Lightning is amazing. Blazing fast, with the hardest money of the world and low fees.
But recently a lot of my transactions were over 1% and I read about people getting into lightning for the sake of profit more and more often.
Do you worry about fees approaching onchain fees? Even in free markets competition?
Run your own LN node and connect to nodes that uses low fees. As I did in this experiment https://darthcoin.substack.com/p/lightning-routing-fees-experiment
I try to have 1st, 2nd, 3rd level of peers with lowest fees possible. In that way if I had a tx with 4 hops, at least 3 of them are low fees. If a node with high fees connect with me I simply close that channel.
The goal is to FUCK THE BANKS, not to fuck each others...
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Shameless plug for my zero fee routing node https://amboss.space/c/iampigman
Once we have PTLCs and Eltoo the operating cost of running a routing node will go way down and subsequently the fees. Until then though HTLC attacks are too costly to facilitate altruistic routing.
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Due to Taproot, PTLCs are possible now right? Also I haven't heard much about Eltoo and SIGHASH_ANYPREVOUT lately. Have you heard anything about it?
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Yes, I do worry.
Running routing nodes is pretty expensive because of the capital cost, risk, storage and maintenance costs, spam and force-closes fees.
Hosted channels fix this. Use https://sbw.app/.
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Can you explain how hosted channels fixes it? What is the trade off you make with that?
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How does the client's private key factor into the creation and use of hosted channels?
I'm thinking that the private key can be used to create the client's pubkey so payments can be routed to them. Private key can be used for other generic signing tasks and on-chain bitcoin things. Is the private key used in any other way for hosted channels though?
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LN is not necessarily meant to be "low fee". it is to provide an alternative settlement later with different speed propositions and trade offs regarding privacy and payment size.
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Fees are a race to the bottom. They're currently can be pretty high but in the mean time you'll need to pick and choose what nodes you connect to.
Personally I'm currently using one of my LN nodes as a way to quickly move funds back and forth between Bitfinex and myself. I do this to minimize as much counter party risk as possible while still being able to take smaller long positions. To make sure I have liquidity I set my fees to Bitfinex at 1%. This disencourages others to use my liquidity but still lets them use it in emergency cases. And I get paid for it :)
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I am very happy to hear people discuss this topic. When I found out about the Lightning Network, my first idea was that this allows free sat transfers for those who want.
One thing I still dislike is that there is no channel type which will be stable, i.e. where a force-close would not be possible but any close would require two humans agreeing and cooperating (not just bots signing something according to the protocol). But this part is easily worked around with 2of2 multi-sig wallets (which can exist as another long-term and zero-fee way to settle while the same two parties have a LN channel with zero fees).
But really very happy there is a growing number of those asking this question. All the best!
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if you run your own node, and manage your channels yourself, you can setup advantageous channels, theres a zero fee routing node, i think i see him down in the comments.
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I would not say worry, but i kinda feel this whole LN will be cheap forever is how people used to think the same thing about on-chain back in the day.
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I think currently the growth and connectivity of lightning network is skewed to the side of early adopters joining, many of them trying to become profitable routing nodes and overall just experimenting with the space.
Fee structures will change when we get more organic growth with real world economies moving to lightning - think towns, communities, cities as that will naturally become more localized in terms of connectivity and network graph.
For example: if you have a bar and majority of people pay with lightning and you can pay your suppliers with lightning then it will make sense to be connected to either a local liquidity provider that primarily servers that community or directly to your counter party in that transaction
Lots of nodes currently try to gamify node status and be better positioned in the network as they don't have a "natural" economic position yet, but I think with more businesses coming on lightning and wider adoption among people this will change in the future.
I suspect we'll see long term network growth more in the direction of how internet works with isp, local internet exchanges routing metropolitan or country traffic and only sending the traffic further out if the destination is not local. In this scenario bigger routing nodes will become more of a backbone like we have tier 1 internet providers who take care of underlying connectivity between smaller participants (be it isps/cities/countries or in lightning network case clusters of nodes representing connected economies)
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I think we will see more "centralization" in the sense that a bunch of competing big routing nodes will grow bigger and crowd out all other nodes. The fees between these hyper-nodes will be very low or 0.
What worries me more is the rising cost of opening and closing channels on-chain.
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Use proper wallet and software which caps fees so you wont overspend on fees.
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