This thread is now self-moderated. The previous one got derailed. Please, don't discuss here whether or not the Lightning Network is a good scaling solution.If you don't know anything about the Lightning Network, consider reading "Basics of The Lightning Network" first.Table of contents 1.
General Information 2.
Running a node 3.
ConcernsGeneral InformationHow are bitcoins on the Lightning Network different from on-chain bitcoins?They are exactly the same coins. There are no Lightning Network tokens. The only difference is that bitcoins are stored in multi-signature addresses and transactions are settled between two parties without broadcasting anything to the blockchain (except when opening and closing the channel).
When will merchants start accepting Lightning Network payments?More and more merchants start accepting Lightning Network payments. The most popular payment gateaway - BitPay does not accept Lightning Network payments and is very unlike to introduce them anytime soon.
Here you can find a list of merchants who accept LN payments.
How many times can we expect to be able to use a payment channel?Every channel has a minimum amount of coins which has to stay unspent. Channels can be used as long as both parties continue to cooperate with each other. Channels do not have any use limit.
How fast and reliable are Lightning Network payments?Depending on the route, Lightning Network payments can be instant. Every wallet tries to find the cheapest and the shortest route when you attempt to send a transaction. You can open a channel directly to a person who you are going to often trade with or depend on other channels which can route your payment for a small fee (usually under 1 satoshi). Lightning Network payments fail from time to time due to no route to the destination node or too high payment amount (not enough liquidity). The latter problem is mitigated by splitting the transaction into multiple smaller payments routed via different channels.
What are the upcoming features?Dual funded channels - both parties will be able to fund a channel.
Splicing-In & Out - it will be possible to add and remove funds from existing Lightning Network channels without having to close them.
Channel factories- existing Lightning Network channels could be used for creating new channels without broadcasting anything to the rest of the Bitcoin network. Normally, a channel is opened to only one person. In channel factories, we have multiple people forming a group. Group members maintain channels between themselves. More interested users = higher savings. If one of the participants is uncooperative, existing channels are not affected - new channels can't be created, though.
Where can I find the latest news regarding the Lightning Network?Telegram channel,
Bitcoin Lightning,
Cointelegraph,
1ml.com (Lightning Network Explorer),
Lightning Labs blog.
Which wallet is the best one?There are multiple implementations of the Lightning Network and most wallets have similar features. Eclair Mobile is the most popular wallet for
Android but it is also available
on Windows. The most popular implementations are:
c-lightning,
LND and
eclair.
Running a nodeHow much money can you make on running a Lightning Network node?In order to start making money on running a node, you have to open a few channels and encourage others to open a channel back. Keep in mind that built-in autopilot might not guarantee you the best connections. Don’t expect to make a lot of money. Everything depends on the number of connections and your fee policy. The less you charge, the higher your chances to route a payment are. Don’t set the fee too low. You have to save up money for future channel re-balancing.
User Xian01 opened almost 200 channels and earned barely 15 satoshis after 2 weeks (
Reference). Here's more detailed and recent data:
The data from my post mentioned by Rizzrack is not really relevant; I should change that answer. Take
this article from 2018 as an example for that year.
There are currently 25 nodes owned by LNbig.com. They provide about 52,19% (497,2647581 BTC out of 952,86 BTC) of the whole network's liquidity. I can't find any data on their recent earnings, but their
Twitter account shares the amount of transactions and BTC passed through their nodes in the last 24 hours from time to time. You can clearly see the surge of the transactions in the last few months. Starting from 100-800 transactions in March and going to over 4000 in May. That is a huge change.
I have tried to calculate the possible earnings using the fee formula (basefee + (amount * feerate / 1000000) and the data from
this tweet, but my results were far too off.
The
3rd March seems to have been the most profitable day. 161 routed transactions worth 2.24602985 BTC paid in total 219484 sat (0.00219484 BTC) in fees. At the current price of Bitcoin ($9300), it is about $20! Still, don't forget about the amount of coins locked up in all the nodes and the cost of opening transaction all channels.
The
24th January is even more impressive to me. 186 routed transactions worth 0.60161437 BTC paid in total 172378 sat (0.00172378 BTC) in fees. It is about $16 now.
Alex Bosworth
shared that his node charged 0.25% per transaction and routed about $10,000/month which translates to earnings of about $25/month. He didn't say which node he was referring to, but since he is the CEO of yalls.org, we can assume that it was
this one. That is actually interesting because of the significantly smaller capital.
Coming back to earth, you are not going to earn much if your node doesn't provide enough liquidity. However, it is also worth mentioning that multipart payments are now available in all implementations. Once more wallets start supporting them, the earnings of well-connected, small nodes might increase.
Note: Keep in mind that 952,86 BTC is the amount of the funds locked up in public channels. Private channels are... private so we don't know how many of them exactly there are and what is their balance (
although that might not be the case [5.4.2]). Such channels do not route any payments.
Fees earned from routed payments are added to the balance of the channel. The total fee charged is basefee + (amount * feerate / 1000000), where amount is the forwarded amount. If you set both of these values too high, you won't route any payments.
Is running a Lightning Network node demanding?You can run a Lightning Network node on both Linux and Windows. Even Raspberry Pi 3 B+ is capable of running a Lightning Network node. Check out
RaspiBlitz for fast setup.
Is there any risk in running a Lightning Network node?Yes, due to many factors. Lightning Network implementations are still in beta and might contain critical bugs which could be used to steal funds locked up in channels. Keep in mind that if you won't keep your node online 24/7, someone can attempt to cheat you by broadcasting an old state of your channel. An online node would normally broadcast a penalty transaction. This can be mitigated by using watchtowers.
Keep in mind that you have to keep your coins in a hot wallet which increases the risk of coins theft.
Does opening new channels help to increase the earnings?No, it doesn't. There are many other things that you should take into account. Your fee policy, channels' capacity, connection to differently sized nodes.
Here you can find an interesting comparison between Andreas Brekken's and Alex Bosworth's nodes. The node which had lower principal, made higher profit.
Do I have to run a full Bitcoin node?No, LND supports
neutrino; c-lightning allows using a pruned node. Eclair users are out of luck. Mobile clients obviously do not need you to run a Bitcoin node.
How do I set up a Lightning Network node?The setup process varies for each implementation. Fortunately, detailed documentation makes it easy for inexperienced users to start their own Lightning Network node even on Linux. If you don't feel confident with any other operating system than Windows then take a look at
this tutorial which will help to set up your own node.
What is the purpose of setting alias and color?This information is often used by
Lightning Network visualisers and explorers. It is not very important and has no impact on how the node works.
Do I have to generate an invoice every time I want someone to send me coins over the Lightning Network?No, invoiceless Lightning Network payments are supported by LND and c-lightning. Most wallets do not support this feature, yet.
Can I refill my channel?Currently, there is no way to refill channels without using third party services such as
Lightning Conductor. Splicing will allow users to either top-up their channels or drain funds from them without having to reopen the channel. Channel balance will be updated once the transaction gets enough confirmations.
Why can't I receive coins?In order to receive Lightning payments, some conditions must be met:
1. Nothing can be received immediately after creating a new payment channel, as ‘room’ for incoming funds has to be made by spending some funds first. A payment channel can be thought of as a full bottle of water: in order to pour something in one first has to pour something out.
2. Each channel implicitly contains a reserve which is unspendable and typically takes about 2% of the channel’s capacity. You must spend an amount matching that reserve to make receiving possible. Unspendable channel reserve is the reason you see a negative receive limit when a new channel is full. It indicates how much you need to spend before anything can be received through the channel.
3. Every payment request is disposable, they can’t be fulfilled twice. So you will need to issue a new individual payment request for every incoming payment you wish to receive.
4. Wallet needs to be online in order to receive off-chain funds.
Note that not every mobile wallet supports receiving coins because of the fourth point. There are some exceptions such as Bitcoin Lightning Wallet (Android), Eclair Mobile (Android).
How is the balance settled for values under 1 satoshi?Example: let's assume that after deducting the fee of the closing transaction, node A is supposed to get 6049.4 sat and node B 10300.6 satoshis. Since Bitcoin blockchain supports only up to 8 decimals, we have to do something about milisatoshis. All such values are rounded down and the remaining 1 satoshi is added to the transaction fee.
It is also worth mentioning that if one of the parties' balance is under
dust limit, it is added to the fee instead.
ConcernsIs Lightning Network centralized? Is it more centralized than Bitcoin? Does it make Bitcoin more centralized?This topic has been brought up many times. The Lightning Network is a second layer scaling solution which has no impact on the Bitcoin network. It works independently and no one is forced to use it. The problem of large nodes should solve itself once network continues to grow.
Will casual users be able to accept payments and donations without having to run their own full node 24/7?Both
OpenNode (payment gateway) and
Bitlum.io allow users to receive Lightning Network payments without having to run a full node. However, these wallets are custodial which means that they have a full control of one's funds.
What are the new limitations of scalability once lightning is fully functional?Opening and closing a channel requires broadcasting a Bitcoin on-chain transaction. Increasing the blocksize might be necessary in the future; however, solutions like SegWit, Schnorr signatures can help to decrease the size of transactions. Lightning Network is a second layer protocol, it is possible to build more user-friendly layers on top of it.
What would happen if a large node disappeared from the network?Recently, we were able to observe Andreas Brekken’s experiment (shitcoin.com node). He was in charge of a node whose capacity was around 43 BTC (more than 50% of the whole network’s capacity!). After its closure, some people started to experience routing problems.
Is Lightning Network more anonymous than on-chain transactions?Lightning Network increases the level of privacy. The next node in the path doesn’t know if the previous one initiated the transaction. Every node which routes the payment doesn’t know the details of the transaction (final destination, sender). Multipart payments help to hide the total amount of coins sent.
What happens if some nodes go temporarily offline?This problem has already been addressed. When a channel is being closed or any of the node's peers has gone offline, the rest of the network is informed that they are incapable of routing payments. It is also possible to create unadvertised (private) channels which won't route payments. They are widely used by mobile wallets.
What discourages from running big nodes and overtaking the network?Large nodes could be targetted by hackers since the funds are stored in a hot wallet. Since multipart payments are already available, having large channels might not be worth it in the long run. Connectivity might be more important.
