i'm not charging much on my routing fees right now, i make more from my swap service. also i pass on most of my earnings to partner nodes that use my earning api right now.
it varies by the day, but a typical day would be something like:
500k sats earned from swaps
200k sats earned from routing (mostly to LOOP)
500k sats paid to node runners who use my earning api
the biggest day i ever had so far earned ~1m sats from swaps
no problem. i'm really trying to pass on all my earnings to other nodes right now. i think the potential profits to be made today are so much smaller than the future, so really optimizing for the future
in college 2013-2014, some kids were mining bitcoin in their dorms. i was like, oh, and didn't think much of it.
in 2016 i saw an article, asked a family friend about it, and he said "i think blockchain tech is cool but not convinced about bitcoin" lol. so i bought like $40 of bitcoin
in early 2017 i asked god to give me a good investment, and soon i started seeing things about bitcoin and ethereum, so i bought some more. 2017 i was a total shitcoiner, it was bad! but eventually learned that shitcoins suck.
in 2018 i started teaching myself bitcoin programming, then got a job at BitGo
too much shitcoinery at BitGo, so I left for Cash App in 2019, and been there ever since, working on the bitcoin hot wallets and lightning stuff
i'm not thrilled about the concept of alternative assets on lightning. i also think it will take a while for Taro to get a network of users. it is very far behind the current stablecoins
but that said, if it brings more volume to lightning, i guess i'm ok with that
i think there will be 10,000+ profitable nodes (slightly profitable), but I think the biggest profits (and %APY) will be had by the ~10-20 biggest nodes. And then a constant churn of another 10,000 or so nodes who are unprofitable.
each node is itself a network, and the value of a network increases exponentially w/ the number of connections (metcalfe's law). which is why i think the top nodes will have a big advantage over the smaller nodes
can you expand on your thoughts on how the network will grow over the period of 5-10y? Extrapolating from your comment you see a small minority of nodes playing the role of core backbone and earning the most? My speculation is that we'll see a lot of smaller local clusters with localized economic activity, similar to what we can see today in internet routing or even banking - you have local branches who serve smaller populations who facilitate a partially circular economy.
The way network was growing since inception wasn't a reflection of where there was an actual need for liquidity or any real economic activity, this has started to shift in the last 1-2years but i still think that with wider adoption we'll see a lot more nodes and players in the space serving smaller populations (from villages and cities to maybe regions) not globally, specially with the growing pains of regulation and uncertainty in that direction, but also from a pure practical standpoint of simplicity (being hyperconnected to where you spend/earn the most)
i'd like to see continued privacy enhancements, particularly around protecting the identity of receivers
i worry that Tor is not going to work well enough, everyone defaults to clearnet, and then we start seeing governments crack down on clearnet usage
i worry that "yield farming" on lightning will hit a mania phase, the market for inbound liquidity goes through a speculative bubble, and retail gets rekt somehow
my first impression is I think we may see some crystallization to an extent, but there will always be churn and instability, as is the nature of most human systems
ensuring you're not opening up opportunities for your liquidity to get drained
what to set the fees!?
biggest operational challenges for cash app:
dealing with the constraints the legal team put on us that we can only connect to 3-4 vetted peers lol. makes routing payments for low fees much harder when you are restricted with who you can connect to
keeping the deposit invoices small enough to scan was an interesting challenge. the more nodes you have, the more route-hints you need in the invoice. not too hard to solve (just select which nodes you wanna put in the route hints) but i was interesting
Rolling up through Block as a public company, are you all subject to compliance for understanding and reporting payment details and amounts (issues like AML)? Or audit requirements for 'material' capital deployment?
Running a node on Deezy looks sweet and I would like to do it sometime soon. Is there any chance the minimum amount to start would ever be less than 1 BTC or 0.005 BTC for testing?
i don't have any good recommended strategies that would work well for under like 0.5 BTC of capital, but that's not to say there won't be something better in the future
i think spending a lot of time with athletes, i learned how to be dumb. i feel like i'm half dumb. so i think that helps me keep things simple in software.
I learned in school mostly (high school + studied computer science in college), but after that I learned by trying to build stuff and using free online materials (google is a programmers best friend!)
I don't mind too much what others do! I think it can be worth it be run unprofitably for a little as a way to gain experience. And if a node is unprofitable it just means they're giving profits to other nodes (or miners!)
You're using LND for your swap service, right? Any thoughts on LDK becoming a superior service offering that eventually hits end consumers? Or do you see LDK being more for enterprise use cases like Cash App?
What tools do you use for managing the liquidity? Very curious moreso on the onchain vs in channels part of it.
i personally use LND for my deezy node - it is the easiest to get running and has the most extensive ecosystem of tooling around it.
i don't think LDK will supplant LND as the leader for most nodes. I do think LDK will be extremely useful for a few major apps (I think the biggest self-custodial lightning apps will find LDK has the tooling they need to make it happen). LDK is great when you wanna do something more customized
In your opinion, what are some of the current challenges, tech, or proposals in the Lightning space (especially on the protocol side) that devs should prioritize to work on?
i would like to see more focus on ensuring all the node implementation remain compatible (sometimes there are weird issues where different node implementations have problems working together)
i also would like to see some solutions to the known attacks that exist on lightning
Are there any sites, GitHub repos, or other sources you can recommend for tracking known security issues in Lightning and the progress on efforts to address each?
Similarly, is there a resource with a compatibility checker for the different LN node implementations, it would be great to know what features are available in which node implementation and the known issues using certain implementations together?
i am surprised and excited by how global the lightning network is. seeing volume from nodes in india, south america, south asia, etc is super cool and makes me feel like we're really onto something here
How many sats do you earn in fees on average in a day?
i'm not charging much on my routing fees right now, i make more from my swap service. also i pass on most of my earnings to partner nodes that use my earning api right now.
it varies by the day, but a typical day would be something like:
paidto node runners who use my earning apithe biggest day i ever had so far earned ~1m sats from swaps
Cool, thanks for being open with this info. Very helpful to understand.
no problem. i'm really trying to pass on all my earnings to other nodes right now. i think the potential profits to be made today are so much smaller than the future, so really optimizing for the future
What is your Bitcoin story?
in college 2013-2014, some kids were mining bitcoin in their dorms. i was like, oh, and didn't think much of it.
in 2016 i saw an article, asked a family friend about it, and he said "i think blockchain tech is cool but not convinced about bitcoin" lol. so i bought like $40 of bitcoin
in early 2017 i asked god to give me a good investment, and soon i started seeing things about bitcoin and ethereum, so i bought some more. 2017 i was a total shitcoiner, it was bad! but eventually learned that shitcoins suck.
in 2018 i started teaching myself bitcoin programming, then got a job at BitGo
too much shitcoinery at BitGo, so I left for Cash App in 2019, and been there ever since, working on the bitcoin hot wallets and lightning stuff
What are your thoughts on Taro? Any idea how it will impact Deezy Node?
i'm not thrilled about the concept of alternative assets on lightning. i also think it will take a while for Taro to get a network of users. it is very far behind the current stablecoins
but that said, if it brings more volume to lightning, i guess i'm ok with that
how many profitable routing nodes will be operating on the Lightning Network in a decade?
i think there will be 10,000+ profitable nodes (slightly profitable), but I think the biggest profits (and %APY) will be had by the ~10-20 biggest nodes. And then a constant churn of another 10,000 or so nodes who are unprofitable.
each node is itself a network, and the value of a network increases exponentially w/ the number of connections (metcalfe's law). which is why i think the top nodes will have a big advantage over the smaller nodes
can you expand on your thoughts on how the network will grow over the period of 5-10y? Extrapolating from your comment you see a small minority of nodes playing the role of core backbone and earning the most? My speculation is that we'll see a lot of smaller local clusters with localized economic activity, similar to what we can see today in internet routing or even banking - you have local branches who serve smaller populations who facilitate a partially circular economy.
The way network was growing since inception wasn't a reflection of where there was an actual need for liquidity or any real economic activity, this has started to shift in the last 1-2years but i still think that with wider adoption we'll see a lot more nodes and players in the space serving smaller populations (from villages and cities to maybe regions) not globally, specially with the growing pains of regulation and uncertainty in that direction, but also from a pure practical standpoint of simplicity (being hyperconnected to where you spend/earn the most)
From 1 to 10, what is your greed level?
i'm pretty greedy and competitive, so like 9 maybe lol
Assuming Bitcoin adoption continues its trajectory, what are your biggest concerns with Lightning Network's ultimate adoption, growth, and success?
i'd like to see continued privacy enhancements, particularly around protecting the identity of receivers
i worry that Tor is not going to work well enough, everyone defaults to clearnet, and then we start seeing governments crack down on clearnet usage
i worry that "yield farming" on lightning will hit a mania phase, the market for inbound liquidity goes through a speculative bubble, and retail gets rekt somehow
What are your thoughts on the steady state lightning network model?
As NGU, do you think the network will 'crystalize'?
interesting! i'll need to read more on that.
my first impression is I think we may see some crystallization to an extent, but there will always be churn and instability, as is the nature of most human systems
Hi Danny, thanks for all your work in the Bitcoin and Lightning space, and thanks for taking time for an AMA.
What are the biggest challenges for you as a large routing node operator?
What are the biggest operational challenges for Cash App running a group of lightning nodes?
biggest challenges as a routing node operator:
biggest operational challenges for cash app:
Thank you for your insight.
Rolling up through Block as a public company, are you all subject to compliance for understanding and reporting payment details and amounts (issues like AML)? Or audit requirements for 'material' capital deployment?
https://www.acfcs.org/acfcs-exclusive-whitepaper-the-lightning-network-deconstructed-and-evaluated/
yeah Block is subject to all the legal things
Running a node on Deezy looks sweet and I would like to do it sometime soon. Is there any chance the minimum amount to start would ever be less than 1 BTC or 0.005 BTC for testing?
i don't have any good recommended strategies that would work well for under like 0.5 BTC of capital, but that's not to say there won't be something better in the future
In what ways has being a former athlete made you a better software engineer?
i think spending a lot of time with athletes, i learned how to be dumb. i feel like i'm half dumb. so i think that helps me keep things simple in software.
lol, all the other athletes coming for the sn comments
that's how you onboard users
Two questions.
Thanks for doing the AMA and what you do with LN!
You're using LND for your swap service, right? Any thoughts on LDK becoming a superior service offering that eventually hits end consumers? Or do you see LDK being more for enterprise use cases like Cash App?
What tools do you use for managing the liquidity? Very curious moreso on the onchain vs in channels part of it.
for managing liquidity, i have a bunch of scripts i wrote. but also at times have used things like these:
charge-lnd for fee setting (https://github.com/accumulator/charge-lnd) lightning-jet for automated rebalancing (https://github.com/itsneski/lightning-jet) lndg for node management (https://github.com/cryptosharks131/lndg)
i personally use LND for my deezy node - it is the easiest to get running and has the most extensive ecosystem of tooling around it.
i don't think LDK will supplant LND as the leader for most nodes. I do think LDK will be extremely useful for a few major apps (I think the biggest self-custodial lightning apps will find LDK has the tooling they need to make it happen). LDK is great when you wanna do something more customized
Favorite Sci-Fi novel?
i haven't read much sci-fi, but I liked Ender's Game
also not a novel, but i'm a huge fan of Rick and Morty
In your opinion, what are some of the current challenges, tech, or proposals in the Lightning space (especially on the protocol side) that devs should prioritize to work on?
i would like to see more focus on ensuring all the node implementation remain compatible (sometimes there are weird issues where different node implementations have problems working together)
i also would like to see some solutions to the known attacks that exist on lightning
Are there any sites, GitHub repos, or other sources you can recommend for tracking known security issues in Lightning and the progress on efforts to address each?
Similarly, is there a resource with a compatibility checker for the different LN node implementations, it would be great to know what features are available in which node implementation and the known issues using certain implementations together?
i'm not aware of existing resources for either of those unfortunately, other than possibly the Issues sections of each node's github repos
What's been the biggest challenge of running Deezy?
keeping flows and channels balanced! also bootstrapping at the beginning was a grind!
What's the most surprising thing you've learned running Deezy?
i am surprised and excited by how global the lightning network is. seeing volume from nodes in india, south america, south asia, etc is super cool and makes me feel like we're really onto something here
also, the biggest learning i've had is about the market dynamics of liquidity on lightning. liquidity is a market, you can buy it and sell it, etc
Family of Freddy?
how u mean
https://cdn.filmtotaal.nl/images/original/bikn62egnm08_hero.jpg
ah yes he looks like me
I knew it!
i just gotta grow out my fingernails a little longer
When are we going to see Lightning Address support at Cash App?