Lightning Network Observer

[Rath_]

We could see if ndalliard is up for making a little triangle...

That's an interesting idea. I will message him in a moment.

If we set to zero fees we effectively add ALL of each other's peer channels with a zero cost single hop to them.

Sounds good. I have already set my base fee for all channels to zero and I have just dropped my feerate to zero in my channel with him. I was planning to do it anyway but RTL does not let users to set the PPM parameter below one for some reason, so I had to do it manually via a command.

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[n0nce]

You guys are having fun! I will share my node ID as well once I've got the new node up.
Decided to give c-lightning another go, without nodeJS plugins - if needed, going to write my own plugins and stuff like that.

[Rath_]

Decided to give c-lightning another go, without nodeJS plugins - if needed, going to write my own plugins and stuff like that.

We can open a dual-funded channel once you have set up your node. If you don't want to use experimental features on the mainnet then that's fine. We can figure out something else.

[ndalliard]

We could see if ndalliard is up for making a little triangle...


         ndalliard
            /\
          /    \
        /        \
 Rath --------cAPS

If we set to zero fees we effectively add ALL of each other's peer channels with a zero cost single hop to them.    

hmm, to be honest i still have to read about the #zerobasefee and you are now proposing to add both fees to zero?

i've already a channel open to rath, that means rath would open one to caps and caps one to me?

also, at the moment for example the balance of the channel from rath and me is on his side, so i've set the fees a little bit higher to discourage the usage of the channel from my side, cause no one can use it anyway from my side. i am not sure if i would like to set it to zero if it is not usable from my side...

we can try that with the zero fees, but i can't promise that i will keep it that way

Note that this channel between me and @ndalliard is active. 1ml.com lists it as closed for some reason.

its now displayed as active again (i guess your restart helped or maybe it was just a time thing) - it only displays no fee infos on my side, hopefully this will also be solved soon

[n0nce]

Decided to give c-lightning another go, without nodeJS plugins - if needed, going to write my own plugins and stuff like that.

We can open a dual-funded channel once you have set up your node. If you don't want to use experimental features on the mainnet then that's fine. We can figure out something else.

Dual-fund sounds good! Just a question: do you know why c-lightning only allows 1 channel between partners? Design decision? Limitation due to some networking library...?

[cAPSLOCK]

We could see if ndalliard is up for making a little triangle...


         ndalliard
            /\
          /    \
        /        \
 Rath --------cAPS

If we set to zero fees we effectively add ALL of each other's peer channels with a zero cost single hop to them.    

hmm, to be honest i still have to read about the #zerobasefee and you are now proposing to add both fees to zero?

i've already a channel open to rath, that means rath would open one to caps and caps one to me?

also, at the moment for example the balance of the channel from rath and me is on his side, so i've set the fees a little bit higher to discourage the usage of the channel from my side, cause no one can use it anyway from my side. i am not sure if i would like to set it to zero if it is not usable from my side...

we can try that with the zero fees, but i can't promise that i will keep it that way

Note that this channel between me and @ndalliard is active. 1ml.com lists it as closed for some reason.

its now displayed as active again (i guess your restart helped or maybe it was just a time thing) - it only displays no fee infos on my side, hopefully this will also be solved soon

No.  I am not proposing people do 0/0 fees.  In fact I wonder if there is a risk in that for abuse.

I have recently been reading Rene Pickhard's opinion on the idea for zero base fees for the sake of pathfinding for micro-payments.

I do 0/0 on a channel that routes tons of 1-5sat payments.  But currently that is the only one until I know that 0/0 is for sure not an attack vector.  My main reasons for running a node are self sovereignty and to help the network.  But I certainly respect that many folks are interested if profiting from it, or at least covering the costs for running it and future fees to close channels eventually.

Finally... I am in no way married to the idea of us doing a bitcointalk lightning channel ring.  Frankly I have a few too many channels for my comfort.  But on the other had I would be willing to participate in one as well... for just about any size (well probably not much bigger than 20-30mm sats, and probably not smaller than 1-2...).

And if we set up a "ring" of channels, the only argument for turning off fees is for balancing.  That said, fees duing balancing are not going to be all that bad either way.

[ndalliard]

Dual-fund sounds good! Just a question: do you know why c-lightning only allows 1 channel between partners? Design decision? Limitation due to some networking library...?

just stumbled upon this tweet thread from niftynei (c-lightning developer), which at least gives one reason why only one channel is allowed: https://twitter.com/niftynei/status/1435031797650309125#m

i think another might be complexity, but that is just an assumption from my side

No.  I am not proposing people do 0/0 fees.  In fact I wonder if there is a risk in that for abuse.

I have recently been reading Rene Pickhard's opinion on the idea for zero base fees for the sake of pathfinding for micro-payments.

I do 0/0 on a channel that routes tons of 1-5sat payments.  But currently that is the only one until I know that 0/0 is for sure not an attack vector.  My main reasons for running a node are self sovereignty and to help the network.  But I certainly respect that many folks are interested if profiting from it, or at least covering the costs for running it and future fees to close channels eventually.

my main reasons to run a lightning node are the same you mention. but i am hesitant about the zero base fee cause i don't know enough about it, i tried to read the paper from rene, but to be honest, i didn't understand it... its a new idea and everyone is just jumping on it. maybe i am just too sceptical... atm my node runs without a percentage fee and only a base fee which seems more logical to me, if my goal is to route as much as possible (without doing 0/0 which could open my node to some attacks)

[n0nce]

Dual-fund sounds good! Just a question: do you know why c-lightning only allows 1 channel between partners? Design decision? Limitation due to some networking library...?

just stumbled upon this tweet thread from niftynei (c-lightning developer), which at least gives one reason why only one channel is allowed: https://twitter.com/niftynei/status/1435031797650309125#m

Well, I'd argue against that: If I have a small channel to someone and want to 'enlarge' it, closing and reopening causes even more gossip than just opening a new one..
This is just one reason for multiple channels that comes to mind, since I had this situation before. I imagine there might be many more.

My personal bet would be that routing is easier if you don't always have 2 channels connecting every 2 peers because there won't be the question 'which channel to use'. But I don't know, didn't look into the code a ton so far.

[Rath_]

Just a question: do you know why c-lightning only allows 1 channel between partners? Design decision? Limitation due to some networking library...?

It's a design choice. See this Github issue. There are a few reasons.

Well, I'd argue against that: If I have a small channel to someone and want to 'enlarge' it, closing and reopening causes even more gossip than just opening a new one..

That's the problem which splicing is supposed to address.

[n0nce]

That's the problem which splicing is supposed to address.

What's the state of splicing again?
https://lightning.readthedocs.io/search.html?q=splice&check_keywords=yes&area=default# yields no results. Is it just a concept or implemented / experimental stage?

[Rath_]

What's the state of splicing again? [...] Is it just a concept or implemented / experimental stage?

It is still a draft. I wouldn't expect it anytime soon. The developers seems to be busy polishing the v2 open protocol.

[Wind_FURY]

Shower thought for Lightning Network Observers, will Lightning fees be cheaper and cheaper as the network grows, and its participants increase? Or will it be higher and higher?

I believe it’s another important question before we assume anything about the Lightning Network.

I have given this some thought.

Things depend on what we call a participant and how the distribution of them looks.  Here are the sorts of participants as I see them:

1.  Bank nodes
These may actually end up BEING banks, but we will also see Lightning Service Providers in this role.  Examples are the Wallet of Satoshi node.  Or the IBEX node which I believe is processing the Chivo payments.  These nodes are big, and deeply connected.  They are the scary "banks" that "Blockstream has replaced the miners with".  And they are correctly identified as hubs.  These are the ones the big blockers will point to when they are arguing that lightning centralizes control of Bitcoin.  In the future I believe actual BANKS will also have nodes like this.  Western Union, and Wells fargo better be spinning up BP/LNP nodes RIGHT NOW if they want to remain relevant.  Rarely would an individual run a node like this, but Alex Bosworth's node probably classifies.  I personally do not see them as evil, or negative unless they take over the entire network, which I think is unlikely.  These nodes can see large traffic in both directions.

2. Merchant nodes
These would be big "takers" of liquidity like Bitrefil and other places bitcoin is SPENT.  Eventually, companies like Starbucks might end up spinning up their own nodes once they realize this is a better return for them than having a service provider handle it.  Hard to say... some businesses will likely run their own, but for a while I imagine many businesses that TAKE bitcoin will use the services of an LSP.  These nodes will also likely be BIG and well connected HUBS.  Eventually I envision large retailers like grocery stores, and big box places running their own nodes just because of the amount of money moved around as well as thin margins.  They also have an incentive to be able to capture the data of their customers directly. "2%off if you are connected to our node!"  It could be advantageous for merchants to have a direct connection to customer nodes. These nodes will see more incoming than outgoing traffic.  I can even see big merchants becoming LSPs.  Your grocery store also becomes your one of your banks so to speak.

3.  Non custodial LSP nodes 
These are unique.  Wallet makers like Breez, Phoenix and Muun makes apps that allow users to run Neutrino nodes on clients like phones.  These wallets currently handle all lightning stuff in the background.  They open a channel (or more?) on behalf of the customer.  Presumably they are using their own nodes which are sort of a subset of the #1 nodes up there.  Again, these are well connected HUBS.  But the users are not really nodes but dead ends on the network.  The business model for these LSPs will be to charge fees on the first hop.

4.  Hobbiest/Pro routing nodes
This is what I run.  This is a generally smaller node with strategic targeted connections to the network.  They can be run for several reasons.  A computer hobbyist with a rPi will run them.  Self-sovereign bitcoinners that want to "be their own bank" and preserve their privacy might run them.  Idealists who want to keep bitcoin as decentralized as possible might run them.  I think they are quite important.  These are the nodes that keep the network from ONLY being run on commercial grade nodes and captured.  We might be motivated by making a little profit for routing, or like me motivated to provide low/zero cost connectivity between 1,2 and 3 as well as the ability for user to user connections.  I personally connect to several of the above nodes as well as rings of peers to keep the network as distributed as possible and drive fees down.  It is hard to imagine that this will ever be more than a minority percentage of the network, in connectivity, and liquidity.  But i do think enough of us will have a palpable effect on the overall network.  We are the X degrees of separation that will route around the big powerful hubs, thereby forcing them to be better network citizens.

5.  Dead end users
This could be the majority of users. These are users who use a custodial wallet (arguably not really lightning users at all, but customers of lightning businesses), or a non-custodial wallet that does not route at all.  So these are the dead end spokes on the hubs in 1, and 3 (and maybe 4?).  Since they do not route payments they do not really have an effect on the network other than providing velocity and liquidity for the routing nodes to handle.  These "nodes" will handle way more outbound transactions, but will also process "Venmo" type user/user payments as well as refunds.

To your point, I think #4 is the lynchpin for how fees end up working.  If there are enough of us providing low fee connectivity I think the cost for payments could be kept very low or even free for the archetypal "coffee transaction".  Small transactions from customers to businesses, or from user to user could find lightning pathways that cost very little and do not even have to touch some of the hubs.  I would guess we see the hubs being involved in transactions that are big enough that it becomes hard to find pathways between the idealists.  But my node has enough inbound and outbound liquidity that I could route payments approaching $10kUSD at today's prices.

Anyway.. it is VERY interesting in my opinion... and we are still in the infant stages of it.  It will be fun to watch! 

But do you believe node operators would run their nodes altruistically by taking fee rates lower and lower, or do you believe they will eventually look for incentives? Because opening/funding channels require capital, which is limited, resources to maintain hardware costs which is also limited, and technical knowledge/labor maintenance.

[cAPSLOCK]

But do you believe node operators would run their nodes altruistically by taking fee rates lower and lower, or do you believe they will eventually look for incentives? Because opening/funding channels require capital, which is limited, resources to maintain hardware costs which is also limited, and technical knowledge/labor maintenance.

I think the hobbyist class nodes will sometimes be run altruistically.  But I believe most of the professionally run nodes will look to make profits.  The thing is the lightning model allows for ways to make money as a node that the base model does not, really.  AND running a lightning node is a very different model to make sats than running a mining rig.

For example, a wallet provider like Acinq can change for various services with their Phoenix wallet. Channel setup fees, and then a bigger first hop fee since they will be the first node on any route.

Bank/merchant nodes are incentivized for customers to use their nodes to save them on merchant fees (VISA).  So they have like 3% baked in before they charge a fee at all.  So I could see those being cheaper.

I think there are tons of things to see play out here.  How often does a particular use case need to settle to the base chain for example?  The more it does, the more I would expect those nodes to charge.

One other thing that makes lightning different.  The "low fee" is not the only advantage it offers the buyer and seller.  Instant settlement is also a key benefit to a small retail merchant.  Like McDonalds in ES.  Seeing the terminal go green means the money has changed hands, and the deal is done.  The base layer does not have that property.

[Wind_FURY]

But do you believe node operators would run their nodes altruistically by taking fee rates lower and lower, or do you believe they will eventually look for incentives? Because opening/funding channels require capital, which is limited, resources to maintain hardware costs which is also limited, and technical knowledge/labor maintenance.

I think the hobbyist class nodes will sometimes be run altruistically.  But I believe most of the professionally run nodes will look to make profits.  The thing is the lightning model allows for ways to make money as a node that the base model does not, really.  AND running a lightning node is a very different model to make sats than running a mining rig.

For example, a wallet provider like Acinq can change for various services with their Phoenix wallet. Channel setup fees, and then a bigger first hop fee since they will be the first node on any route.

Bank/merchant nodes are incentivized for customers to use their nodes to save them on merchant fees (VISA).  So they have like 3% baked in before they charge a fee at all.  So I could see those being cheaper.

I think there are tons of things to see play out here.  How often does a particular use case need to settle to the base chain for example?  The more it does, the more I would expect those nodes to charge.

One other thing that makes lightning different.  The "low fee" is not the only advantage it offers the buyer and seller.  Instant settlement is also a key benefit to a small retail merchant.  Like McDonalds in ES.  Seeing the terminal go green means the money has changed hands, and the deal is done.  The base layer does not have that property.

I believe that the main issue of consideration is that it is a fact that there will be opportunity costs for opening channels, and funding with with a scarce/limited resource. Bitcoin is fundamentally a form of “capital”. Capital usage should be earning, not losing?

[Wind_FURY]

No reply? From anyone? Let me explain. Like the block rewards/fee revenue for miners that should be high enough to maintain Bitcoin’s security, and it success, the Lightning Network’s “liquidity providers” should also he incentivized for the opportunity cost on their capital, to maintain the growth and success of LN. How would this be possible? Charge higher fees.

[n0nce]

No reply? From anyone? Let me explain. Like the block rewards/fee revenue for miners that should be high enough to maintain Bitcoin’s security, and it success, the Lightning Network’s “liquidity providers” should also he incentivized for the opportunity cost on their capital, to maintain the growth and success of LN. How would this be possible? Charge higher fees.

It was already answered above. Basically yes, more fees or just simply more transactions at a low fee, could probably cover the electricity and channel opening costs.
Keep in mind opening a channel isn’t as crazy expensive as you might think, after all it’s just a normal Bitcoin tx that currently costs <1$ to get mined.

I know node operators that have channels open for years at a time and routed thousands of transactions in that time.

What I mean with more transactions: even with a limited number and size of channels, if they’re routing stuff back and forth hundreds of times per day instead of once or twice per week (like on my node at the moment), with a maybe 1-2 sats routing fee, instead of getting 5 sats a week you’re looking at thousands of sats per week.
Routing more transactions doesn’t consume (significantly) more power or need more / bigger channels, so contrary to the underlying blockchain it scales much better and has kind of a fixed running cost with increased revenue the more it is used.

[fillippone]

Just afew Day's old news:


https://twitter.com/btc_ln/status/1438017446330261506?s=21

This news was relaunched also by Bitcoin magazine:

PAXFUL INTEGRATES THE BITCOIN LIGHTNING NETWORK

Peer-to-peer bitcoin exchange Paxful announced that its platform has fully integrated the Lightning Network, Bitcoin's second-layer scaling solution. The firm, one of the leading peer-to-peer trading platforms worldwide, will now allow its more than seven million users to transact bitcoin across the globe more quickly and cheaply.

This recalled an old tweet by Paolo Ardoino:



https://twitter.com/paoloardoino/status/1404724609602232323?s=21

I am wondering how the exponential growth of these last months changed that scenario. I asked him on Twitter, I'll update you if he makes himself heard.

[Timelord2067]

Just a few day's old news:
...
I am wondering how the exponential growth of these last months changed that scenario. I asked him on Twitter, I'll update you if he makes himself heard.

I'm beginning to wonder if the growth in Bitcoin Lightning Network transactions correlates to the slump in mempool transactions (and their fees) that we have seen in recent months.

It would explain why the price has stabilized while the number of transactions in the mempool has at the same time appeared to stall.

[Wind_FURY]

No reply? From anyone? Let me explain. Like the block rewards/fee revenue for miners that should be high enough to maintain Bitcoin’s security, and it success, the Lightning Network’s “liquidity providers” should also he incentivized for the opportunity cost on their capital, to maintain the growth and success of LN. How would this be possible? Charge higher fees.

It was already answered above. Basically yes, more fees or just simply more transactions at a low fee, could probably cover the electricity and channel opening costs.

Keep in mind opening a channel isn’t as crazy expensive as you might think, after all it’s just a normal Bitcoin tx that currently costs <1$ to get mined.

That was not the only point. The main point is actually the opportunity costs, which might be OK during a bull market. But during a bear market, if someone/a company/service opens 10 Bitcoins or more for different channels, they will be taking a loss, missing out on other opportunities for their capital.

I know node operators that have channels open for years at a time and routed thousands of transactions in that time.

I believe it can only be sustained through incentivization.

[ndalliard]

I'm beginning to wonder if the growth in Bitcoin Lightning Network transactions correlates to the slump in mempool transactions (and their fees) that we have seen in recent months.

It would explain why the price has stabilized while the number of transactions in the mempool has at the same time appeared to stall.

not according to murch:

source: https://twitter.com/murchandamus/status/1438521484910075919