The Lightning Network FAQ

[Pmalek]

...because if you open a channel directly to the grocery place, then your outgoing capacity is their incoming capacity. For that channel only.

So it would be no problem in that case,

So from your response, I can conclude that the grocery store would be able to receive Lightning payments as soon as the channel was opened. But I have to be the one who opens the channel, not them? Sending payments in the opposite direction would in this scenario not be possible. The grocery store can't send me anything, because "my bottle is full" and I first have to empty it by sending funds to them. Did I understand it correctly?

@Timelord2067
This is only a made-up scenario I though of. It didn't happen. I am just trying to figure out some specifics about the LN network. I found the part of the FAQ that mentioned that funds couldn't be accepted immediately with the opening of the channel unusual. 

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[LoyceV]

I can conclude that the grocery store would be able to receive Lightning payments as soon as the channel was opened.

Correct.

But I have to be the one who opens the channel, not them?

A channel gets funded when it gets opened, so it makes sense to be opened by the person who has to pay the other person.

Sending payments in the opposite direction would in this scenario not be possible. The grocery store can't send me anything, because "my bottle is full" and I first have to empty it by sending funds to them.

Correct. But as a customer buying groceries, that should be fine. If you're a supplier selling something to the store it's a different story.

However, if a supermarket accepts Bitcoin Lightning payments, they'll most likely use a payment processor to handle the transaction. So you can open a channel to any well-connected node, and the shop doesn't have to worry about anything.

[Pmalek]

A channel gets funded when it gets opened, so it makes sense to be opened by the person who has to pay the other person.

Yeah, that makes sense.

Correct. But as a customer buying groceries, that should be fine. If you're a supplier selling something to the store it's a different story.

In that scenario, they would have to be the the ones who open and fund the channel since they are paying and sending me Bitcoin.

However, if a supermarket accepts Bitcoin Lightning payments, they'll most likely use a payment processor to handle the transaction. So you can open a channel to any well-connected node, and the shop doesn't have to worry about anything.

You lost me here. How do I establish the connection to the grocery store in this scenario? I send LN payments to the node operator. The node operator opens a channel to the grocery store?

[Rath_]

You lost me here. How do I establish the connection to the grocery store in this scenario? I send LN payments to the node operator. The node operator opens a channel to the grocery store?

You could open a channel with either payment processor's node or any other well-connected node which would be able to route your payment. The routing fee should be negligible in the latter case. You wouldn't be able to connect directly to the grocery store since in this scenario, they would be using a third-party to handle your payment. Usually, payment processors offer a few different ways of withdrawing money, so the grocery wouldn't necessary need to use the Lightning Network at all.

[LoyceV]

How do I establish the connection to the grocery store in this scenario? I send LN payments to the node operator. The node operator opens a channel to the grocery store?

That's the "magic" of LN: the network finds a route to send your payment. As long as the node is connected to someone who (is connected to someone who) has a connection to the node you need, it should work. It sometimes fails though, but I assume that gets better over time.
If you haven't tried it yet, just try A custodial wallet is easiest though, and if you post a payment request for 100 sats, I'll fund it so you can send a few sats to a casino to test it.

[jackg]

How do I establish the connection to the grocery store in this scenario? I send LN payments to the node operator. The node operator opens a channel to the grocery store?

That's the "magic" of LN: the network finds a route to send your payment. As long as the node is connected to someone who (is connected to someone who) has a connection to the node you need, it should work. It sometimes fails though, but I assume that gets better over time.
If you haven't tried it yet, just try A custodial wallet is easiest though, and if you post a payment request for 100 sats, I'll fund it so you can send a few sats to a casino to test it.

I'm about to bump my testing thread in lending so I can help with this too if necessary.

You lost me here. How do I establish the connection to the grocery store in this scenario? I send LN payments to the node operator. The node operator opens a channel to the grocery store?

You could open a channel with either payment processor's node or any other well-connected node which would be able to route your payment. The routing fee should be negligible in the latter case. You wouldn't be able to connect directly to the grocery store since in this scenario, they would be using a third-party to handle your payment. Usually, payment processors offer a few different ways of withdrawing money, so the grocery wouldn't necessary need to use the Lightning Network at all.

I'm considering a payment processor might for close channels on the light Ing network too to maintain their funds so it might be interesting to see how that is dealt with (unless the funds get sent to another channel but thatight need inbound capacity - I say might because things might be changed and the ln is a decentralised protocol so they can change their own thing individually if it's just them connecting to them).

[Pmalek]

You could open a channel with either payment processor's node or any other well-connected node which would be able to route your payment. The routing fee should be negligible in the latter case. You wouldn't be able to connect directly to the grocery store since in this scenario, they would be using a third-party to handle your payment.

For the sake of simplicity, let's say they aren't using a third-party for their payment needs, and will keep the Bitcoin. I would then be able to make a direct connection with the grocery store without going to any other node?

If you haven't tried it yet, just try A custodial wallet is easiest though, and if you post a payment request for 100 sats, I'll fund it so you can send a few sats to a casino to test it.

I don't see any benefits in using LN one time only, or for testing purposes. It is good to test things to see how they work. But opening the channel requires a standard on-chain transaction with normal fees. Closing it as well. If I were to send multiple payments a day/week/month, it would make sense.

I understand that this is a a test you are suggesting. I am just saying that using LN for an one time thing doesn't save on fees or improves the speed of confirmation.

[LoyceV]

For the sake of simplicity, let's say they aren't using a third-party for their payment needs, and will keep the Bitcoin. I would then be able to make a direct connection with the grocery store without going to any other node?

Yes.
And if the grocery store's node is well-connected, you'll be able to pay your local bookstore too without opening another channel.

I am just saying that using LN for an one time thing doesn't save on fees or improves the speed of confirmation.

I think of LN as a Bitcoin niche market: it's still small, but has the potential to grow a lot. My one time testing lead to currently having several wallets installed, each with a few bucks worth of LN sats in there. Whenever a site (such as a webhost) accepts LN, I use it to help increase it's usage.

[Rath_]

I would then be able to make a direct connection with the grocery store without going to any other node?

That's correct.

I understand that this is a a test you are suggesting.. I am just saying that using LN for an one time thing doesn't save on fees or improves the speed of confirmation.

That's why Loyce suggested using a custodial wallet. BlueWallet doesn't require you to open your own channels. You can start receiving coins over the Lightning Network right after you create a wallet. You don't have to worry about inbound/outbound liquidity since it's managed by someone else.

[Timelord2067]

That's why Loyce suggested using a custodial wallet. BlueWallet doesn't require you to open your own channels. You can start receiving coins over the Lightning Network right after you create a wallet. You don't have to worry about inbound/outbound liquidity since it's managed by someone else.

Just ensure you write down the 24 word mnemonic seed passwords/phrase in a secure location when prompted to do so (and create an on-chain wallet first *and then* create a Lightning Wallet)

[LoyceV]

Just ensure you write down the 24 word mnemonic seed passwords/phrase in a secure location when prompted to do so (and create an on-chain wallet first *and then* create a Lightning Wallet)

In BlueWallet, you can create a LN wallet without creating an on-chain wallet. The LN-wallet uses a different backup system.

Here's a BlueWallet LN backup holding 100 sats:

Code:

lndhub://667c9c47fa0ac23c2844:11c65745b9b050dd731b

First one to restore this backup can move it to his own wallet.
Warning: don't use this wallet to receive funds, it's obviously compromised.

[Pmalek]

Snip

How is the connection strength and the connectivity measured? Are there stats that one could look at before deciding which route to take to make sure that the payment goes through? Apparently it can happen that a payment doesn't go through. Is there a reason it's made this way and not like regular Bitcoin transactions, where everyone can send to every other person on the world?

[LoyceV]

How is the connection strength and the connectivity measured? Are there stats that one could look at before deciding which route to take to make sure that the payment goes through?

I'm not sure.

Apparently it can happen that a payment doesn't go through. Is there a reason it's made this way

LN is a bit like a spoke-hub: instead of making a connection from anywhere to anywhere, everyone makes only a few connections.

and not like regular Bitcoin transactions, where everyone can send to every other person on the world?

That exists already You can of course just use a normal on-chain Bitcoin transaction.
The problem with this is scalability: currently every Bitcoin node sees all transactions. That works fine for a few transactions per second. LN will be able to handle much larger transaction volumes, without storing all transaction data on the blockchain forever.

[darosior]

LN is a bit like a spoke-hub: instead of making a connection from anywhere to anywhere, everyone makes only a few connections.

That's just plain wrong. The Lightning Network is completely distributed at its core.

It may be right for some services built on top of the Lightning Network, such as mobile wallet providers easing the flow by providing a gossip source or even a custodial wallet.
But that must not be assimilated to the Lightning Network as defined. There were some previous models based on an *actual* hub-and-spoke architecture for payment channels, and they are very different from the Lightning Network.

[Wind_FURY]

OK Lightning hobbyists/experts, teach us plebs the art of running a Lightning node, FOR PROFIT. Don't keep it to yourselves!

Make a simple guide for newbies?



https://twitter.com/alexbosworth/status/1318778737228349440

Today my nodes reached 0.21 BTC (currently $2,500) in routing fee earnings, on 83 (currently $1,000,000) of forwarded BTC.

[LoyceV]

LN is a bit like a spoke-hub: instead of making a connection from anywhere to anywhere, everyone makes only a few connections.

That's just plain wrong. The Lightning Network is completely distributed at its core.

But..... How far is the current Lightning Network from being completely distributed? I get that it's theoretically possible, just like it's possible to send a letter from A to B without using a centralized distribution center, but I'd expect a few large nodes to handle the majority of transactions because it's much more efficient that way.

https://twitter.com/alexbosworth/status/1318778737228349440

Today my nodes reached 0.21 BTC (currently $2,500) in routing fee earnings, on 83 (currently $1,000,000) of forwarded BTC.

That's 0.25% fee on average, not bad for small transactions (paying 5 sat to send 2000 sat), but if you're sending a few mBTC, on-chain fees can be lower already.

From what I've seen so far, this is much more likely:

Realistically I have earned 326 Satoshi over the last two years

[Wind_FURY]

LN is a bit like a spoke-hub: instead of making a connection from anywhere to anywhere, everyone makes only a few connections.

That's just plain wrong. The Lightning Network is completely distributed at its core.

But..... How far is the current Lightning Network from being completely distributed? I get that it's theoretically possible, just like it's possible to send a letter from A to B without using a centralized distribution center, but I'd expect a few large nodes to handle the majority of transactions because it's much more efficient that way.

Plus only a few large nodes can handle the costs, and handle the opportunity costs by earning them back in fees.

https://twitter.com/alexbosworth/status/1318778737228349440

Today my nodes reached 0.21 BTC (currently $2,500) in routing fee earnings, on 83 (currently $1,000,000) of forwarded BTC.

That's 0.25% fee on average, not bad for small transactions (paying 5 sat to send 2000 sat), but if you're sending a few mBTC, on-chain fees can be lower already.

From what I've seen so far, this is much more likely:

Realistically I have earned 326 Satoshi over the last two years

Then how did Alex Bosworth reach $2,500 in routing fee earnings?

I believe it was darosior who also said that he earns enough to pay for his monthly costs for running his node. What is the secret?

[Wind_FURY]

Then how did Alex Bosworth reach $2,500 in routing fee earnings?

That much should be obvious, he's CEO of https://yalls.org/, which sometimes used to try LN first time. Even myself have tried it previously, even though i use testnet edition few years ago.

Simply have lots of capital isn't enough, there should be reason why i should connect to your channel. People is more likely to create new channel when they pay for service or goods.

So simply, he's earning by leveraging his company, yalls.org, to have as much connections as it can? Why aren't exchanges starting to run/operate their own Lightning nodes? The incentive is there.

[LoyceV]

Why aren't exchanges starting to run/operate their own Lightning nodes? The incentive is there.

I don't think they care about earning 0.2 BTC in several months, or 0.25% on withdrawing small transactions (they earn much more from the common 0.5 mBTC withdrawal fee).

[DaveF]

Why aren't exchanges starting to run/operate their own Lightning nodes? The incentive is there.

I don't think they care about earning 0.2 BTC in several months, or 0.25% on withdrawing small transactions (they earn much more from the common 0.5 mBTC withdrawal fee).

And beyond that there will be time & infrastructure costs.
Unlike most of us, since they will be a bit more concerned with security (I hope...) their node is not going to be run on an RPi that was sitting around or a VM on a random desktop machine that has enough power to do it.
Going to need hardware, someone who knows what they are doing, redundancy, etc.

Going to be tough to justify the cost vs. profit.

-Dave