or some) of them:

I want to start a LN node, what are the requirements?
- Will my coins be tied up while a channel is open?
- How many coins will I need to have? the more the better?
- How will users find my node?
- How will they decide to use my node or not?
- If I'm the only node in my area, are my chances of being used higher?
- How will fees actually be calculated?
- If nodes set their own fees, will it be a race to the bottom (fee-wise) for competing nodes?

Thanks in advance guys.

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[achow101]

- Will my coins be tied up while a channel is open?

Any coins you use to fund the channel with and that you receive while the channel is still open will be "locked" to that channel. However you can still pay other people by routing payments through other open payment channels that people have with each other, hence it is called the Lightning Network.

- How many coins will I need to have? the more the better?

You can have 0 coins and have the other person in the channel fund the channel. This means that they are paying you, and if you have to pay them, you can only do so after they have paid you.

- How will users find my node?
- How will they decide to use my node or not?

There is a peer discovery mechanism described here: https://github.com/lightningnetwork/lightning-rfc/blob/master/07-routing-gossip.md

- If I'm the only node in my area, are my chances of being used higher?

Peer selection is done by IP address and presumably uptime just like how Bitcoin peer selection is done. Physical location does not matter.

- How will fees actually be calculated?

Fees are only used for HTLCs for routing payments. IIRC they are negotiated by the nodes participating in the routing of a payment and are set by the nodes themselves

- If nodes set their own fees, will it be a race to the bottom (fee-wise) for competing nodes?

Probably.

[aleksej996]

I assume that people would prefer to choose their nodes manually, so they can connect to people they often pay them or receive coins from them. This would decrease the route and therefor the fees and possibly speed, not that the speed won't be negligible.

[miguelmorales85]

- Will my coins be tied up while a channel is open?

Any coins you use to fund the channel with and that you receive while the channel is still open will be "locked" to that channel. However you can still pay other people by routing payments through other open payment channels that people have with each other, hence it is called the Lightning Network.

- How many coins will I need to have? the more the better?

You can have 0 coins and have the other person in the channel fund the channel. This means that they are paying you, and if you have to pay them, you can only do so after they have paid you.

- How will users find my node?
- How will they decide to use my node or not?

There is a peer discovery mechanism described here: https://github.com/lightningnetwork/lightning-rfc/blob/master/07-routing-gossip.md

- If I'm the only node in my area, are my chances of being used higher?

Peer selection is done by IP address and presumably uptime just like how Bitcoin peer selection is done. Physical location does not matter.

- How will fees actually be calculated?

Fees are only used for HTLCs for routing payments. IIRC they are negotiated by the nodes participating in the routing of a payment and are set by the nodes themselves

- If nodes set their own fees, will it be a race to the bottom (fee-wise) for competing nodes?

Probably.

Thank you for the answers, you really are an expert in the matter and I find you always willing to help us noobs. I have publish the answer in the reddit forum they came from, maybe there are more visibility to he Lightning Network.

I have a personal question about the Lightning Network:
Could it be possible to set up a LN node and earn satoshis just putting some BTC available to others to create payment channels or these channels are just for those involved in the transactions (Bob and Alice)? Sorry if you have explained this in other post.

peace

[achow101]

I have a personal question about the Lightning Network:
Could it be possible to set up a LN node and earn satoshis just putting some BTC available to others to create payment channels or these channels are just for those involved in the transactions (Bob and Alice)? Sorry if you have explained this in other post.

Yes, that is certainly possible.

[LoyceV]

Could it be possible to set up a LN node and earn satoshis just putting some BTC available to others to create payment channels or these channels are just for those involved in the transactions (Bob and Alice)?

I've been wondering about something related for a while now: as far as I understand LN, a payment can go through different payment channels to connect Bob and Alice. That means several people are involved. What if one person decides to close a channel, even though it will cost him money? Does that mean all connected channels also have to close?
If that's the case, can a malicious user join an existing payment channel with the sole purpose to close all connected channels? This spam would mean all participants in those channels have to pay a transaction fee again for an on-chain transaction to join another payment channel. Unless there's already something in place to prevent this from happening, an attacker could abuse this.

[achow101]

I've been wondering about something related for a while now: as far as I understand LN, a payment can go through different payment channels to connect Bob and Alice. That means several people are involved. What if one person decides to close a channel, even though it will cost him money? Does that mean all connected channels also have to close?

No. Payments are not dependent on channels remaining open after the payment has completed (i.e. the HTLCs have been fulfilled).

[LoyceV]

I've been wondering about something related for a while now: as far as I understand LN, a payment can go through different payment channels to connect Bob and Alice. That means several people are involved. What if one person decides to close a channel, even though it will cost him money? Does that mean all connected channels also have to close?

No. Payments are not dependent on channels remaining open after the payment has completed (i.e. the HTLCs^* have been fulfilled).

I think you misunderstood me: I know the payments are safe, but the channel has to close. If the users want to continue using it, they'll need to open another channel, making on-chain transactions with on-chain fees to do so.

^*Hashed Timelock Contracts (wiki)

[achow101]

I've been wondering about something related for a while now: as far as I understand LN, a payment can go through different payment channels to connect Bob and Alice. That means several people are involved. What if one person decides to close a channel, even though it will cost him money? Does that mean all connected channels also have to close?

No. Payments are not dependent on channels remaining open after the payment has completed (i.e. the HTLCs^* have been fulfilled).

I think you misunderstood me: I know the payments are safe, but the channel has to close. If the users want to continue using it, they'll need to open another channel, making on-chain transactions with on-chain fees to do so.

^*Hashed Timelock Contracts (wiki)

Payments to one person do not necessarily have to follow the same route. A different route can be chosen to route around the fact that someone has closed a channel. One person closing a channel in the route just means that that route can no longer be used. All of the other channels in that route can remain open.