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0 sats \ 4 replies \ @nullcount 29 Aug 2022 \ on: What if a Lightning HTLC has to be settled onchain but fees are over its amount? bitcoin
Nodes generally do not relay transactions below the dust limit, so care must be taken when constructing an HTLC.
When you pay someone over LN with an amount lower than the dust limit (546 sats/$0.10), Your node shouldn't actually create a redeemable HTLC for LN payments below the dust limit. Rather it negotiates a new commitment transaction with the channel peer and adds the amount as fees for the new commitment.
There's a bit of trust applied here, but the argument is that both nodes should want to close the channel ASAP so it's a "fair enough" risk/reward to enable micropayments across their channels.
What if onchain fees are, say, over $10?
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If on chain fees are high, and the HTLC output is low, it's not best time to close the channel. It's entirely possible to lose money closing a channel (or having a channel closed on you) in a high fee environment.
This is almost by design, if fees are high, then demand for routing payments on LN channels should rise. If you're attempting to limit the supply of channels while they're in demand, you should be punished.
The issue is that the one who opened the channel pays the closing fee. https://bitcoin.stackexchange.com/a/96522
So it's possible that you decided to open a channel to a node that doesn't care if you lose money and they close it in a high fee environment. Again, there is trust. But also, reputation in the social layer. If a large node was caught doing this to their peers, word would spread to avoid opening channels to them.
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But would a lightning node create an HTLC for a $7 payment if it knows it will cost $10 to redeem it?
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You think word would spread automatically or do we need to build some kind of system that keeps track of these things?
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