Unprofitable Lighting Node Operator here. AMA \ stacker news ~bitcoin

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Unprofitable Lighting Node Operator here. AMA

1696 sats \ 25 comments \ @NEEDcreations 30 Oct 2022 bitcoin

I did earn 400 sats when Saylor paid my 1 million sats invoice though so at least there's that

580 sats \ 1 reply \ @026c9e8a12 30 Oct 2022 freebie

From my own experience (very personnal and subjective one) you can't be profitable until you acquire enough routed volume. It means to have at least 2 or 3 BTC capacity, 50 big channels of a minimum 5 millions sats each, and enough good peers... And even with that you can expect few hundred or thousands sats in net positive at the end of the month, if you managed your liquidity well.

I think you have to manage your liquidity by avoiding swaps and rebalancing, just playing with the fees. If you are skilled enough you can automatized the changes in your fees.

To conclude I would say that the only way to be profitable is to be one the biggest node or by selling Lightning related services through your node, but no routing only.

0 sats \ 0 replies \ @NEEDcreations OP 30 Oct 2022

Thanks for sharing these tips. I appreciate it!

376 sats \ 0 replies \ @Tony 30 Oct 2022 freebie

This article by Lopp is highly recommended: https://blog.lopp.net/lightning-network-liquidity-management-guide/

301 sats \ 1 reply \ @SatoshiNakanodo 30 Oct 2022 freebie

After just a few months running my own LN node, I think I’ve come to the conclusion that profitability can be achieved, but only after you've been running for a while, have opened a number of good sized channels, and have found a good mix of active channels that balance themselves to a degree by their natural flows.

Everyone's node is different, but the basic steps I have followed (based on my own learnings) go something like this:

First, study node information available from Amboss and Lightning Terminal to identify peers to connect to. I aim for a mix of channels (both sinks and sources) with A. relatively low outgoing fees B. lots of good connections & growth C. relatively high rank for Betweenness / Hopness / Hubness
Start by opening 10-15 balanced channels with a capacity of at least 2-5M sats each (larger if you can afford), either by rebalancing immediately after opening the channel, or by opening channels using 'Liquidity Swaps' at https://lightningnetwork.plus/ and then working with the other peers to rebalance for no fees.
I set my channel fees fairly high at first (ie. >500ppm and >10 base fee)
I set MAX HTLC at no more than 500,000 sats (most node operators ignore this setting or set their MAX HTLC very high, but I set mine low to take advantage of my 'Base Fee' by allowing the channel to be used multiple times instead of one or two large transactions depleting the liquidity)
Wait and watch for a few hours to see if any movement occurs…

If movement occurs, I either leave fees alone or raise them incrementally until activity slows (being careful not to squash it completely)

If no movement occurs after a few hours, I begin reducing fees incrementally until liquidity starts to move (I generally use the same fees for all channels but may set certain channel fees higher if they get much higher usage)

When liquidity all moves to one side of a channel, routing activity will usually stop (especially when you're just starting out and don't have many channels). At this point I have two choices:

A. If I have enough funds on-chain I can open new channels that I think might complement my existing channels by pulling or pushing liquidity – essentially rebalancing my unbalanced channels for me.

B. Alternatively, I can rebalance my existing channels to feed the movement of liquidity and get things moving again.

-- In Conclusion... if you keep at it long enough you will eventually figure out the right fees and the right mix of channels that will keep you in the green. For now I have accepted the fact that I may have to operate at a loss for a while but I am helping the network to grow. Plus, it's a good way to learn.

-- Other resources I have found helpful...

• Four Tips for Running a Profitable Lightning Network Node by Erin Malone https://bitcoinmagazine.com/culture/four-tips-run-profitable-lightning-node

• Building a Lightning Network Node for Routing – Parts 1-3 https://voltage.cloud/blog/bitcoin-education/building-a-lightning-network-node-for-routing-part-1/

• How to run a Bitcoin Lightning Network node by BTCsessions https://youtu.be/KItleddMYFU

• Start and Manage a Bitcoin Lightning Node https://youtu.be/KItleddMYFU

• How to choose the right Lightning Network Channels for your Bitcoin node by Jonathan Levi https://youtu.be/Lojku8Tstyg

• Imbalance measure and proactive rebalancing for the Lightning Network https://youtu.be/KQX_cSenxNI

• Lightning 101: Node Profitability feat. Plebnet by Lightning Labs https://youtu.be/LRZy-VtCPe4

0 sats \ 0 replies \ @alpacachino 31 Oct 2022

Useful, thanks!

273 sats \ 1 reply \ @gd 30 Oct 2022

What do you find is your biggest pain point in running a lightning node?

0 sats \ 0 replies \ @NEEDcreations OP 30 Oct 2022

I'd say the toughest thing for is figuring out how to manage fees so that I can become profitable. It's not as easy as "setting it and forgetting it." You have to monitor the inflows and outflows of each channel. It's not easy doing this manually because I don't have that kind of time to provide that level of care for my node. People have figured out how to automate lots of the processes, but I'm not a coder so I have a disadvantage.

273 sats \ 5 replies \ @_b_o_n_e_s_ 30 Oct 2022

how many channels do you have, and how did you set up your first?

297 sats \ 4 replies \ @NEEDcreations OP 30 Oct 2022

Right now I have 14 channels. Most have 1-2 millions sats of liquidity which is the range I've seen recommended for new nodes. I used Umbrel to set it up. What other factors should I describe in how I "set it up"? I'm not sure what else to say about that...

100 sats \ 3 replies \ @_b_o_n_e_s_ 30 Oct 2022

I see. I run a node on old laptop, not umbrel, so I’m not really sure what the process to open channels really is.

Guess meant: how did you find the other node operator to setup first channel open with?

273 sats \ 0 replies \ @SatRat 30 Oct 2022

https://1ml.com/

https://amboss.space/

These are two sites that list and allow you to search lightning nodes to connect with. The hard part is figuring out who to connect with in order to route payments for fees. It’s more of an art than a science.

0 sats \ 1 reply \ @_b_o_n_e_s_ 30 Oct 2022

Sorry I don’t have any tips to be more profitable. I’m more curious how to get started running a lightning node 😅

2 sats \ 0 replies \ @Brunswick 30 Oct 2022

Sure, ask for advice from the guy that is losing money doing it, lol

273 sats \ 3 replies \ @nullcount 30 Oct 2022

What are your biggest costs that make you in profitable?

317 sats \ 2 replies \ @NEEDcreations OP 30 Oct 2022

There are on-chain fees for opening channels. There are lighting fees for manually rebalancing channels. There are on-chain fees for closing channels. When I open a channel that doesn't route any transactions (so I earn nothing), even after I balance it with a rebalance, I've wasted all those sats in fees. This has happened to me a handful of times already. I'm not sure if I'm being to impatient or that my peers are just not well connected enough or what. I'm still learning!

130 sats \ 1 reply \ @SatRat 30 Oct 2022

As a “non-coder” I ran an umbrella node for about a 11/2 yrs. 1- for the learning experience and understanding more about BTC and LN. and 2 - to see if I can build something that makes a little BTC on the side routing payments. I was unprofitable as well. The cost to open channels and rebalance constantly well eat your routing fees continuously. I think the problem is if you don’t have a source of revenue that feeds into the LN then all the costs to maintain and open channels falls on you as the operator. And I don’t mean you have to generate the money or whatever you just need to have a node that is connect to value being transferred on the LN. If you have a business that receives LN payments that works. If you find LN “loops” where value is consistently moving that works too but it’s hard to find unless you are willing to front the costs to open larger channels. You have to commit resources “BTC” to channels without knowing if they will even produce. And if not, closing the channel costs you the Sats you put into the system to balance it because they end up in the possess of the counter- node you balanced with. It’s interesting to learn but without constant analysis, knowledge and tools to help you “see” the network it is really hard to create a profitable routing node. Just my two Sats though. Good luck and keep up the good work my friend.

100 sats \ 0 replies \ @SatoshiNakanodo 31 Oct 2022 freebie

“closing the channel costs you the Sats you put into the system to balance it because they end up in the possess of the counter- node you balanced with.”

This is not true. When you rebalance a channel, your funds leave your node through one channel but they come back IN through another. Your Lightning balance will remain the same MINUS any transaction fees.

30 sats \ 0 replies \ @NEEDcreations OP 30 Oct 2022

I am trying to improve my node game. Tips welcomed

1 sat \ 1 reply \ @TheBTCManual 31 Oct 2022

I think most of us will remain unprofitable until we find a channel size range, right now plenty of the ones making any money have massive liquidity and running a bunch of channels, In my mind I feel think that it gets to a point where the topology of the network needs a lot of lets say 0.01/1 million sat channels just feeding one another and doing multi-path payments.

Right now it's still in the formation phase, I learned alot by wrecking myself opening channels lol and I am still learning

0 sats \ 0 replies \ @NEEDcreations OP 31 Oct 2022

true, thanks for sharing!

1 sat \ 0 replies \ @alpacachino 31 Oct 2022

Good job processing Saylor's tx

0 sats \ 0 replies \ @02947a7fb5 31 Oct 2022

200M to 1B sats in node size is probably the minimum why, Enough channels for your 100+users to have enough liquidity to utilize from. Anything short of that and you most likely won’t have enough sats from forwarding fees to cover your expenses. Users are what generate sats for your node, I’m talking mobile wallets with private channels or lndhub/lnbits wallets. Perhaps in the future more users will benefit routing node operators more.

Anyways stay safe gl hf don’t get scammed.

0 sats \ 2 replies \ @2big2fail 30 Oct 2022

why do it if it is so unprofitable?

15 sats \ 0 replies \ @NEEDcreations OP 30 Oct 2022

I can verify my own transactions with my node meaning I don't have to trust another node on the network to do it for me. This helps my privacy. Also, running a node increases the decentralization of the network so it helps Bitcoin. I like helping Bitcoin. I also like learning new things and everything about setting up the node and node management was/is new to me!

0 sats \ 0 replies \ @SatRat 30 Oct 2022

At this point I think the home node operator is donating time and resources to the evolution, decentralization, growth and ideals of the Bitcoin network. You reward is the satisfaction of “doing your part.” But monetarily it is not profitable for the regular pleb. And you get to verify your own tx’s and a dabble more privacy so there’s that as well.