1628 sats \ 3 replies \ @nullcount 25 Jan \ on: can running a lightning node be profitable or just a labor of love? lightning
Routing is a business. It has revenues and expenses. If you can maximize revenue and minimize expense, then you can be profitable.
In mining, a terrahash is more or less the same as any other terrahash. It will be rewarded basically the same so your primary competitive advantage is energy cost.
In staking pools, one token is more or less the same as another token. Investing 10x more into a liquidity pool will yield about 10x more reward. Your competitive advantage is access to capital.
However, in LN, every channel has unique properties. Capacity, routing fees, onchain fee paid, position in the network, relative liquidity flow (sink/source) and many other factors will directly impact the ROI on a channel and each factor presents an opportunity to optimize into a competitive advantage.
You are unlikely to generate passive profit because you will always be out-competed by someone who actively tries to optimize their channels.
Many people think that one day, there will emerge an algorithm that magically and automatically manages your node to achieve maximum profits. Then, LN basically becomes a staking pool where access to capital is the only competitive lever.
I think this senario is unlikely for the same reason that there is no magic portfolio that always returns maximum results. People create algos to trade stocks profitably, but as soon as a critical mass of capital is deployed by the algo, all the arbitrage is depleted and another strategy will outcompete it.
Many people think that one day, there will emerge an algorithm that magically and automatically manages your node to achieve maximum profits. Then, LN basically becomes a staking pool where access to capital is the only competitive lever.I think this scenario is unlikely for the same reason that there is no magic portfolio that always returns maximum results. People create algos to trade stocks profitably, but as soon as a critical mass of capital is deployed by the algo, all the arbitrage is depleted and another strategy will outcompete it.
Succinctly put. There's this idea floating around that LN will eventually offer a risk-free rate, but that doesn't make any sense for the reasons you outline: If there's an easy profit to be made, then everyone adopts the strategy and income falls back to 0.
reply