Will Pleb Hobby Lightning Nodes Be Big, Profitable Enterprises In The Future? \ stacker news ~lightning

Will Pleb Hobby Lightning Nodes Be Big, Profitable Enterprises In The Future?

4022 sats \ 37 comments \ @siggy47 8 Apr lightning

Before you all dismiss me as an idiot, please hear me out. I started my lightning node about 2 ½ years ago via the whole Umbel Pi craze that was so popular. I read all about channel balancing, setting fees, etc, hoping to create a giant, profitable routing node. Reality soon set in.

Later, I started talking to @DarthCoin and used his guides to change my node. I made so many modifications, but perhaps the biggest was focusing on a relatively few, much larger channels. My goal was no longer to route, but to just use my node for my own purposes. By then, bitcoin’s price had crashed into the teens and I opened some pretty big channels (around 10 million sats or more).

Now, bitcoin’s fiat price has more than tripled, and my node is routing a lot more transactions. Obviously 10 million sats is a bigger deal now than when I opened the channels. The increase in transactions is bringing in more fees, and each of those sats contains a lot more buying power in the real world.

Does it not stand to reason that in 10 years 10 million sat channels will be incredibly valuable, assuming we are all correct that bitcoin will continue to grow and consume larger parts of the economy?

I understand that for purposes of this argument, I am assuming the lightning network survives, and is still being used at least as much as it is today.

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1036 sats \ 1 reply \ @DarthCoin 8 Apr

If your node is stable and have good channels and is routing, just leave it be. I am sure you already read my "vision" about LN future here: #486306

If you really want to run a profitable public node, nothing wrong with that. But in time you will need to do a lot of improvements, in channels, in volume, in maintenance, upgrading software etc.

What many hobby routing nodes plebs do not take in consideration is that they cannot know upfront the cost of closing channels in the future, so all this "profitability" of running a hobby node is not anymore profitable.

IMHO after I run several LN nodes, in different modes, is that to reach that profitability you need to move around a lot of capital and keep the good channels up as much as you can. But unfortunately for various reasons you will get some force closed channels and all your "profit" predictions goes to the bin.

For a "regular Joe" user of LN I will always suggest: run a private node. No need to run public channels and look for profits from routing. And nothing wrong with that. Private channels does not get force closed so easily and so often. Also do not need to put too much liquidity in your channels, just enough for your regular needs.

282 sats \ 0 replies \ @siggy47 OP 8 Apr

Thanks for this great information, as usual. I should have made the point that for me, I don't plan any changes or look to run a profitable lightning node. Maybe I have been lucky, but I have never had a ton of force closes. But, you raise a good point about my argument. In the future, on chain closing fees will in all likelihood also be huge. Something to think about.

145 sats \ 0 replies \ @random_ 8 Apr

One could also argue that as the fiat price increases, LN will become over provisioned. I think we will see the network ossify as NGU.

145 sats \ 7 replies \ @megaptera 8 Apr

Agree on all you said but you also have to consider that the risk of running this node will be quite bigger. Maybe you want those 10m sats in a cold storage rather then a hot wallet.

447 sats \ 4 replies \ @DarthCoin 8 Apr

I do not see any risk of having 20M sats in a LN channel vs a cold wallet. The only risk is to get a force close, but that doesn't mean you will lose your sats. Not at all! You will only pay some extra fees, that's all. It's all about perspective: what do you want to do with those sats.

If you plan to use use them, buying stuff, then the right choice is to have them ready in some LN channels. If you do not plan to spend them soon, then yes, keep them in a cold wallet.

But keep ALL your sats in cold wallet and not being prepared to spend I think is silly. ofc you do not have to put all your sats in LN channels, but a portion of max 10% I think is reasonable. It's all about how many sats you expect to spend in the near future.

SPLITTING YOUR STASH IN 3 LEVELS IS VERY IMPORTANT!

178 sats \ 2 replies \ @elvismercury 8 Apr

Advice on channels to open if you don't need to buy anything, at least right now?

I struggle with this part of it. Your advice makes sense, but since there's nothing that I can think of to buy via LN, it's never been clear to me what would be sensible channels to open in order to give myself future optionality like you and Siggy are describing.

334 sats \ 1 reply \ @DarthCoin 8 Apr

If you do not plan to spend a large amount of sats over LN, then I think accumulating few sats over LN from SN, nostr and other sources, will be OK to use any custodial LN wallets that will not bother you with channels management.

I wrote this guide for example, describing how to do it: https://darth-coin.github.io/beginner/getting-started-stack-sats-en.html

Basically you just accumulate few sats, little by little and once the amount is considered enough to be converted into a good UTXO, just swap it out into your onchain cache or cold wallets.

THERE'S NOTHING WRONG using custodial non-KYC accounts for that. The amounts will not be anyways so significant to affect your finances and also you are not touching your cold stash.

Keep it simple guys!

96 sats \ 0 replies \ @elvismercury 8 Apr

Gracias!

75 sats \ 0 replies \ @megaptera 8 Apr

The 20M sats channel is essentally a hot wallet (there are nuances). If you're ok with having 20M in a hot wallet thats fine. It all depends on your risk management/appetite.

62 sats \ 1 reply \ @siggy47 OP 8 Apr

Very true. We can hope that security also improves, but who knows?

75 sats \ 0 replies \ @megaptera 8 Apr

It boils down how secure you can run your LN Node.

95 sats \ 4 replies \ @nullcount 8 Apr

NgU affects the larger non-pleb nodes too.

LN already follows a power law distribution. Those nodes who maintain the power (top 5%) are more likely to continue existing. Those nodes who are in the bottom 95% are more likely to quit especially as a result of exchange rate increase.

0 sats \ 3 replies \ @Bell_curve 8 Apr

LN is asymmetric and unequal?

Shocking development

1008 sats \ 2 replies \ @nullcount 8 Apr

Trend is towards Maximum Tolerable Centralization

Either the big nodes become targets for DDOS and the network cannot tolerate being so centralized (like tor operates today).

Or the big nodes specialize such that they are the only nodes that can withstand a DDOS and the network cannot tolerate being decentralized (like email operates today).

50 sats \ 1 reply \ @k00b 8 Apr

I hope that isn't inevitable. One glimmer of hope is that Tor and email don't have financial incentives. I want to believe that if lightning nodes can be made a lot easier/cheaper to run profitably, people will run them.

10 sats \ 0 replies \ @nullcount 8 Apr

Email certainly has a financial incentive even if it's not expressed in SMTP.

99% of email servers are run by for-profit companies. Same is not true of Tor routing nodes.

So because LN has financial incentives built-in, like email, it may also go the way of email. Only faster.

250 sats \ 1 reply \ @DarthCoin 8 Apr

I made a quick design of the LN topology, of how I see it. I hope will make more sense for you to understand the levels of rings we have:

PUBLIC RINGS

central big beefy profitable nodes, with large liquidity and strong servers
LSP ring, medium sized public nodes, connected well with these big nodes, offering good routes to mobile nodes users and also to pleb rings
All custodial accounts public nodes (Alby, WoS, Strike, Cashapp etc)
Plebnet Ring, with smaller liquidity capability and machines, maybe in process to became LSPs

PRIVATE RING

outside rim, the private ring of mobile nodes, connected to well known LSPs
normal small pleb private nodes, trying to evolve

It's all about WHERE you position yourself. As you can see the out rim cannot communicate directly between them, but only through good LSP nodes. All the rest could be interconnected through public channels. Also the LSP nodes could have PRIVATE channels (that the public do not see it) to big beefy nodes, but mostly public channels.

33 sats \ 0 replies \ @siggy47 OP 8 Apr

Great explanation. Thanks for this.

76 sats \ 1 reply \ @BlokchainB 8 Apr

This is my base case. Plus I just do it because what the hell else am I going to do with my free time?

50 sats \ 0 replies \ @siggy47 OP 8 Apr

That's my primary motivation too.

75 sats \ 0 replies \ @nym 9 Apr

The capital inefficiency at the edges for non-custodial users is a hard and annoying optimization problem, but it's not an unworkable problem.

75 sats \ 0 replies \ @IamSINGLE 9 Apr

Before you all dismiss me as an idiot

Without reading anything else, let me tell you one thing, until now you're my favoirite stacker here, so you can't call yourself an idiot.

Now, LN will not only survive but it will be much more popular in 10 years. (Based on my own calculations, my personal love for LN). I never ever imagine Bitcoin without LN. I don't have any idea what nodes are, and don't think that Everyone needs to know but because I love LN, I love to talk about it, barring I know nothing useful.

75 sats \ 3 replies \ @OT 8 Apr

It could end up being a lot of capital in a hot wallet.

If the security continues to improve and you don't get forced closed by a huge fee spike, then yes it would.

0 sats \ 2 replies \ @siggy47 OP 8 Apr

Those are the two big ifs.

75 sats \ 1 reply \ @OT 8 Apr

Probably worth keeping open since they're already up for so long.

You might even consider (in a few years) to run a mint off it.

101 sats \ 0 replies \ @siggy47 OP 8 Apr

Good idea. For now I'll just tread water and see what happens.

54 sats \ 0 replies \ @Coinsreporter 30 Apr

I understand that for purposes of this argument, I am assuming the lightning network survives, and is still being used at least as much as it is today.

LN will definitely survive and it will be the main catalyst system for Bitcoin Economy. This is how I view it with great enthusiasm.

110 sats \ 9 replies \ @justin_shocknet 8 Apr

Nodes were never supposed to be profitable through routing, why should they be in a permissionless system where anyone can park capital with no risk beyond hot wallet risk? Where did this narrative come from?

Fees on Lightning are to make the system work, what you earn is only meant to offset what you pay.

If you expect to be profitable solely routing, you're misinformed.

17 sats \ 1 reply \ @nicosey 10 Apr

High fees and and hot wallet risks will force them to be profitable or the network dies...

0 sats \ 0 replies \ @justin_shocknet 10 Apr

wrong, Lightning works great for clients and services... all but a few arbs will get rekt and rightly so

0 sats \ 6 replies \ @siggy47 OP 8 Apr

Bitcoiners can believe in the free market, no? Bitcoin doesn't require us to be socialists, right? Should wallet devs be permitted profits for their hard work? I would say node operators do take a risk. Don't they have a right to seek compensation for that risk?

75 sats \ 5 replies \ @justin_shocknet 8 Apr

Believing it and understanding it are different things. This has nothing to do with philosophy, it's a practical matter.

Do you believe in free markets and not arbitrage? Care to explain why your routing node should be profitable when you have no moat? What is your value prop vs every other router on the network?

Again, if you expect to profit purely from routing, you're misinformed.

0 sats \ 4 replies \ @siggy47 OP 8 Apr

I'm not really sure we're disagreeing with each other. I don't even run a routing node. My node is not profitable, and I don't care. In essence, the point of my post is that nodes may become profitable over time whether that was the operator's intention or not. Also, I'm not saying it's easy, but I don't think there should be any moral or ethical prohibition against striving to run a profitable node.

0 sats \ 3 replies \ @justin_shocknet 8 Apr

Who's talking about prohibition?

0 sats \ 2 replies \ @siggy47 OP 8 Apr

When you question why someone is entitled to a profit when there is no moat, it sounds like an ethical judgment to me. You're right that there's no moat to set up a node, but I suspect running a profitable one requires a good deal of capital and commitment.

75 sats \ 1 reply \ @justin_shocknet 8 Apr

When one crosses the street without looking, they should expect to be hit by a car

That statement isn't morally supportive of hitting people with cars

Perpetuating the misconception that routing is a profitable activity is only going to cost noobs who attempt it their sats, leading more angry Lightning FUD posts by the blind who followed the blind

For the noobs: Unless you are running a service that attracts its own flows and routes as a side-effect, you will lose money trying to be a router. As an edge node, you should have only a couple-few, ideally private, channels.

17 sats \ 0 replies \ @siggy47 OP 8 Apr

I can't disagree with any of this. Good advice.

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