Still Digging for Bitcoin? Lightning Network

Those who run lightning network nodes are earning a little extra bitcoin.

As a capacity expansion method prepared to deal with the possible adoption of bitcoin by the mainstream, lightning network can also bring you a little-known additional income, that is, you can make users complete the real-time payment of low handling charges by running lightning network nodes, so as to earn bitcoin.

At present, the average handling charge for using the lightning network is about 1 Satoshi, and it costs less than a cent per jump (when the lightning network node routes the transaction to another node). Therefore, Alex Bosworth, a famous lightning network application developer, said that the monthly income of its lightning network nodes was about $2.

Although profits are meager now, this may be a sign of the development of lightning network over time.

Lightning network, as its name suggests, is a network. In order to send payment information to someone, the payment information usually jumps on several different nodes before reaching the receiver, which is similar to the previous postmen who passed letters or parcels from one person to another to deliver the mail to the destination.

In the lightning network, the operator of each node can choose to charge a small fee to facilitate the transaction.

The emergence of this charging market shows that cryptocurrency enthusiasts are more willing to take high risks (people who use this early lightning network are actually regarded as very "reckless" by protocol developers).

In this regard, Bosworth recently tweeted:

"I think that for many people, even for those firm holders, the bitcoin obtained by running lightning network nodes to provide routing will become the first bitcoin they can earn in addition to trading cryptocurrency."

Handling charges are adjustable

Nevertheless, there are still some obstacles to earning bitcoin in the lightning network.

At present, if you want to use lightning network, you still need to have some technical knowledge and considerable storage space. Anyone who wants to use the lightning network to pay needs to download nearly 200 GB of complete historical transaction data of bitcoin, and then download the components required by the lightning network.

At present, there are at least 3000 lightning network nodes on the bitcoin network.

After becoming a lightning network node, the user needs to update the default handling fee setting, which is set to zero by default. For LND (lightning network daemon), one of the most popular lightning network implementations, this function of changing the handling fee and monitoring how much revenue you get from the handling fee is relatively novel.

Bosworth told coindesk:

"In the past, you couldn't see how much commission you earned in LND, but after this function was added, it stimulated more charging activities."

However, another thing to remember is that users are also "competing with each other" here.

In order to enable more people to choose their nodes as the jumping point in their payment route, nodes can't charge too much commission (that's why Bosworth earns so little Commission).

However, even if the node chooses to charge the lowest handling fee, it will sometimes be ignored. However, for whatever reason, many lightning network nodes still do not charge any fees; It is possible that the operators of many nodes are just lightning network enthusiasts. There is no need to worry that they will make a profit from their interests.

Bosworth believes that some users may be avoiding the nodes passing through him because they charge a certain handling fee.

Bosworth guesses that the users who complete the payment through his node routing may only be those who do not have any other routing options.

Reasons for charging handling fees

Although it is impossible to know how the market will develop at present, the developers of lightning network believe that it is beneficial to allow fees to be charged on Lightning network.

"You don't want this system to work just because people are kind," Ben Woosley, developer of zap, a lightning wallet application, told coindesk,

"With the development of lightning network and a small number of people using it for conceptual reasons, the handling fee model will develop economically."

Although the fees are insignificant, Woosley continues that charging these fees can be useful for a variety of reasons.

First, lightning networks need sufficient liquidity. Each lightning network node has a certain "mobility". How many bitcoins can be sent through the lightning network depends on how many bitcoins the node operator locks in the lightning network channel. Woosley believes that channels with more bitcoins will be able to complete larger or more payments, and charge the handling fees required to pay these large jumps.

In addition, charging fees "provides a way for nodes to encourage or prevent people from using their channels," Woosley added.

In this way, lightning network developers even set negative fees for nodes trying to compensate their users. For example, this may happen if a channel runs out of funds in one direction and needs to replenish more funds to "rebalance".

Bosworth also pointed out that dedicated lightning network payments, such as those that trade one cryptocurrency into another cryptocurrency, will be more complex and may cost more.

Is it possible to predict the handling fee?

However, according to Bosworth:

"This is a market, so it will be very difficult to predict the handling fee cost."

Nevertheless, many developers still believe that the handling fee for using lightning network will remain at a very low level in the future.

Firstly, the cost of running lightning network nodes and completing payment through lightning network routing is not high. Of course, this takes a little time and takes more time than downloading traditional mobile payment applications. But its economic cost is not high.

For this reason, tadge dryja and Joseph Poon, the cooperative developers of lightning network, predicted that the handling fee of lightning network "will actually be zero" in 2016. So far, their predictions are still valid.

Zmnscpxj, an anonymous lightning network developer, said:

"I think the payment routing system will eventually turn the problem into the level of 'I scratch your back and you scratch my back'."

In other words, developers speculate that people can route their payments with very little Commission, so that others can route their lightning network payments with very low commission.

In view of this, many people believe that using lightning network to complete payment will cost much less than using the existing online payment system. This use scenario will excite people who have long been keen on bitcoin. They are full of enthusiasm for this technology because it can subvert the old payment system.

"The handling charge for payment by credit card is about 3%, so the handling charge for using lightning network may be several orders of magnitude lower than that for using credit card," Woosley concluded,

"My expectation is that the handling charge for using the lightning network can always be ignored, less than a penny, forever."

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