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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.
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Wonderful analogy, love it!
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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?
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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.
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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.
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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.
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This looks like a good solution for the average business owner https://www.tiankii.com/
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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.
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Be sure to check out https://plebnet.wiki
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. https://github.com/cryptosharks131/lndg
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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
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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.
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It's not only routers, merchants need support too. Like this way, which suggestion I sign 100%
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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.
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As a one+ year node operator - I agree with this 110%, great article @Birkeland - thank you for your leadership
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thanks for the write
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My pleasure! Thanks for reading it. 🙏
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