The Lightning Network FAQ

[Rath_]

I have updated the answer to the question about the earnings from payment routing with my quote from some other thread. Since it was in Bitcoin Discussion section, some of you might have missed it.

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.

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[Wind_FURY]

Does that support the theory that Lightning node operators who stake more of their capital in Lightning will charge more, not less, to route transactions?

Plus maintaining the node/rebalancing channels requires specialization. It's right that they charge more for providing efficiency, amd liquidity in LN.

[Rath_]

Does that support the theory that Lightning node operators who stake more of their capital in Lightning will charge more, not less, to route transactions?

I would say that large nodes are now experimenting with the fees to see how the settings can affect the number of routed payments and their earnings.

Plus maintaining the node/rebalancing channels requires specialization. It's right that they charge more for providing efficiency, amd liquidity in LN.

That's a good point. I did some calculations yesterday.

You're right. The LN fees for larger payments would be nowhere near subsatoshi level if all nodes charged 0.1%-0.25% per transaction. Longer routes would be completely cost-inefficient. I believe that there will be plenty of smaller nodes offering lower fees. Currently, most LN nodes route payments at the default settings. Here are some of my calculations. Assumptions: BTC price - $10.000, routed payment value - $30.

LN fee = basefee + (amount * feerate / 1000000)

Default settings:



Currently known LNbig.com settings:



In my opinion, 1200 sat for a $30 transaction is way too much. If such payment was divided into 4 equal parts and sent through 4 different paths consisting of "default nodes" then 1 hop would cost:



That is definitely more cost-efficient and I believe that's what is going to happen in the future to most payments. Some parts of the payments, will be sent through cheaper routes.

If the majority of the network ends up charging as much as LNbig.com or even more then the LN will be mostly known for instant and more anonymous small transactions. Do you think that a $0.12 fee for a $30 transaction being way too high is an over-exaggeration? Consider that there could be longer routes consisting of nodes with similar fee settings. Still, I do agree that nodes should earn more than they do by default, because they might need to rebalance their channels at some point. As far as I remember, someone proposed to increase the default fee settings (the basefee from 1 sat to 5 sat and the feerate from 1 to 500).

[Wind_FURY]

I believe exchanges might play a role, by staking their users' coins in exchange for "interest"? It is a path towards efficiency/lower fees.

[DaveF]

If the majority of the network ends up charging as much as LNbig.com or even more then the LN will be mostly known for instant and more anonymous small transactions. Do you think that a $0.12 fee for a $30 transaction being way too high is an over-exaggeration? Consider that there could be longer routes consisting of nodes with similar fee settings. Still, I do agree that nodes should earn more than they do by default, because they might need to rebalance their channels at some point. As far as I remember, someone proposed to increase the default fee settings (the basefee from 1 sat to 5 sat and the feerate from 1 to 500).

Makes you wonder if there are going to be two "types" of node connectivity.
One is going to be from larger nodes like lnbig.com to smaller nodes for general spending between people
The other is going to be to places like ln.pizza and bitrefill for people who are going to be spending it on "stuff".

Still have not finished resetting up my node due to lack of time but IIRC the few payments that did go through my node went to coingate and no place else.
A lot of people opened channels to me and I had a bunch that I opened but all the spending went though coingate even though there was enough liquidity in other ones for the amount. So I'm guessing that coingate was the final destination.

Can't prove that, just looks like it.

-Dave

[PrimeNumber7]

If the majority of the network ends up charging as much as LNbig.com or even more then the LN will be mostly known for instant and more anonymous small transactions. Do you think that a $0.12 fee for a $30 transaction being way too high is an over-exaggeration? Consider that there could be longer routes consisting of nodes with similar fee settings. Still, I do agree that nodes should earn more than they do by default, because they might need to rebalance their channels at some point. As far as I remember, someone proposed to increase the default fee settings (the basefee from 1 sat to 5 sat and the feerate from 1 to 500).

I would expect the LN fees (as set by the market) to be a function of among other things, the amount of traffic on the LN network.

LN nodes have fixed operating costs to keep the node running, and have the costs associated with opening, and closing their channels. The incremental operating costs associated with processing two LN transactions of approximately equal value, one in each direction of a channel would be very low. As transaction volume increases, node operators can lower their fees to operate on a profitable basis.

[Wind_FURY]

I believe it would depend on how much on-chain fees might be in any given time, lower fees, use on-chain transactions, higher fees, use Lightning, but should we hold Bitcoin in Lightning all the time?

The answer should be yes, IF everyone that accepts Bitcoin accept Lightning transactions.

[jackg]

Has everyone experienced a routing problem on here (when sending funds to toher peopel with only one or two channels open).

I have a channel open on my phone nad electrum and I think there's a connectivity issue betwen the two (I'll open up a channel to be with the same node to see if that's what's causing the problem but I'm not sure if it's a comonly experienced issue). I've been able to send from both to other sites...

(to clarify with electrum I did the copying of the invoice, right clicking and hitting "pay" I'm only partially stupid )

[darosior]

@jackg : a wild guess, but maybe incoming capacity issues ? If you were able to send from both channels, then both can presumably connect and discover routes correctly. If you opened the channels that may be the reason.

[Wind_FURY]

I believe post a list of ALL services available for the Lightning Network in the OP, BitCryptex? Plus easy solutions to get started, like BlueWallet. It might encourage users to actually try it.

[squatter]

Does anyone have thoughts on this recently published paper?

Flood & Loot: A Systemic Attack On The Lightning Network

One of the risks that was identified early on is that of a wide systemic attack on the protocol, in which an attacker triggers the closure of many Lightning channels at once. The resulting high volume of transactions in the blockchain will not allow for the proper settlement of all debts, and attackers may get away with stealing some funds.

This paper explores the details of such an attack and evaluates its cost and overall impact on Bitcoin and the Lightning Network. Specifically, we show that an attacker is able to simultaneously cause victim nodes to overload the Bitcoin blockchain with requests and to steal funds that were locked in channels.

We go on to examine the interaction of Lightning nodes with the fee estimation mechanism and show that the attacker can continuously lower the fee of transactions that will later be used by the victim in its attempts to recover funds - eventually reaching a state in which only low fractions of the block are available for lightning transactions. Our attack is made easier even further as the Lightning protocol allows the attacker to increase the fee offered by his own transactions.

We continue to empirically show that the vast majority of nodes agree to channel opening requests from unknown sources and are therefore susceptible to this attack.

How feasible is this attack, in practice? Will anchor outputs be sufficient to mitigate the threat?

[LoyceV]

Does anyone have thoughts on this recently published paper?

I read about it a few days back, and I haven't read the entire paper. But I'm surprised a single attacker can influence enough channels to flood the blockchain by closing them all. Even if the attacker can't steal your funds, it's just annoying to loose open channels and having to pay fees again to reopen them.

[DaveF]

Does anyone have thoughts on this recently published paper?

I read about it a few days back, and I haven't read the entire paper. But I'm surprised a single attacker can influence enough channels to flood the blockchain by closing them all. Even if the attacker can't steal your funds, it's just annoying to loose open channels and having to pay fees again to reopen them.

I has that issue at the beginning of the year:

https://bitcointalk.org/index.php?topic=5158920.msg53754232#msg53754232

Someone was opening really large channels (for the amount I had on my mode) to me.
I rebuilt my node (again) but, I have not funded it yet because I wanted to have enough BTC in it to open some large channels (large for me anyway) but when you think about it there is no real way for me to ask anyone if it's cool if I open a .25BTC channel to them. They might have just put the BTC in waiting for a friend to open a channel but I saw the capacity and jumped in before their friend got around to it.

-Dave

[PrimeNumber7]

Does anyone have thoughts on this recently published paper?

Flood & Loot: A Systemic Attack On The Lightning Network

There are a few things that can be done to mitigate this kind of attack.

Force channels to have a minimum amount of value on each side. For example if each side of a channel always has at least 10% of the total channel value, the cost of attempting to execute this attack might be higher than acceptable for someone to try.

Increase the complexity of the time lock. LN closing transactions could have a special flag, and if the percentage of transactions included in a block include this flag, the block must have a flag to be valid. The time lock for the second closing transaction on a LN channel could be such that it can only be confirmed once xx blocks without said flag. The purpose of this is to allow LN node operators more time to claim coin in closing transactions if blocks are full of closing transactions.

[Rath_]

I believe post a list of ALL services available for the Lightning Network in the OP, BitCryptex?

Keeping such a list up-to-date would be a pain. I have already linked a website which does it.

When will merchants start accepting Lightning Network payments?

[...] Here you can find a list of merchants who accept LN payments.

Plus easy solutions to get started, like BlueWallet. It might encourage users to actually try it.

A few days ago, I wrote a short walkthrough of the Lightning Network support in the recent Electrum update. I will add it later to the first post. Did you mean a list of easy to use LN wallets or step-by-step guides for the most popular software?

[Wind_FURY]

I believe post a list of ALL services available for the Lightning Network in the OP, BitCryptex?

Keeping such a list up-to-date would be a pain. I have already linked a website which does it.

When will merchants start accepting Lightning Network payments?

[...] Here you can find a list of merchants who accept LN payments.

Everything in the list was mostly gambling sites except, https://bitcoinadultstore.com

The have quite a selection.

Plus easy solutions to get started, like BlueWallet. It might encourage users to actually try it.

A few days ago, I wrote a short walkthrough of the Lightning Network support in the recent Electrum update. I will add it later to the first post. Did you mean a list of easy to use LN wallets or step-by-step guides for the most popular software?

Different easy-to-use Lightning wallet suggestions that newbies could try, but your walkthrough for Electrum LN is solid gold. Thank you!

[cryptomaniac_xxx]

There is a latest Zap Lightning wallet release including Multipart Payments.

Zap 0.7.0 Beta

@mrfelton mrfelton released this 17 hours ago
Release notes

This release contains several new features including support for lnd v0.10, keysend, multi part payment, payment probes, Tor and more. As usual, this release also contains a number of optimisations and bug fixes.

https://github.com/LN-Zap/zap-desktop/releases/tag/v0.7.0-beta

Notes to help verify the signature,

https://github.com/LN-Zap/zap-desktop/blob/master/docs/SIGNATURES.md

[DaveF]

With the usual I know I should ask on github but has anyone screwed up and paid an invoice to themselves and just had the funds disappear?
I was sending out some money and sending out some payment requests and I copy / pasted my payment request instead of the one I wanted to, and it looks like I sent the money nowhere.
Using LND / RTL

Odd, but before I dig deeper I figured I would ask here.

-Dave

[jackg]

With the usual I know I should ask on github but has anyone screwed up and paid an invoice to themselves and just had the funds disappear?
I was sending out some money and sending out some payment requests and I copy / pasted my payment request instead of the one I wanted to, and it looks like I sent the money nowhere.
Using LND / RTL

Odd, but before I dig deeper I figured I would ask here.

-Dave

I get an error in eclare when trying to do it so it might be a problem - otherwise surely itd just say it went through and pay itself.

Does lnd show the funds as gone though? If you know the host of the other node you could ask them to send the same amount to themselves as it could be in the ct on their side.

[DaveF]

With the usual I know I should ask on github but has anyone screwed up and paid an invoice to themselves and just had the funds disappear?
I was sending out some money and sending out some payment requests and I copy / pasted my payment request instead of the one I wanted to, and it looks like I sent the money nowhere.
Using LND / RTL

Odd, but before I dig deeper I figured I would ask here.

-Dave

I get an error in eclare when trying to do it so it might be a problem - otherwise surely itd just say it went through and pay itself.

Does lnd show the funds as gone though? If you know the host of the other node you could ask them to send the same amount to themselves as it could be in the ct on their side.

Update: All is good. BTC never left my node and there was an error thrown. However, for some reason RTL did not show or see the error.
Going to get off my ass this week and update the entire node and see if it still happens. I thought I was on later versions but I guess I have not updated the daily use node for a while. The ones I play with for testing are fully updated, this one I did not.

-Dave