The Bitcoin Lightning Network, a second-layer protocol built on top of Bitcoin's blockchain, has revolutionized microtransactions by offering rapid, low-cost transfers. This post explores the detailed steps involved in a transaction through a Lightning Network Payment Channel, illustrating how this technology has greatly enhanced Bitcoin’s scalability and utility.
Opening a Payment Channel
How and why to open a payment channel: Opening a payment channel is like establishing a private tunnel between two parties. This allows multiple transactions to take place off-chain, reducing congestion on the main Bitcoin blockchain. A channel only requires two on-chain transactions: one to open and one to close.
Funding the channel: To commence transactions on the Lightning Network, one needs to fund the channel. This involves committing a certain amount of Bitcoin from your wallet to the channel, which acts as the maximum capacity for transactions until the channel is closed or more funds are added.
Channel Opening
Transacting on the Lightning Network
Making transactions: Within the confines of a payment channel, parties can conduct an infinite number of transactions, as long as the cumulative amount doesn't exceed the channel's funding. These transactions are instantaneous, happening in real-time between the involved parties.
Updating the channel’s fund distribution: After each transaction, the distribution of funds within the channel changes. Both parties maintain a local copy of the channel's state. For instance, if Alice funds a channel with 0.5 BTC and sends 0.1 BTC to Bob through the channel, she now holds 0.4 BTC and Bob 0.1 BTC in channel balances.
Transacting on Lightning
Closing a Payment Channel
When and how to close a channel: A payment channel can be closed by either party at any time. To close the channel, the latest state (balance distribution) is broadcast to the Bitcoin network and processed as a regular transaction.
Settlement process: When the channel closes, the current balances are settled on the Bitcoin blockchain. Using the previous example, Alice receives 0.4 BTC and Bob receives 0.1 BTC in their respective wallets.
Closing a channel
Forwarding on the Lightning Network
One of the most innovative features of the Lightning Network is its ability to facilitate multi-hop payments. Rather than always requiring a direct channel between transacting parties, the Lightning Network allows payments to be routed through intermediary nodes. Let's break down a simple forwarding scenario:
Initial Setup:
Alice has a channel with Bob, where she possesses 0.5 BTC.
Bob, in turn, has a separate channel with Carol, holding 0.3 BTC of his own.
The Transaction Sequence:
Intent: Alice wishes to send Carol 0.1 BTC. However, Alice doesn't have a direct channel with Carol. Instead of establishing a new channel (which would be resource-intensive), Alice can utilize Bob as an intermediary to route her payment.
Transaction to Bob: Alice sends 0.1 BTC to Bob on their shared channel. After this, Alice's balance reduces to 0.4 BTC, while Bob's balance on the Alice-Bob channel increases to 0.1 BTC.
Forwarding the Payment: Bob, upon receiving the 0.1 BTC from Alice, forwards this amount to Carol on their own channel. This reduces Bob's balance to 0.2 BTC on the Bob-Carol channel, while increasing Carol's balance.
Forwarding Fee: For his role in facilitating this transaction, Bob retains a tiny amount—let's say a few Satoshis—as a forwarding fee. This incentivizes nodes to participate in routing payments, ensuring the fluidity and functionality of the network.
Forwaring on Lightning
Forwarding isn't restricted to just three nodes. Payments can be routed through multiple nodes, essentially connecting any node with any other within the Lightning Network. However, all this complexity is abstracted away from the user, with the task of finding payment routes being automated within wallets.
Multi-hop forwarding
This forwarding mechanism exemplifies the prowess of the Lightning Network, enabling transactions between parties that don't share a direct channel, and fostering a more interconnected and efficient network. Through smart routing and minimal fees, users benefit from faster transactions without the need for global consensus on every payment.
Advantages and Challenges
Speed, cost-efficiency, and privacy: The Lightning Network stands out for its rapid transaction speeds, low costs, and enhanced privacy. As most transactions occur off-chain, they don’t consume precious block space, resulting in lower fees. Additionally, since most of the transactions are kept private between two parties, it boosts transactional privacy.
Handling disputes: One challenge is the potential for disputes, especially if a party attempts to broadcast an outdated channel state. However, built-in punitive measures deter malicious activity. If someone tries to cheat by broadcasting an old transaction, the other party can claim all the funds in the channel as a penalty. Check out Watch Swaps to secure your channel balances even if your node is offline.
Conclusion
The Lightning Network, with its off-chain transaction capabilities, brings unprecedented ease and efficiency to Bitcoin transactions. As we move towards a future where instantaneous microtransactions become a norm, the importance and utility of the Lightning Network can only be expected to grow. Whether you're a casual user or a dedicated Bitcoin enthusiast, understanding the intricacies of Lightning Network transactions remains crucial in navigating the evolving landscape of digital currencies.
Hello dear passionate LN+ users and Bitcoin lightning community!
Some time ago, together with a few LN users we imagined a system reminiscent of a massive and extended liquidity swap (that many of you know well and use frequently), where every channel you open and every transaction you make is reciprocated over the long term. This isn't just a vision; it's the foundation behind the LN+ Liquidity Pool. Just as liquidity swaps allow for short-term reciprocity, our new system promotes long-term cooperation across the entire network. It's like the traditional concept of liquidity swaps, but on a grander and more prolonged scale.
At LN+, we're always looking for ways to up our game. We know the hurdles Bitcoin Lightning Network node operators face, and while we've got great solutions already, we're all about finding even better ones. So, get ready because today I'm unveiling a shiny new tool to help node operators.
Opening the LN+ Liquidity Pool
If you have a Bitcoin Lightning Node and you want to get incoming capacity, you can join our liquidity pool. In order to join you have to buy or earn liquidity credits. Once you're in the pool, nodes will open channels to you in return for your credits. You have full control over to whom you open and who opens to you. We will give you instructions all throughout the process to make it easy. You can monitor the status of the liquidity credit flow in your private section on your profile page.
How To Dive Into the LN+ Liquidity Pool
In order to get started you don't need to learn the process of how to participate in the pool, because we will guide you step by step all the way. However, if you're interested to get a quick overview, you can read about the process below:
Login with your lightning node to LN+ using a signed signature.
Optionally purchase liquidity credits and fast-forward to step 7, otherwise proceed to step 3.
Or, to get involved without spending, select a node in the pool to open a channel.
Patiently await acceptance of your channel opening offer (also called credit transaction) from the other node.
Upon acceptance, initiate the channel opening.
Watch as you automatically and gradually accrue credits over a span of 50 days – a fixed timeframe, during which the channel needs to stay open.
Once you've gathered some credits, other nodes will approach you with their channel own opening offers.
It's your call - accept or decline as you deem fit.
After accepting an offer, wait for a channel to be opened towards you by another node.
The cost of the new channels will be covered by your liquidity credits over the subsequent 50 days.
Nodes in the Liquidity Pool
Why Should You Jump In
Fluidity: No strict time frame constraints for opening and receiving channels.
Flexibility: Tailored channel sizes, depending on your preferences.
Inclusivity: Beginners and merchants can easily integrate with the community by buying liquidity credits.
Control: You decide your channel partners – both for opening and receiving.
Cost-effectiveness: Earn liquidity credits just by opening channels. Stay active within the pool, and you could maintain a profitable node without added costs of needing to ever loop out to establish incoming liquidity.
Credit Transactions between nodes in the Liquidity Pool
Liquidity Credits Explained
Central to the Liquidity Pool are the Liquidity Credits, ensuring that everyone gets their fair amount of incoming channel liquidity that is equal to the amount of liquidity they opened to other nodes. Liquidity Credits aren't a token or (shit)coin. Instead, they're an internal measure of owed incoming liquidity that can only be exchanged for incoming liquidity on LN+.
Node operators and merchants in need of significant incoming liquidity, you have the option to purchase liquidity pool credits directly from LN+, so that node operators would open channels towards you in return for your credits. The price of purchased liquidity credits is determined by LN+ based on market conditions with the intention to ensure there is always enough liquidity credits available in the pool to keep the pool functional. The price is subject to change.
Comparing the Pool with Swaps
I can't thank you enough for being passionate users of liquidity swaps in the last years. It is a huge success thanks to you. The pool is a direct competitor to swaps, so the question would naturally arise. How do the two services, the liquidity swaps and the liquidity pool compare?
Benefits of the Pool over Swaps:
You have full control over who you connect to. In swaps you partially rely on luck for some of your connections.
As a merchant, you can join the pool and start receiving channels even if you don't have capacity to open more channels of your own. This requires you to buy liquidity credits from LN+. In swaps, you're required to open channels as well.
Pool channel opens is a continuous process without a specific end. Swaps happen within a specific time frame.
In the pool the channels you open and the channels you receive can be of a different size and quantity. In swaps the opened and received channels are of equal size.
Benefits of Swaps over the Pool:
Channel opens happen potentially faster, sometimes within 24h. Pool is a continuous process without a specific end.
Some of the connections are partially accidental which is good for LN's decentralization and equity. The pool connections are fully under your control.
Easier to understand and explain how a triangle works with 3 node operators opening to each other. The pool has the concept of liquidity credits that ensures fairness in the system, but adds some complexity.
In case you are wondering, how the Liquidity Pool and Swaps compare to other solutions in the market? The most important benefit of LN+'s services is that you can use them entirely free to achieve incoming liquidity and to grow your node twice as fast without additional cost to open those extra channels.
The Pool is Now Open
I'm very excited to have you at LN+, and eager to hear what you think of the new liquidity pool. If you have any ideas, find any errors, need any help getting started, or want to resolve any potential issue, I'm available on email, in DM, or on social media. You can also learn more about the pool on the about page, which contains a glossary of important terms. Please don't think twice to reach out. And now...
The Bitcoin Lightning Network is a layer-2 scaling solution that enables fast and cheap bitcoin transactions. By running your own Lightning Network node, you not only contribute to the network's decentralization but also gain greater control over your transactions. This article will guide you through the process of setting up a non-custodial Lightning Network node using various solutions.
1. Lightning Network Daemon
LND for short is the most popular implementation of the Lightning Network protocol, because there is a rich ecosystem of apps around it that help you monitor and manage your node.
If you're comfortable with the command line, follow the steps below to get started. Otherwise, skip to the next option, which makes the process more user friendly.
Requirements:
A computer or VPS with a minimum of 2GB RAM.
Sufficient storage for the Bitcoin blockchain and the lightning channel states (1TB recommended).
Bitcoin Core or btcd (for the backend).
Steps:
Install Bitcoin Core: You need to run a Bitcoin full node for LND to work. Download Bitcoin Core from the official website and sync it with the Bitcoin blockchain.
Configuration: Configure your lnd.conf file with the appropriate settings.
Start LND: Once everything is set up, launch the LND daemon.
Create a wallet: Use the lncli create command to set up a new Lightning wallet.
2. Umbrel
Umbrel offers an easy way to run a Bitcoin and Lightning node using LND on a dedicated Raspberry Pi device, on your PC / Mac or on dedicated hardware they sell.
Umbrel Home
Requirements:
Raspberry Pi 4 (with 4GB or 8GB RAM recommended if you want to run many Umbrel apps).
MicroSD card (32GB minimum).
External SSD (1TB recommended).
Steps:
Download Umbrel: Head over to the Umbrel download page and download the latest release.
Flash SD Card: Use a tool like Balena Etcher to flash the downloaded image to your MicroSD card.
Setup: Insert the MicroSD card into the Raspberry Pi, connect the SSD, and power it up.
Access Umbrel: Open a browser and visit http://umbrel.local to access the Umbrel dashboard.
Complete Setup: Follow the on-screen prompts to complete your node setup.
You can also run Umbrel on a PC or Mac. Just run this simple command:
curl -L https://umbrel.sh | bash
Finally, Umbrel also sells ready made boxes with everything setup for you.
3. Core Lightning
Formerly called C-Lightning is Blockstream’s implementation of the Lightning Network. It is optimized for heavy users with many channels and forward transactions.
Create Node: Once registered, click on "Create Node" and choose your desired configuration.
Access Node: Once your node is live, you'll be provided with connection details to manage your node.
Manage Node: Use the provided interface to open channels, send/receive payments, and manage your Lightning node.
5. Start 9 Embassy
Embassy is an elegant, plug-and-play personal server for running powerful, open-source services like Bitcoin, Lightning, data storage, password management, instant messaging, social networking, and more.
Start 9 Server Pure
You can pick from 3 options of servers depending on your need. Everything is pre-installed, so this option is possibly the simplest way to get started if you have the funds to buy a dedicated server for your home or office.
6. Citadel
Citadel is a fork of Umbrel, and it's fully open source. Not only does Citadel include a large selection of apps already available, anyone from the community can build their own app store and you can install it.
Citadel App Store
Conclusion
Setting up a Bitcoin Lightning Network node is a rewarding experience, contributing to the network's growth and understanding the intricacies of the Lightning Network. Whether you opt for a DIY approach with LND or Umbrel or choose a managed solution like Voltage Cloud, you're taking a step forward in the world of decentralized finance.
Once you have your node up and running, come back here to LN+ and start opening channels in Liquidity Swaps with other node operators in a cooperative fashion.
Note: Always ensure you have backups of your node and wallet. Lightning Network is still experimental, and there's a risk of funds loss. Always act with caution and only commit funds you're willing to lose.
From today, you have the freedom to express your unique style by either uploading your custom image or selecting from a growing array of exciting backgrounds inspired by exotic, fictional locations in the post-Bitcoin standard era. This new feature provides the flexibility not only to pick your favorite image but also to choose its opacity against the text overlay, giving you the control over how your profile appears to others.
But that's not all! Your chosen background won't just enhance your profile; it will also automatically update your social image. Within a few minutes, your brand-new look will be visible whenever you share your node on your social platforms.
Getting started is easy. Simply log in with your Lightning node signature, and click on 'Edit' to start customizing your profile. Can't wait to see your creative flair in action!
Oh, and one more thing. You can also add links to your node profile for most social media platforms:
Social media links supported on LN+
Discover the power of the Bitcoin LightningNetwork. It offers safety, wide acceptance, speed, low fees, privacy, scalability, and opportunities for innovation.
Here the 7 things LN does really well:
1. Safe
The Lightning Network (LN) runs on Bitcoin, the world's most powerful computer network. Bitcoin provides safety & security that can't be beaten. Built on a solid foundation, LN ensures the safety of your transactions.
Safe bitcoin foundations
2. Accepted
Denominated in Bitcoin, the satoshis over LN are widely accepted & recognized globally. This makes it easy to use for online transactions to buy many products and services and use it increasingly in real life too!
Lighting payments are widely accepted online
3. Fast
Lightning-fast transactions! The off-chain nature of the Bitcoin Lightning Network means your transactions are completed in mere seconds. Time is money, after all.
LN transactions are fast
4. Cheap
Say goodbye to hefty mining fees! The Lightning Network offers cheap transactions at just a few satoshis per transaction. Keep more of your hard-earned sats.
LN transactions are cheap
5. Private
Privacy matters! With the Bitcoin Lightning Network, transactions remain confidential as they're not on the public blockchain. Secure your privacy while transacting.
LN transactions offer high degree of privacy
6. Scaleable
The Lightning Network scales to global levels! Information is only stored on involved computers & discarded when channels close, enabling massive scalability.
LN scales to global levels
7. Innovative
Build upon the Bitcoin Lightning Network. It enables various L3 innovations like authentication, assets, BiFi, payment streaming, and more. Unleash your creativity!
The Bitcoin Lightning Network (LN) has emerged as a game-changing solution in the world of crypto, addressing the transaction count scalability limitations of the Bitcoin blockchain. This Layer 2 protocol enables faster, cheaper, and more efficient transactions, paving the way for mass adoption. In this blog post, I will explore the fascinating history of the LN, from its inception to its current state.
The Genesis: A Whitepaper in 2015
The story of the Bitcoin Lightning Network began in 2015, when Joseph Poon and Thaddeus Dryja started working on a whitepaper titled "The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments." The paper proposed a novel Layer 2 solution that could overcome the inherent scalability limitations of the Bitcoin blockchain, enabling millions of transactions per second. The paper was published on January 14th, 2016.
Lightning White Paper
Early Development and Progress
Following the release of the whitepaper, several teams started working on implementing the LN concept, including Lightning Labs, Blockstream, and ACINQ. These developers built and refined the LN protocol, creating software implementations such as the Lightning Network Daemon (LND) written in the programming language Go, Core Lightning (CLN) written mostly in Go and partially in Python, and Eclair written in Scala.
The Lightning Network Testnet
In late 2016, Blockstream engineers Paul “Rusty” Russell and Dr. Christian Decker completed the first LN transaction successfully on the Bitcoin testnet, a parallel network used for testing purposes. The test was made using Blockstream’s lightning prototype software, lightningd 0.5. It was a digital purchase from a web-store. This milestone marked the beginning of extensive testing and experimentation, paving the way for the first mainnet LN transactions.
The Mainnet Launch and the First LN Transactions
The first Bitcoin mainnnet Lightning Network transaction was created by software developer Alex Bosworth of Lightning Labs. He paid Bitrefill over lightning to pay his phone bill. Bitrefill is an international online service that enables users top up their prepaid mobile phone plans and buy various gift cards for many other services and products with bitcoin.
The Lightning Torch and Growing Awareness
The Lightning Network gained widespread attention in early 2019, thanks to the Lightning Torch experiment. This social media campaign involved passing an incremental LN payment (the torch) between users, showcasing the LN's capabilities for fast and low-cost transactions. The Lightning Torch attracted participants from around the world, including prominent figures such as Twitter CEO Jack Dorsey, Litecoin founder Charlie Lee, Lightning Labs CEO Elizabeth Stark and Binance CEO Changpeng Zhao among many others.
The Growth of Infrastructure and Ecosystem
Over the years, the LN has experienced remarkable growth in terms of infrastructure, with an increasing number of nodes, channels, and network capacity. The development of user-friendly wallets like Zap, BlueWallet, and Phoenix has facilitated the adoption of LN payments, while services like Bitrefill and Fold have made it easier for users to spend their LN funds on everyday purchases. People also started running Bitcoin Lightning nodes at large numbers when Umbrel announced their easy to use node software that runs on low cost Raspi or on Linux computers.
LN Capacity Growth in BTC
Protocol Improvements and Enhancements
The LN continues to evolve, with developers working on protocol improvements such as multi-path payments, channel factories, and watchtowers (btw, check out our new Watch Swaps). In addition, the Bitcoin network's recent adoption of the Taproot upgrade, which includes the Schnorr signature algorithm, is expected to further enhance the efficiency and privacy of LN transactions.
Recent Adoption
By 2023, the Bitcoin Lightning Network has come a long way since its conception in 2015, transforming from an ambitious proposal to a functional, growing ecosystem. The LN received a massive boost from El Salvador where bitcoin is legal tender, and thus LN is used daily for LN payments in all kinds of establishments, including small local brands and large international brands like McDonald's and Starbucks. The social media platform Twitter introduced LN intergration through Strike a company that facilitates cross border payments using LN. Most recently the brand new decentralized social network Nostr started to support LN natively. As the LN continues to mature, it is poised to play a crucial role in driving the mass adoption of Bitcoin and revolutionizing the world of digital finance.
Operating a Bitcoin Lightning Network node can be a great way to contribute to the network and earn some extra income, but it also comes with some risks. In this blog post, we will discuss how to make your Lightning Network node safe to operate, including cyber security, power redundancy, and internet redundancy.
Cyber Security
Cyber security is a critical aspect of operating a Lightning Network node. A node that is not properly secured can be vulnerable to attacks that can result in the loss of funds or other sensitive information. Here are some tips to make your node cyber secure:
Choose a secure operating system The first step in securing your Lightning Network node is to choose a secure operating system. Linux is the recommended operating system for running a Lightning Network node, as it is more secure than other operating systems such as Windows or MacOS. Choose a version of Linux that is actively supported and updated, such as Ubuntu or Debian.
Secure your node's firewall A firewall is a network security system that monitors and controls incoming and outgoing network traffic. Configure your node's firewall to only allow incoming connections from trusted sources, such as your own IP address or known peers.
Install a VPN A VPN (Virtual Private Network) is a tool that encrypts your internet traffic and hides your IP address. By using a VPN, you can add an extra layer of security to your Lightning Network node. Only allow connections from trusted VPNs to your node.
Update regularly Keeping your node's software up-to-date is important for protecting it from vulnerabilities. Enable automatic updates for your operating system and be up to date on your LN implementation.
Protect your private keys Private keys are the most sensitive piece of information when it comes to securing your Lightning Network node. It's crucial to keep your private keys offline and in a secure location, such as a hardware wallet. Make sure to backup your private keys in multiple locations. The same precautions should be used when generating a macaroon.
Use a secure password Choose a strong and unique password for your node. Use a combination of uppercase and lowercase letters, numbers, and symbols. Avoid using common words or phrases.
Enable two-factor authentication (2FA) Two-factor authentication (2FA) adds an extra layer of security to your LN node. If available (ex. on Umbrel) use a hardware wallet or an authenticator app such as Google Authenticator to enable 2FA.
Now, let's look at specific software recommendations for securing your Lightning Network node:
Use the LND Watchtower service, which monitors the blockchain for attempted breaches of your Lightning Network channels. Check out the Watch Swaps we offer on LN+ for LND nodes that have a built in watchtower service.
Use the LND Tor hidden service to add an extra layer of privacy to your node's network traffic.
Enable LND's "disable admin macaroon" option to prevent unauthorized access to your node's administrative API.
Consider synchronous database replication with LND/postgres.
Use the CLN Watchtower service, which monitors the blockchain for attempted breaches of your Lightning Network channels. On LN+ we offer Watch Swaps for CLN nodes that use The Eye of Satoshi service.
Use the CLN Tor hidden service to add an extra layer of privacy to your node's network traffic.
Enable CLN's "disable admin cookie" option to prevent unauthorized access to your node's administrative API.
Consider sqlite db mirroring network drives to reduce the chance of state data loss.
Power Redundancy
Power outages can happen anytime, anywhere. It is crucial to ensure that your Lightning Network node remains operational during a power outage. Here are some tips to achieve power redundancy:
Use an uninterruptible power supply (UPS): A UPS is a battery backup system that provides power to your Lightning Network node during a power outage. A UPS can keep your node operational for several hours, depending on its capacity.
Use a generator: If you live in an area where power outages are frequent, consider using a generator as a backup power source for your Lightning Network node.
Avoid using Wi-Fi: A wired internet connection is more reliable than a Wi-Fi connection during a power outage.
Internet Redundancy
A reliable internet connection is also essential for operating a Lightning Network node. Here are some tips to ensure internet redundancy:
Use a wired internet connection: A wired internet connection is more reliable than a wireless connection. If possible, use a wired connection to connect your Lightning Network node to the internet.
Use a backup internet connection: If your primary internet connection goes down, a backup internet connection can keep your node operational. Consider using a mobile hotspot or a secondary wired connection as a backup.
In conclusion, operating a Lightning Network node can be a great way to contribute to the network and earn some extra income. However, it is essential to ensure that your node is safe to operate. By following the tips discussed in this blog post, you can make your Lightning Network node cyber secure and ensure power and internet redundancy, making it more resilient to power and internet outages.
TL;DR; I'm introducing Watch Swaps, a service similar to the Liquidity Swaps, but instead of opening channels to each other, node operators will watch each other's nodes with their watchtower services to protect against malicious channel force closure attacks, and the resulting potential loss of funds.
LN+'s first feature, the Liquidity Swaps have been very successful in the last year or so. More than 12K liquidity swaps allowed Bitcoin lightning network node users to cooperate with each other and open 40K channels in a mutually beneficial and efficient way. Liquidity swaps weren't only beneficial to individual node operators but to the network as a whole as well, because together we managed to decentralize the network. LN became highly resilient to single large nodes dropping out or behaving in an unfriendly way. A good test for this was when recently the second largest node (zerofeerouting) in the network dropped out. There was virtually no interruption to payments thanks to the many other nodes and their channels that could be used to route around the missing node.
Watch Swaps
Today, LN+ is launching a new feature that will hopefully improve another aspect of the network: security of your funds. We do this with the help of watchtowers to keep your channels safe even when your node is offline.
LN watchtowers are nothing new to LN+. We've been running an altruistic watchtower for a long time with the help of Voltage.cloud, but the reality is that this is a centralized solution and it's challenging to keep the server running smooth due to the huge demand.
The new LN+ Watch Swaps will allow node operators to find each other so they can watch each other's nodes using their watchtower services. With this setup, without a centralized watchtower service, even if your node is offline and somebody attacks one of your channels, the watchtower service of your choosing that nobody knows about will act on your behalf and issue a punish transaction that will send the entire capacity of the channel to your node.
Network Benefits
Besides the obvious benefit to individual nodes, running many watchtowers is beneficial to the entire network as a whole as well. When watchtowers are common, it becomes highly risky for an attacker to maliciously force close on a channel. Due to game theory, even nodes that have no watchtowers will be safe. There will be less attacks, which in turn helps the reputation of LN in general.
How Does it Work?
Watch Swaps are rather simple. It's an agreement between two participants: the author, who starts the watch swap, and the applicant, who applies to the watch swap.
The author can start a watch swap and setup the rules, such as type of watchtower (LND Watchtower or The Eye of Satoshi for CLN), the duration, and other unique rules they may have. The size of the watch swap is set automatically based on the author's node's size expessed as an LN+ rank.
As a side node, if you notice your LN+ node rank dropping a bit, that's nothing personal against you. It's expected across the board for many nodes starting now. It's a result of a new formula to calculate the rank, which hopes to help estimate the load a certain node will exert on the peer's watchtower service, so the pairing of nodes within a watch swap service is more fair and sustainable. Small nodes will be paired up with small nodes, and larger ones with larger ones. There are five watch swap sizes: Extra Small, Small, Medium, Large and Extra Large.
Applicants can look through the created watch swaps that match their node's size. Non-matching watch swaps will be filtered out from the view. The applicant can apply to the watch swap, but the application is not automatically accepted. The author can accept or reject the application. The reason for this extra approval step is necessary because watching each other node requires some level of trust. Both the applicant and the author will have a chance to assess each other's through their node profile information. If the application gets rejected, the applicant should not get offended, just apply elsewhere or create a watch swap themselves. Once an application is accepted, both parties will be able to see the URI for their peer's watchtower services, so they can add the service to their nodes.
Your watchtower service URI is kept secret from every party until the application is accepted. Once accepted the URI will be shared with your watch swap partner, and nobody else. In general, remember not to share your own or your watch swap partner's watchtower service URI with anyone else, or they may be able to connect to the service uninvited.
All this may feel complex just by reading about it in theory, but LN+ will guide you through the process step by step so it's easy for you in practice.
What's Next?
Before you create a watch swap, please do learn about the following subjects:
The concept of watchtowers in general and how your specific lightning implementation handles it. LND has a built in watchtower. On Umbrel the settings are exposed under Advanced Settings in your Lightning app (LND). For CLN you need a separate software The Eye of Satoshi (TEOS) to run a watchtower service, and there is a plugin for CLN to connect it.
How to enable the watchtower service on LND or how to install The Eye of Satoshi for CLN.
Creating your watchtower service URl. This is different from your URI to open channels.
Implications of running a watchtower service. It does require some resources on your part to run it (disk space, processing, bandwidth). Be conservative giving away your watchtower service URI.
Once you're knowledgeable about watchtowers and have the service URI ready, go ahead and start a watch swap or apply to an existing one.
Please do test out watch swaps and let me know if you see any issues, so I can fix them ASAP. Any ideas, recommendations are welcome!
Frequently Asked Question: Do I have to close my bitcoin lightning channels after some time?
Answer: No, you can keep channels open indefinitely. Many channels on the network are years old, and still working perfectly fine. There are 6 special situations when you want to close a channel listed below.
1. You absolutely NEED sats that are on your channel on chain instead. Examples for why:
The Bitcoin price went 10x, thus you want to put sats in cold storage.
You have to pay somebody on-chain.
2. Your peer went OFFLINE for a long time (9+ days), thus the channel is useless to receive or send. Also, if you both go offline, you may not be able to recover the sats in the channel. Don't be too hasty closing inactive channels, sometimes it takes a few days to fix a node.
3. You accumulated too many channels over time (100+), and your node is struggling to process all the traffic. This can happen on weaker hardware. Reducing channels fixes the problem.
4. You want to move your sats to a new node and you're not comfortable moving channel states files, or have no ability to do so. For example, when switching implementations (LND > CLN or vice versa).
5. You are going on a long sabbatical to a location without stable internet and/or electricity. Lightning nodes require to be online most of the time, unless you have a channel with a trusted node you agree with not to force-close you.
6. You're running a profit oriented routing node and a channel is not routing, but it is locking up funds (sats are on your side). Close and open to another node to make profit, unless you agreed to keep the channel open for a specific amount of time. You may also want to close & reopen to the same peer a larger channel if it was profitable.
If you can think of other reasons why you would want to close a bitcoin lightning network channel, please add a comment.
Read the interview I conducted with ZeroFeeRouting, a lightning network professional who ran one of the largest nodes in the bitcoin lightning network with immense success. The node was known for having no routing fees and instead earning an income by selling channels to other node operators for a small fee through their website.
LN+: Congratulations to your family regarding your second child. We wish you the very best health! Thank you for running your popular node, and for taking the time to answer these questions for the community. You ran a grand experiment in many ways and we would love to learn more about what you found out. My first question: How big was your node in terms of capacity, channel count and number of forwards (per month)? ZFR: I had about 100 BTC in capacity, a little more than 1,600 channels and about 450,000 forwards a month.
LN+: Did you prefer the LND or the CLN ecosystem overall? ZFR: I preferred the CLN ecosystem by a wide margin. It felt like the CLN developers are truly interested in supporting node operators and expanding the feature set of CLN. With lightning labs, I had the impression it was more about features they needed for their venture capital (Taro etc.). Might be a misjudgement - but that's how I felt.
LN+: Which implementation do you recommend for a hobby user and a serious profit oriented power user? ZFR: CLN.
LN+: Was your node abused in some way since it had no fees, such as excessive rebalancing or such? ZFR: It was certainly used for excessive rebalancing - would not call this abuse though. I have not been subject to any attacks.
LN+: Were you profitable, and how much did you earn (APR)? ZFR: The node was running profitably. My APY would clock in around 2% minus on-chain fees and hardware cost.
LN+: What was the most time consuming or stressful part of running a giant node? ZFR: Fund security.
LN+: For companies, do you recommend they run a single node or multiple nodes for redundancy? ZFR: One single node with backup in place.
LN+: What is missing in the lightning ecosystem? ZFR: I think it just needs a bit of time to mature.
LN+: What are the tools you use, you recommend the most? ZFR: I've not used any third party tools - besides BTCPay for my channel sales. Everything else were tools that I developed myself.
LN+: Do you have any secrets on which nodes are good to connect to? ZFR: Completely depends on the goal. For me it was always about connectivity. I wanted to be the best connected (i.e. least amount of hops) node in the network. If you just want to be able to make successful payments, ACINQ is the node to go. For routing, probably LOOP, WoS, Kraken, BFX as sinks and some good sources like Boltz. Breez also always worked like a source for me.
LN+: Do you have any strategies for node management that you wish to share to help people become more profitable? ZFR: Every node operator has their own strategy. It's crucial to be aware of the cost for rebalancing, otherwise you're just subsidizing other people's routing.
LN+: Do you expect the upcoming RGB and Taro protocols to increase lightning node profitability? ZFR: No.
LN+: If there was one thing you could change about the lightning protocol, what would it be? ZFR: It would be great if a wallet could "overpay" an invoice. Example: You break down a 10M payment into 15 x 1M chunks and send them out through different routes, as soon as 10M have been claimed by the target node, the target node can no longer claim the rest of the payments and they would return. This would reduce failed payments by a huge margin, because right now all payment parts have to succeed in order for the payment to succeed - in my example only two thirds would need to succeed. This is technically possible already but neither implemented nor specced.
LN+: Where do you get your lightning news from? ZFR: Twitter.
LN+: Which lightning wallets do you recommend for daily use? ZFR: I love Breez and OBW, because they give you full control. Phoenix is an excellent wallet if you don't want to think about anything. I've never used WalletOfSatoshi.
LN+: What was your largest cost during your experiment besides deployed BTC capital? ZFR: On-chain fees. I've had one force-close that cost me about 130,000 sats (30K for the force-close and another 100K for the sweeps).
LN+: Lightning is often compared to DeFi and criticised for having too little BTC deployed. What are your thoughts on this? ZFR: The only anology is that you can earn a return on locked up coins. But contrary to DeFi your locked up coins are actually used for something and the return is paid by participants of the network - not by issuing new tokens. I think the liquidity on the network matches market demand. Otherwise prices for liquidity would go up.
LN+: What is the biggest barrier for merchants to adopt lightning? ZFR: Same as BTC. The hassle of bookkeeping in what most tax authorities argue is a foreign currency.
LN+: Do you think Lightning can handle all the world’s transactions in the future or do we need L3 or other solutions? ZFR: It will be able to handle all the worlds transactions. Whether that will be 100% noncustodial I'm unsure.
LN+: Do you think there will be other zero fee nodes filling the gap you left open with your departure? ZFR: I don't know, but I am curious as well.
LN+: Can you recall any crisis or crazy story that happened during your experiment? ZFR: The disk containing my database crashed, back when I was running the node on a laptop. Luckily I was able to copy it to another drive - I had no other backups a t that time.
LN+: If you could give a single advice to a new node runner, what would that be? ZFR: Be aware that if you want to run at a profit, managing the node will take a lot of time.
LN+: What is something people care a lot about that they perhaps should not within the lightning ecosystem? ZFR: The way the network is working at the moment, is a hunt for cheap liquidity. If someone opens a channel to a sink node like LOOP and forgets to adjust the fee, the first one to snipe that liquidity (by using it to rebalance their own channel) wins. I wished this was not the case - but currently I don't see a way out of this.
LN+: Do you think geographically distributed nodes are important? ZFR: As long as there are tons of TOR only nodes being used as hops in routing (and speed is not a factor for wallets to construct) the routes it makes zero sense to set up geographically distributed nodes.
LN+: Tor is under attack, and it hurts lightning. What can we do about this in your opinion? ZFR: As hard as it sounds: Not use TOR for routing payments. There are options to run a node from home with a clearnet IP via VPN.
LN+: What are the important metrics we should follow regarding the lightning network in your opinion? ZFR: Total capacity in public channels, measured in USD.
LN+: How big do you think the lightning network will be at the same time next year, and in 5 years? ZFR: No idea. I would assume steady, exponential growth - at least 2x every year.
LN+: Is there any project or person that we should follow as it’s underappreciated? ZFR: I don't know if they're underappreciated but @fiatjaf, @callebtc as well as @jb55 are extremely strong recommendations.
LN+: If you hypothetically had 10,000 BTC, would you be able to deploy it to the lightning network successfully, and would it help the network? ZFR: Yes and yes. No idea about the potential yield though. Probably way less than 1 % at the current demand for LN liquidity.
LN+: Are you planning to come back as a professional node runner at one point? ZFR: Yes. I plan on doing this, if the opportunity presents itself.
LN+: Any other Bitcoin related project you’re following with great interest? ZFR: Nostr.
LN+: Do you know if it’s a boy or a girl? ZFR: A girl.
Lightning Network Plus (LN+), the free web app that helps lightning node operators to team up and create liquidity swaps to get free incoming liquidity, is now also available in the Umbrel app store.
There are several benefits to the offline Umbrel version of the app:
⚡️ Automatic Sign-in: No need to sign a message with Thunderhub or other apps
⚡️ Swaps Available for Me page: Easier to find swaps that match your node
⚡️ One-Click Channel Open: No need to copy paste node and channel capacity information
⚡️ Insufficient On-Chain Funds Detection: No more confusion around why the channel won't open
Swaps Index Page
The offline Umbrel app is meant to make it easier for new node operators getting started, therefore it offers all the basic required functionality (finding, joining and creating swaps, rating, comments, etc.) of the online version and some more. But, it doesn't offer all the features of the online version (ex. asking support questions, receiving and sending messages, creating posts, browsing node profiles, etc.). If you want to use all the features you can also sign-in with your node here. All your settings, and activity is synced between the offline and online versions.
Swap Details Page
If you're running an Umbrel node, I hope you will test out the app and enjoy the simpler experience. If you find any bugs, wish for a feature or have any trouble, let me know! Happy to help!
Today we are launching two highly requested minor feature updates, which will make it easier for you to sort through the available swaps on LN+.
Bookmarking UX
Bookmarking, as the name suggests, allows you to add a bookmark to a swap, so you can easily find it later by clicking the bookmark icon in the top right navigation or the bookmark button in your profile dashboard (as long as you're signed in.) If you bookmark a swap you will be notified if a new participant joins the swap. You would want to bookmark a swap if you're interested in the swap, but also want to wait and see which other participants are joining before committing. You can of course remove a bookmark if needed.
Hiding UX
Hiding is the opposite of bookmarking. It lets you hide a swap from all swap index pages. You would typically use hiding if you're confident that you are not interested in a swap, and you want to hide it from searches, so you can focus on the swaps you haven't reviewed yet. If you want to see the swaps you have hidden, click the Hidden button in your profile dashboard. You can unhide swaps if needed.
You can bookmark or hide a swap by clicking the relevant buttons on swap pages in the left sidebar below all the swap information.
As always, let me know if you notice any issues or if I can help you in any way.
