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25 sats \ 4 replies \ @andyleroy 17 Jul 2022 \ on: Zero fee routing as a donation to everyone bitcoin
I personally have started putting a small amount of bitcoin onto a lightning node. I don't intend to make a profit, but rather get value from learning how everything works and testing things out. I think Lightning will become the payment rails and network of the future and there will be great professional opportunities as the network grows and banks and existing payment infrastructure companies continue to adopt bitcoin and lightning.
However ... I don't think it is a good idea to rely on "altruism" and "donations", and I don't think that zero fee routing is something that should be the goal.
Bitcoin is so valuable because it puts in place the right incentives. All incentives in the bitcoin protocol encourage new miners to join and secure the network, encourage people to hodl, and proof of work ensures maximum decentralization and offers the highest form of protection against network corruption.
It is fine in the short term to see everyone join lightning and run nodes for learning, professional growth opportunities, and the betterment of the network, but IMO this is not sustainable. At some point the proper incentives must be in place to reward all of the work that goes into the network. Lightning won't be the payment rails of the world if no one makes any money. Long term, companies aren't going to run infrastructure for free and eat the costs of maintaining a node. And if they are doing all of this for free, they have to be making it back somewhere else - and usually that ends up making the people using their services the product.
I don't know how everything will turn out, but I think we should be rewarding and looking favorably on node runners who are making great profits. They are putting up their capital, doing a lot of work for the network, and creating tremendous value for everyone, and should be rightly compensated for everything.
Thanks for your thoughtful comment. I agree with you. The network will only be sustainable as incentives keep on generating a game theory that nudges everyone into the right behaviour. This means there must be a reward for deploying liquidity.
Obviously, a "donating" routing node like mine is not following a rational behaviour from an economical point of view. I just happen to enjoy things this way, which doesn't mean others should, nor that the network should rely on me.
You got me thinking though, and maybe some charitable effort can help the network grow though.
Think about it: the better the experience of users in the LN is (fast, low fees, payments don't fail), the more user we should see joining. Hence, a donating behaviour like mine might look like unfair competition towards other benefit-seeking routing nodes, but if it improves the network enough, more users will join, increasing the demand for channels and routing. Eventually, the capital I can or want invest in my charitable operation will run out, thus the increase in demand will start making yields more attractive for benefit-seeking nodes, and they will have more business than if I had never helped make the network better.
Or maybe not, who knows :)
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I agree, the incentives need to keep everything moving in the right direction. And to have accessibility to everyone is paramount, regardless of our altruistic or capitalistic behavior and intentions.
I'm no expert on the underlying protocols at play, but there seems to be some slight differences in running a lightning node blindly than that from bitcoin. My laptop that runs bitcoin core can almost only help the bitcoin network as a validator. The only time that wouldn't be the case is if I download the whole blockchain and take up bandwidth from peers, and then turn it off. But even if I turn off my laptop, etc - I'll generally serve as 100% net benefit to everyone.
Compared to lightning however, there may be many cases where I could be detrimental to the performance of the network - if my node doesn't have good uptime or balanced channels, I may make the path finding for payments more computationally expensive for other nodes or introduce more paths for failure when my selected channel doesn't actually have liquidity on the right side.
Not saying these detriments are worth some sort of "prevention from acting however I want to with my node", but it doesn't seem as cut and dry as the benefit to running a bitcoin node.
But to your points, it's still all likely for the better as these sort of things would have to be worked out over time, and getting everyone to adopt it is probably the most important thing. I just hope that there will be enough profitability and roi to compensate all of the professional node operators who drive forward such great innovation for everyone.
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Your ideas on the net negative outcome of a poor LN node are very interesting. I hadn't thought about them, thanks for sharing. I guess nodes and their implementations will also keep developing heuristics to avoid the bad apples. And perhaps reputation systems appear at some point (I think players like amboss are doing a great job in positioning themselves for these kind of roles).
And as for the profitability... Let's hope so. I frequently dream awake about what will happen when we see a massive jam at the mempool (December 2017 caliber). If things go as expected, the bottleneck at the mempool should both incentivize shifting transactions to LN (allowing node operators to increase fees and still get routing activity) and also make it more expensive to deploy new capital to open channels, again giving more gunpowder for the existing operators and channels to increase fees and benefits.
It feels a bit as if, nowadays, we live in a time where everyone can build a highway for free and no one charges much on cars going through their highways because there is barely any traffic. But if one day highways become prohibitively expensive to build and traffic suddenly spikes...
Oh well, let's keep on waiting to see how things unfold and enjoying the present as well. Thanks for the interesting discussion.
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Likewise, thanks for all your points and original post! And I love the highways analogy :) I'm hoping we continue to see adoption and excitement for lightning continue to grow
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