The lightning network has been growing at an exponential pace since its inception in 2018. Growth rates year-over-year have been at over 127%. With the number of clearnet nodes peaking at just over 20,000 earlier in March of 2022, the number has since fallen and stabilized at just over 17,000. Why?

No doubt a significant portion of recent node growth can be attributed to the rise of Umbrel, Voltage, Start9, and other companies that made it easier than ever to spin up a lightning node. However, there’s more to running a node than meets the marketing, and many node operators are familiar with this.

Problems with Operating a Node

Nodes need to be connected to a stable power source with a stable network connection 24/7 else risk a loss of funds. If they submit an outdated channel state to the network, their counterparty can revoke the entire balance locked in that channel. Throughout the Global South, where many Bitcoiners see the largest potential of adoption, this is a huge risk. Power and internet are not guaranteed 24/7. Of course, running a node in a datacenter with enterprise-grade technology and security solves this, but that always comes at the cost of self-sovereignty—you no longer have control over the hardware that your node is running on.

Finding high quality channel peers can be intimidating for a neophyte, and requires some searching on Amboss, 1ML, or any number of lightning telegram groups. There are now services offering inbound liquidity, but if you want inbound from nodes other than the most centralized in the network, you're going to need to go on a search through a fragmented market. For the plebs who enjoy the work of diving deep into a new technology, the search is rewarding. For the users who simply want to utilize the network in a self-custodial manner and receive the benefits (making/receiving payments or routing for yield), the user experience is far from optimal. The founders at Wavlake learned firsthand how difficult it was to onboard artists with their own lightning node. Spoiler alert: it was very difficult, and they've now pivoted their model. The process of running a node currently appeals to those who love the technology and the vision, not to those who need a lightning node for their business or to facilitate their payments.

Even for highly technical individuals, it's difficult to maintain a node. Liquidity management is something that requires frequent attention, and the more channels you have, the more channels you need to monitor. Zero fee routing recently shut down his node due to the time and energy it costs to maintain even despite his love for the lightning network. There's a reason why companies like River, Bitfinex, or Kollider have full-time staff dedicated to the management of their node(s). It's tough to run a lightning node, and many people dove in too deep too early. In my understanding, this is the reason for those 3,000 nodes going offline since March of 2022.

For the uninitiated non-technical folk who simply want to make or receive payments on lightning, the solutions available are only custodial. That begs the question: are we simply living in an in-between space where custodial lightning solutions are the bridge to truly self-sovereign payments infrastructure, or is the future of lightning custodial? Another "decentralized" network that will grow under the purview of an oligopoly, under the will of the executives and board of directors?

On Network (De)centralization

This paper analyzes the lightning network in its current state, and has a bleak outlook on its decentralization. As most people familiar with the lightning network already know, a small number of nodes hold the vast majority of connectivity and effectiveness. Furthermore, with 30% of nodes on AWS and 11.8% on LunaNode, one can wonder what might happen if a policy shift happened in the headquarters of big tech that presents Bitcoin Lightning in an unfavorable light. The “they fight you” stage is already here, so it seems to be only a matter of time before some real heat from the state is brought to the table.

Networks tend towards centralization—it's a law of nature. In nearly every city of the world, you'll be able to get a sim card, purchase mobile data, download a ride hailing app, and book a cab to a hotel where you'll have a bed, shower, and possibly something to eat. These ways of living have coalesced around a centralized process facilitated by familiar institutions (ride-hailing apps, the hospitality industry, telecommunications infrastructure, payments, and so on). The motif of technology companies gobbling up services, as a16z puts it, is not far off. However, it's not just technology, it's people, it's mimetic, and it’s natural. For a network to maintain itself as decentralized, it must begin decentralized. The myth of centralization paving the way to decentralization is just that—a myth. The United States congress dissolving Standard Oil into a multitude of smaller companies didn’t make the oil industry any less centralized. Look at any crypto company or protocol in existence. None of them will become decentralized as time goes by—they're all already operating as centralized corporate entities, and that's because they started out that way.

Lightning doesn’t need to end up this way. The authors of this paper simulated the lightning network with and without hubs or service providers, and the results look promising! The lightning network is resilient to the loss of hubs, and can facilitate payments reliably with passively balanced channels. However, if lightning continues on its path of highly technical node operation, the only players that will be able to offer good UX to users will be well funded tech companies who have the knowledge and experience to do so. As Bitcoiners, we should ask ourselves: do we want that future?

The Future of Lightning

Despite all of this, I'm optimistic for the future of lightning. Whenever I use lightning, it truly feels like magic: a teleportation of value across space and time—a near instantaneous settlement of value across the globe without trusted third parties. And even beyond that, lightning is another layer of the internet that enables authentication, identity, and commerce under cryptography, not trusted third parties. I see a future where it is possible to automate away the granular technicalities and release this technology to a wide array of people. However, before the lightning network is ready for that growth, it's necessary to lower the bar to operate a node in a self-custodial manner. Users need good UX. That's the only way we maintain the cypherpunk security promises of Bitcoin.

Nothing rises higher than its source. Bitcoin is decentralized because it was decentralized at its source. If the lightning network is to be decentralized in the future, it must grow in a decentralized fashion moving forward. That means more users need to become lightning node operators. For that to happen, we need to lower the bar for lightning node operations. That means more automation, and better user experience. That’s what we’re working on at Birkeland.

Stay Tuned

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The UX of routing nodes will get so good it will disappear entirely. Just like how you no longer have to pick wich routes to send your IP packets to in order to fetch a webpage, your browser and ISP does it all automatically.

Routing nodes will likewise become fully automated and achieve the "Lightning Reference Rate" in yield for their owner's capital.

Wonderful analogy, love it!

You dont need to run your node as a Routing node if all you want is to accept payments as a business. It is not hard at all to setup a node for a business. You can literally have 1 big incoming channel. You dont need to worry about “managing your liquidity”. Just loop it out when the channel starts to fill up.

That is true, and I think that kind of architecture is definitely way easier to automate than a full-on routing node! Merchants don't need outbound unless they'd want to pay out their employees in lightning, which is functionality that I doubt many would want to pay for.

However, for the average business owner, it's still really challenging to figure all those details out even for a simple setup. They'd have to be an enthusiastic Bitcoiner who has knowledge about how Lightning works, what Loop is, etc.

But that's the beauty of where we can come to help! Setting up batteries-included simple UX systems that give the functionality and security users expect is a major opportunity.

This looks like a good solution for the average business owner

It's not only routers, merchants need support too. Like this way, which suggestion I sign 100%

100% the biggest area of potential in the ecosystem is the merchants. After all, routing nodes won't have much to route if no merchants are accepting lightning payments.

With a bit of automation, a merchant can be able to securely accept lightning payments with a node they control. Once the UX is there, it's really just about onboarding more merchants and regular users to the Bitcoin Lightning ecosystem.

You hit it spot on. One other challenge, i would see is that since btc is a scarce commodity, people do not want to spend it. Just here at SN, majority of people just stack sats, but do not give it forward. How do you change that mentality?

Yeah I think KP said something on a lightning twitter spaces once that made sense to me.

As a lightning node operator, you're locking up your BTC capital in a hot wallet that has risk. You deploy that capital into channels essentially as a bet that there will be monetizable activity on those channels in the near future. By charging fees on transactions that you route, you earn yield on that capital.

Deploying your BTC into a lightning node is absolutely not as safe as keeping it in cold storage, which is ideally where many people would be keeping it.

However, in exchange for taking on that risk, noticing those information asymmetries in the lightning market, and maintaining your node to stay in an optimal condition to route payments, you can be rewarded with yield. With those natural incentives in place, we don't need to rely on just good faith of the community for functionality and reliability--it's an investment opportunity and a business venture. As a node operator, you are providing a service to other nodes in the market and other users in the lightning network. In exchange for providing that service, you are rewarded with fees.

I'd say with people on SN trying to stack sats, it's more of a psychological hurdle, rather than a business problem. Nobody is earning a living on SN just yet, so the sats are (sadly) still at a similar level of functionality and impact as reddit upvotes. However, with a psychological problem, there's always a psychological solution. Governments have convinced masses of men to willingly go to war and fight people they've never met. I'm sure with a little PR, there can be more of a "pass it on" mentality in the SN community.

As a one+ year node operator - I agree with this 110%, great article @Birkeland - thank you for your leadership

I can relate. Fired up a node yesterday and it's a steep learning curve. fell into liquidity sinks twice, and always looking for decent peers.

Be sure to check out

Also, LNDg is a popular tool for channel management with minimal work once set up correctly. I know people with > 5 BTC liq who use it routinely.

Thanks, I'm digesting all the knowledge one bite at a time.. took me forever to set up pruned lnd node on mac, now i'm learning bos, will get to automation next. I'm not so tech savvy, even simple command line is a challenge, but learning every day

If not tech savvy, something like Umbrel on a laptop might be a good way to learn, then switch to rolling your own on bare metal.

Don't put too much money on the node during the learning phase.

thanks for the write

My pleasure! Thanks for reading it. 🙏