Supporting the Bitcoin network by running a full node helps decentralize the ecosystem and make it more resistant. The same applies to operating a Lightning node, although there is a minor monetary incentive. It is possible to make money with a Lightning node, although you shouldn’t expect too much from it.
The Current Lightning Network Landscape
Everyone will agree Bitcoin cannot scale to accommodate the necessary amount of real-world transactions through a Layer-1 approach. That issue isn’t unique to Bitcoin, but it is the only relevant network when talking about real-world settlement and transactions. Unfortunately, the network is held back by 1 MB blocks and 10-minute confirmation times per block.
Although there have been attempts at increasing the block size – through unsuccessful and ultimately nearly useless forks – that isn’t the answer either. Ongoing efficiency improvements will reduce the amount of data transactions take up in a block, but that can only go so far. Taking some transactional data or transfers off-chain – through solutions like the Lightning Network – is an appealing option.
Through Lightning, users can keep individual ledgers of liquidity and only broadcast it to the Bitcoin chain once they create or close payment channels. Transactions involving channels are only broadcast so often, while the network can still perform day-to-day operations without clogging up the Bitcoin chain. Instead, the main blockchain will have more room for large-scale transfers immediately requiring security and finality on that layer.
To achieve that goal, the Lightning Network needs substantial BTC liquidity for people to make transactions quicker, cheaper, and more efficient. Today, the LN has liquidity of over 4,319 BTC, or roughly $97 million. It is a fraction of the Bitcoin network’s value, representing over 19.1 million BTC, or $493 billion. Not all of that liquidity should move to the Lightning Network, but there is more demand for those willing to run a Lightning node.
Every Lightning Node Matters
In the current landscape, there are 17,137 Lightning nodes. That may seem like a good amount, but things can always be better. More importantly, those noes have over 85,000 payment channels. That covers a good reach for those looking to make BTC payments to other enthusiasts but still makes no real dent for real-world adoption.
One way of changing that narrative is by getting more people to run a Lightning node. It is not a complicated task, and with the help of Umbrel, all it takes is getting the necessary hardware set up. Others prefer a more hands-on approach and will scour GitHub repositories for software and code tweaks. Either approach is valid, but it is essential to get more Lightning nodes online AND improve their overall channel capacity.
Is A Lightning Node Profitable?
Unlike a Bitcoin full node, running a Lightning node can generate a small income. Users that forward transactions from other nodes can collect a small fee – often a fraction of an on-chain BTC fee – to create a passive revenue of sorts. The more liquidity a node has to forward payments, the higher the chance other payment channels will connect to it.
Lightning nodes will always try to find the most efficient path for processing transactions. That includes setting your routing fees as low as possible to be deemed efficient. However, the fees need to be high enough to cover your electricity costs for running the node and pocket a profit. It requires a bit of tinkering and evaluation.
Once you find the sweet spot for your fees, it is a matter of being patient and ensuring you can cover the basic costs. Recovering the hardware cost will take a long time, and being profitable only comes after that. Even so, it is worth running a Lightning node if you are passionate about advancing Bitcoin in a mainstream-oriented sense.
With the right hardware, running a Lightning Node barely consumes electricity, and you can keep initial setup costs well below $200. Of course, it will cost you a few coffees at Starbucks, but it is for the greater good.
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