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62 sats \ 1 reply \ @Storyteller OP 28 Aug 2023 \ on: Are current lightning nodes killing new small nodes? bitcoin
I have to readjust my statement. Current Lightning Nodes are NOT killing the smaller ones.
I'm sorry to all the large nodes trying to run a business and seeing this post. And I'm thankful to all the large nodes that replied to my post and taught me some valuable lessons today.
I got a lot of insights with this post.
My understanding after just some hours of posting this post are as follows now:
- it is a business running a lightning node.
- the larger nodes are just businesses taking risk, deploying capital to make a living.
- there are natural reasons why a larger node will not just open a channel with each new small starter node
- if you open channels that are not used it is like investing a lot of dead capital on a road that is never going to be used. No normal person would ever build a road to a new city where no body is going to be living. If there is no activity or no activity expected for routing sats it makes no sense to just open a channel.
- large nodes are no Santa Clause that just share goodies and presents with others.
- there are risks involved, closing channels etc. If you have to close channels, because they are small, it just eats up your capital. So no large node would do this otherwise they go bankrupt.
- There are some economics involved that when the bitcoin price increases that this will be more difficult for starting nodes to start. Because the existing nodes will have more incentives not to link to smaller ones.
- you can use testnet. Better to use testnet to teach about lightning nodes, umbrel etc.
- you can have private nodes. You can link private nodes with each other and teach people. You do not have to go the public node approach.
- Running your own bank, hmmm is that possible for everyone? I don't think so. I will be a bank, but there will not be easily inbound and outbound transactions.
New questions come up
This is an exiting journey. It looks like running a node is kind of something that can be simulated or calculated in a spreadsheet.
You have capital to invest. You have some assumptions about the channel size. You have assumptions or some targets regarding your connections. And you expect this amount of liquidity to be routed and this amount of revenues (transaction costs). And there are this amount of channels to be closed (chances) and this amount of costs involved (onchain).
That sounds like a nice spreadsheet where you can calculate if you are going to make money or not. Hard money I mean.
I wonder now how much liquidity you need and how many nodes with what liquidity to build say a 10 million USD economy. If you have 1000 businesses spread around a country or globally and they all have 10 million USD liquidity. The money supply is 10 million USD. How many transactions do you need, at what level - how big per transaction - to be able to create a small economy between these 1000 businesses.
Imagine these businesses all sell a 100 dollar product. And they all have sales of 10.000 dollars per month. How many nodes do you need. What does the channel size needs to be?
This is another question. Has nothing to do with this post. But I just put my thoughts here. After reflecting on this post.
Thanks all for teaching me.
I can recommend using Polar (https://github.com/jamaljsr/polar) to roll out a local LN. It runs real daemons such as Bitcoin Core and LND and they connect to each other using real sockets. You can insta-mine btc and give it to all the nodes, open channels, create and pay invoices etc., the usual stuff. Everything is instant, free and as close to the real network as possible.
Imagine these businesses all sell a 100 dollar product. And they all have sales of 10.000 dollars per month. How many nodes do you need. What does the channel size needs to be?
No real way to answer that, just open some channels and see how it scales. Liquidity only limits payments in one direction, i.e. you can't send more than 1M sats through a 1M channel. But if you send and receive back, you can do that indefinitely long. So what actually matters is the balance between selling and buying goods&services between those businesses.
I think a good rule of thumb would be opening a channel with at least 3 times greater capacity than your monthly turnaround so you'd have some margin. It's possible to buy inbound with push, i.e. you buy a 3M sat channel and your balance will be 1.5M (of course, you pay that 1.5M on chain + the service fee for 1.5M inbound). Now you can both spend and receive which is ideal for a business because if all businesses open channels with no inbound they can't pay because no one can receive, and if they all buy inbound they also can't pay because no one can send, and if they somehow agree that some of them open channels by themselves and some buy inbound it becomes overcomplicated and messy.
Another cool feature is that LN doesn't need to be global or even public. Businesses, banks and communities (such as villages) can run their own segments that don't interact with the main LN, fully privately. They don't even need internet for that except for opening the initial channels and monitoring the chain for force closes. Of course, they can also run their own Bitcoin network (and ditch the internet completely) but it wouldn't have any real value because it wouldn't be a global consensus money.
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