The Lightning Network FAQ

[LoyceV]

Also LN related to above I can't envisage rocking up to a coffee shop and creating a channel to said shop to then buy a cup of Joe (giving the shop a small amount of inbound and outbound capacity) - unless of course you were planing on being a regular customer as confirmation time to open a channel will be an initial issue.

Makes me wonder how many customers would be willing to pay 10 or 100 cups of coffee up front to fund their channel. I don't expect direct channels (where you don't pay any routing fees) to become a big thing.

[gmaxwell]

Makes me wonder how many customers would be willing to pay 10 or 100 cups of coffee up front to fund their channel. I don't expect direct channels (where you don't pay any routing fees) to become a big thing.

They wouldn't open a direct channel because they can pay via existing channels... but it should be emphasized that funds in a channel aren't "paid".  If they create a channel to the coffee shop with 100 cups of coffee worth of funds, they can use those funds for whatever still.  They can close the channel to move the funds offline or they can pay payments to other people using those funds, routing across the coffee shop.

[GGUL]

Makes me wonder how many customers would be willing to pay 10 or 100 cups of coffee up front to fund their channel. I don't expect direct channels (where you don't pay any routing fees) to become a big thing.

Correct thinking. Just by thinking about it for a while, you can understand that neither the buyer nor the seller can benefit from creating a direct channel between them.
It is profitable for the buyer to make 1 channel to a large reliable node that has channels to other large nodes. This makes it possible to use LN for purchases from any seller.
It is also profitable for the seller to make  1 thick  channel with a large node in order to receive payments from all buyers through it, and use the amount collected inside the channel for their purchases or for selling on the exchange.

[Timelord2067]

Makes me wonder how many customers would be willing to pay 10 or 100 cups of coffee up front to fund their channel. I don't expect direct channels (where you don't pay any routing fees) to become a big thing.

They wouldn't open a direct channel because they can pay via existing channels... but it should be emphasized that funds in a channel aren't "paid".  If they create a channel to the coffee shop with 100 cups of coffee worth of funds, they can use those funds for whatever still.  They can close the channel to move the funds offline or they can pay payments to other people using those funds, routing across the coffee shop.

I totally agree with this, however, it could be assumed that the new user who only has one active channel (to the coffee shop) is probably going to *just* be buying a coffee and bagel a dozen times with what they opened the channel with.  They *might* open a second channel once the first is empty/near empty, which would then give them inbound+outbound on their portable device via two channels.

[Wind_FURY]

"profit" is a canard imo.

With Lightning, you have access to cheap, anonymous transactions. If you break even on routing fees, that's a pretty good outcome.

LN routing supply is market driven, because it's an open competition. Therefore, you can expect some people to take the competing part seriously, and so try to be better at routing than others. The key point is that this cannot lead to monopolization while the ability to compete remains open, and so fees will be pushed as low as routing nodes can tolerate. I expect many will figure out some way to run at a marginal loss, and recoup the costs some other way (e.g. miners/pools are well positioned to run loss-making LN nodes, as they're the ones confirming the open/close transactions on chain in the first instance).

For the sake of debate. Don't you believe that those two, "profit as a canard", and "taking the competing part seriously" are contradictory?

Plus consider that LN routing supply is limited by the capital one holds. It has to be for profit to grow capital, and compete more effectively.

[Carlton Banks]

For the sake of debate. Don't you believe that those two, "profit as a canard", and "taking the competing part seriously" are contradictory?

yes, but that didn't stop you and DaveF lamenting the fact that profit is a canard up-thread, made more painful by clinging to the possibility that you could compete seriously

I've said it before, but I'll say it again: the market dynamics of the LN are an absolute race to the bottom: if anyone tries to charge higher fees than their operating costs, some upstart will try to undercut them, in the belief that they can push their competitor/s out of the marketplace by running at a loss "short term". This will probably be a mistake, but it won't stop them trying. When everyone wants to participate (because fast cheap transactions), there will always be transactions to route, and always a procession of people thinking they can use routing as a way to earn income... and people with alot of BTC in channels that want to troll such profit-seekers by undermining their ability to make any money. Thusly, the margins are cut to nothing, and the balance of routing rewards trends to zero.

Sorry to burst the bubble, but I think that secretly, you already knew. Really though, what's not to like?

[DaveF]

For the sake of debate. Don't you believe that those two, "profit as a canard", and "taking the competing part seriously" are contradictory?

yes, but that didn't stop you and DaveF lamenting the fact that profit is a canard up-thread, made more painful by clinging to the possibility that you could compete seriously

Don't drag me into this about profit.
I don't run any of my nodes expecting a profit.

I just pointed out the fact that since there is no profit to be made that people are not going to treat it like a business.

I pulled my funds from all my nodes without a thought because I wanted to spend the BTC on something else. And since there is no real profit to me made, it was just easier for me to do that then pulling from cold storage.

bitrefill / ln.pizza / etc. they are businesses and run their LN nodes as such.
99% of everyone here is an enthusiast / hobbyist / tech nerd and run their nodes as such.

Case in point. As of now I am going to refill one of my nodes. On chain fees are above 50 sat/vB
Guess what, I am not going to start to refill till they drop a bit over the weekend.

A business can't play that game if they have to move on chain funds to open / close / do something else with a channel. They eat the fee and open it now.

-Dave

[Timelord2067]

...

Hi, I can still do top up's of your LN by sending funds from my Eclair wallet if you would like to send back via on-chain 1:1 - the only thing I ask is that you pay your own on-chain TX fees (this would enable you to make just one on-chain TX but top up multiple LN)

I'll be back on in about ten - twelve hours.

[Wind_FURY]

For the sake of debate. Don't you believe that those two, "profit as a canard", and "taking the competing part seriously" are contradictory?

yes, but that didn't stop you and DaveF lamenting the fact that profit is a canard up-thread, made more painful by clinging to the possibility that you could compete seriously

I've said it before, but I'll say it again: the market dynamics of the LN are an absolute race to the bottom: if anyone tries to charge higher fees than their operating costs, some upstart will try to undercut them, in the belief that they can push their competitor/s out of the marketplace by running at a loss "short term". This will probably be a mistake, but it won't stop them trying. When everyone wants to participate (because fast cheap transactions), there will always be transactions to route, and always a procession of people thinking they can use routing as a way to earn income... and people with alot of BTC in channels that want to troll such profit-seekers by undermining their ability to make any money. Thusly, the margins are cut to nothing, and the balance of routing rewards trends to zero.

Sorry to burst the bubble, but I think that secretly, you already knew. Really though, what's not to like?

There wasn't a "bubble" bursted, but I am always open to new possbilities, and new theories, regarding the fee-market in LN.

I believe the "race to the bottom" hypothesis holds IF capital is unlimited, and if there wasn't an opportunity cost.

For the sake of debate. Don't you believe that those two, "profit as a canard", and "taking the competing part seriously" are contradictory?

yes, but that didn't stop you and DaveF lamenting the fact that profit is a canard up-thread, made more painful by clinging to the possibility that you could compete seriously

I pulled my funds from all my nodes without a thought because I wanted to spend the BTC on something else. And since there is no real profit to me made, it was just easier for me to do that then pulling from cold storage.

OR invest in something else that could profit more. Opportunity cost.

Would you have pulled funds from all your nodes if you were making profit?

[DaveF]

OR invest in something else that could profit more. Opportunity cost.

Would you have pulled funds from all your nodes if you were making profit?

Opportunity cost is a tough one to call. Would depend on many factors.

If there were making a profit, depends on the amount.
I moved ~$400 out of LN. So if I was making $0.25 a day, probably yeah still would have.
$2. a day would have to think about it.
Some where in between would depend on many factors.

But LN nodes with that little amount of BTC don't make that much money so it's kind of a moot point.
I put myself in the tech nerd side. So I run them for fun. And are operated a such. A few satoshi here or there that they throw off are a bonus.

-Dave

[Carlton Banks]

I believe the "race to the bottom" hypothesis holds IF capital is unlimited, and if there wasn't an opportunity cost.

neither of those things matter, that's like saying "people avoid keeping cash in their pockets when they leave the house, because they could've invested it better and made more money"

people selling newspapers in kiosks don't accept ACH transactions from your savings account, because it's inconvenient.

Lightning is about convenience of use, not optimum investing.


and so, if this means big nodes can't ever make money, and the LN will just be like the cash system (people transferring around everything from their weekly takings, down to the pennies lost under their couches), again, what's not to like?

[PrimeNumber7]

I believe the "race to the bottom" hypothesis holds IF capital is unlimited, and if there wasn't an opportunity cost.

neither of those things matter, that's like saying "people avoid keeping cash in their pockets when they leave the house, because they could've invested it better and made more money"

people selling newspapers in kiosks don't accept ACH transactions from your savings account, because it's inconvenient.

Lightning is about convenience of use, not optimum investing.


and so, if this means big nodes can't ever make money, and the LN will just be like the cash system (people transferring around everything from their weekly takings, down to the pennies lost under their couches), again, what's not to like?

People will typically carry around modest amounts of money in their pockets, and not significantly more than they expect to need. One reason for this is the risk they will lose some or all their money.

I believe the same principle applies to LN node operators. There is not a zero risk of running a LN node. The risks are similar to having a hot wallet on their computer. Many businesses and bitcoin holders will keep their coin on an offline wallet, sacrificing convenience for security.

[DaveF]

and so, if this means big nodes can't ever make money, and the LN will just be like the cash system (people transferring around everything from their weekly takings, down to the pennies lost under their couches), again, what's not to like?

With multi-path payments working, it's not as big a deal as it was.
But still, you don't want to rely on people providing a free service so others can make payments.

In an ideal world yes, but here in the real world businesses want to make money.

Do you really not want to have any large hubs with a large amount of liquidity?

As I said a few posts up, I don't think most people here really care about making any money.
But for a commercial business to tie up funds without the potential for some profit, it's going to be a tough sell.

-Dave

[Wind_FURY]

I believe the "race to the bottom" hypothesis holds IF capital is unlimited, and if there wasn't an opportunity cost.

neither of those things matter, that's like saying "people avoid keeping cash in their pockets when they leave the house, because they could've invested it better and made more money"

people selling newspapers in kiosks don't accept ACH transactions from your savings account, because it's inconvenient.

Lightning is about convenience of use, not optimum investing.

From our standpoint, yes. But from a serious long term LN node maintainer's standpoint, it might be different.

and so, if this means big nodes can't ever make money, and the LN will just be like the cash system (people transferring around everything from their weekly takings, down to the pennies lost under their couches), again, what's not to like?

That wasn't the point. The point is about limited capital, labor and specialization, and about a natural gravitation towards a practical incentives structure to maintain the network.

[DaveF]

Question that has probably been answered before someplace I just can't find it.
Is there a way to know what the minimum a peers wants to open a channel with, without trying to open a channel 1st.
I want to query what their minimum and get an answer without attempting to open a channel.

Reason: I have a node with 0 funds in it available, I have several channels open already and want to open another. I don't want to send .005 to it to then find out that they want a minimum of .01. That's just a waste of TX fees. I also don't want to send .025 if they are happy with .02 since that just means I am going to be leaving BTC just sitting on my node.

And with no funds LND will not even let you try to open a channel.

-Dave

[Wind_FURY]

Can anyone give the explanation on why, and how the Lightning Network can decimal places from sats to millisats again? It's disinformation campaign by flat-Earthers and trolls again. They probably know newbies are lurking.

I shall use every opportunity to say NO, and give the right information out.

[DaveF]

Can anyone give the explanation on why, and how the Lightning Network can decimal places from sats to millisats again? It's disinformation campaign by flat-Earthers and trolls again. They probably know newbies are lurking.

I shall use every opportunity to say NO, and give the right information out.

Not sure what you are asking.
Between nodes that have channels between them keep accounting records down to millisats.
When closing the channels back to onchain funds they go away. You really can't trust they will exist "in the real world"

If BTC goes to a very high number, then it might matter. For now the value between $0.0001948 and $0.0000001948 is not worth the bother to deal with.

-Dave

[Rath_]

Shouldn't it be simple rounding (with satoshi unit) when the channel is closed? One's balance will pass through ceil function and another one will pass floor function.

It is as simple as that. All outputs of a commitment transaction are rounded down to whole satoshis, though (source).

[Wind_FURY]

Can anyone give the explanation on why, and how the Lightning Network can decimal places from sats to millisats again? It's disinformation campaign by flat-Earthers and trolls again. They probably know newbies are lurking.

I shall use every opportunity to say NO, and give the right information out.

Not sure what you are asking.

A simple explanation. franky1 is gaslighting everyone again that, "because of msats, which doesn't exist onchain, then LN transactions are made of tokens issued/IOUs".

Between nodes that have channels between them keep accounting records down to millisats.
When closing the channels back to onchain funds they go away. You really can't trust they will exist "in the real world"

Thank you. It's just a matter of record keeping offchain?

[Rath_]

It's just a matter of record keeping offchain?

For the time being, yes. There will be no need for rounding down millisatoshis on channel closure once we increase the number of decimal places on-chain. It is bound to happen some day.

Honestly it's bit odd that all outputs are rounded down rather than one is rounded up and the other one is rounded down.

I am quite sure I have read an explanation for this. I will try to find it.