The Rise of Transaction Advertising on the Bitcoin Lightning Network

Posted 8 months ago by LN+

This post is primarily about the new phenomenon of Bitcoin Lightning Network Transaction Advertising. If you're already familiar with Bitcoin and the Lightning Network, skip the next two sections, which I only included because the post may be read by marketers who are not familiar with these concepts yet.

Introduction to Bitcoin

Bitcoin, the first and most well-known cryptocurrency, has revolutionized the financial world since its inception in 2009. Created by an unknown person or group of people under the pseudonym Satoshi Nakamoto, Bitcoin is a decentralized network and a currency that enables peer-to-peer transactions without the need for a central authority. Transactions are recorded on a public ledger known as the blockchain.

Introduction to the Lightning Network

The Lightning Network is a "second layer" payment protocol that operates on top of the Bitcoin blockchain. It's designed to enable instant and efficient  transactions by allowing users to create payment channels between any two parties on that extra layer. This method significantly reduces the transaction load on the main Bitcoin blockchain, thereby increasing speed and reducing costs.

Lightning Network Transactions

In order to understand how Bitcoin Lightning Network Transaction Advertising works, one needs to be familiar with several concepts as follows.

Memo Field in Transactions
Each Lightning Network invoice can contain a memo field, allowing users to add a short text message. Lightning payments (HTLCs) can contain data in the custom records fields. These field can contain arbitrary text, including links, making it a versatile tool for communication. The security and privacy of these messages relies on the inherent security of the Lightning Network and Bitcoin blockchain. However, there are limitations, such as the length and formatting of the messages.

By default, receiving lightning transactions and attached messages requires issuing an invoice from the receiver before the sender can send any value. However, the keysend option allows for on-the-fly invoice generation, which enables transaction advertising.

Keysend and Lightning Addresses
Keysends allow for on-the-fly transactions, requiring no invoice, and can include these custom record fields which are being used to store the advertisement message. For paying to lightning addresses, and invoice gets generated by the lightning address provider such that it will contain the advertisement message in the comment field. Many wallets and services allow the creation of Lightning Addresses, including Orangepilled.Email.

Low-Value Transactions and Spam Prevention
Messages can be sent with as little as 1 satoshi, the smallest unit of Bitcoin. To reduce what is considered "spam", some wallets may hide these low-value messages. Increasing the fee to 2 or more satoshis can make these messages more visible.

Length of the Memo Field
The memo field in Lightning Network transactions can accommodate up to 639 bytes of information. The number of characters this translates to depends on the UTF-8 encoding, where characters can vary in size:

  1. For the first 128 characters (US-ASCII), each character is encoded in one byte. Therefore, you could fit up to 639 characters from this set in the memo field.
  2. For characters that require two bytes, such as those in many Latin alphabets, Greek, Cyrillic, and others, up to 319 characters can be accommodated. This is because each character takes up two bytes.
  3. For characters from the rest of the Basic Multilingual Plane, which includes most commonly used characters, including many Chinese, Japanese, and Korean characters, three bytes per character are needed. This allows for up to 213 of these characters in the memo field.
  4. Characters from other planes of Unicode, which include less common symbols, historic scripts, mathematical symbols, and emojis, require four bytes each. In this case, the memo field can hold up to 159 characters.

In summary, the actual number of characters that can fit into the 639-byte memo field depends on the specific characters used, as they have different byte sizes in UTF-8 encoding. The simplest characters (US-ASCII) allow for the highest count, while more complex characters, such as certain emojis, allow for fewer characters due to their larger byte size.

Lightning Wallet receiving lightning transaction ads


Transaction Advertising

Satogram.xyz represents a novel approach to digital marketing through the Bitcoin Lightning Network, offering users the ability to send paid messages, known as Satograms. These are essentially keysend payments with a custom message attached,  or payments to ligtning addresses where the invoice memo contains the custom message, similar to receiving spam email but with the added benefit of getting paid for it.

The cost structure of using Satogram.xyz is straightforward yet flexible. Each Satogram is priced at 1 satoshi or more if the advertiser can afford a larger payment, with an additional charge for network fees. For instance, to reach the entire network of around 65,000 nodes and addresses, it would cost approximately 65,000 satoshis. Satogram.xyz also applies a 10% service fee on the invoiced amount, ensuring a part of the payment is retained for the provision of the service.

One of the key aspects of Satogram.xyz is its broad reach. Users can send Satograms to any node that has keysend enabled or to any lightning address that supports comments. This wide reach makes it an effective tool for anyone looking to advertise products or services, or simply to broadcast a message to a large audience. Whether you're a well-established brand or an individual, Satograms provide a unique way to convey your message directly to other users, with the added bonus that recipients tend to be more receptive to these messages since they are compensated for receiving them.

In terms of payment and fees, Satogram.xyz offers a user-friendly approach. Users can set a maximum limit for network transaction fees, ensuring that they don't overpay. Additionally, the platform provides a refund mechanism for any overpayment. If the actual cost of sending all Satograms is less than the estimated total cost, users can request a refund for the difference. This feature adds an extra layer of financial control and transparency, making it a user-friendly service for marketing and communication purposes.

Satogram.xyz is planning to release a compelling new feature where advertisers will be able to select what audiences they want to reach to adjust their target audience, including people who specifically signed up for receiving advertising messages. So ultimately the options will be:
  • All
  • Lightning Addresses only
  • Nodes only
  • Signups only

Overall, Satogram.xyz harnesses the power of the Bitcoin Lightning Network to offer a unique and efficient way of sending messages across a vast network. Its cost-effective structure, combined with the ability to reach a wide audience quickly, makes it an attractive option for diverse messaging needs.

As a node operator, if you want to connect to Satogram's lightning node and benefit from their traffic, here is their node.

If you want to learn more about the tech behind Satogram watch the site creator's presentation.

Satogram.xyz


Effectiveness of Lightning Transaction Advertising

Currently, with Satogram you can reach a total of 20,440 nodes and addresses, a number which is likely to grow aggressively in the coming years as people learn about the utility of the Lightning Network.

The effectiveness of this advertising method varies, and understanding its impact can be gleaned from user experiences. For instance, one user (note: this is a sample size of one) reported the following results from their advertising campaign using Lightning Transaction Advertising:
  • Reach and Engagement: The campaign resulted in 40 unique visitors and 188 page clicks. This indicates a certain level of engagement, suggesting that the messages were noticed and prompted action.
  • Conversion and Sales: Despite the engagement, the campaign led to 0 sales. This lack of conversion highlights a potential gap in the effectiveness of this advertising approach in driving actual sales.

These results suggest that while Lightning Transaction Advertising can generate interest and drive traffic to a page, converting that interest into sales is another challenge. This form of advertising may be more suitable for raising awareness or disseminating information rather than directly boosting sales. As with any advertising medium, its effectiveness will likely depend on various factors, including the nature of the product or service, the target audience, and the messaging itself.

View Lightning Advertising Companies

Ethical Questions Around Lightning Transaction Advertising

The advent of advertising through Lightning Network transactions, as seen with services like Satogram.xyz, brings with it a set of ethical considerations that merit discussion. This mode of advertising straddles the line between innovation and intrusion, raising questions about the moral implications of such practices.

Unsolicited Yet Compensated Communication
One of the primary ethical dilemmas revolves around the unsolicited nature of these transactions. Users on the Lightning Network may receive these messages without prior consent, akin to receiving spam email. However, unlike traditional spam, these messages are accompanied by a small payment. This compensation adds a layer of complexity to the ethical evaluation: is it acceptable to send unsolicited messages if the recipient is compensated?

The Balance of Convenience and Annoyance
Another aspect to consider is the balance between convenience and annoyance. While some may view these paid messages as a novel way of earning small amounts of Bitcoin, others might see them as intrusive or even exploitative. The fact that these messages can be sent to a vast number of users with relative ease raises concerns about the potential for overuse or misuse of this advertising method, leading to a digital environment cluttered with unwanted communications.

Consent and User Autonomy
The issue of consent is paramount in this discussion. Traditional advertising models usually, but not always operate within a framework of implied or explicit consent, where audiences opt-in to receive messages. In the case of Lightning Network advertising, the consent is less clear. While receiving payment for these messages might imply a form of tacit agreement, it doesn't necessarily equate to explicit consent, raising questions about user autonomy and the right to choose one's digital interactions.

The Impact on Network Dynamics
From a broader perspective, there's also a need to consider how this form of advertising might impact the overall dynamics of the Bitcoin Lightning Network. If transaction advertising becomes prevalent, it could alter the way the network is used and perceived, potentially affecting its efficiency and the user experience. This shift could lead to a reevaluation of the network's primary purpose and functionality.

The Role of Regulation and Governance
Finally, the question of regulation and governance comes into play. Should there be mechanisms in place to control or regulate this form of advertising? The decentralized nature of the Bitcoin Lightning Network makes centralized regulation challenging, but there might be a need for community-driven standards or guidelines to ensure that this advertising method doesn't become problematic or harmful to the network and its users. At the very least, services like Satogram.xyz should allow users to remove themselves from their database, so they wouldn't receive spam messages. This is also a service to advertisers, since no advertiser wants angry potential customers, who are annoyed by spam transactions.

Opting Out of Lightning Transaction Advertising

As the practice of Lightning Transaction Advertising grows, it's important for users and node operators to know their options for opting out or managing these interactions.

For Node Operators
Node operators might observe an influx of low-value transactions, often used for advertising messages. Recently, there's been a significant increase in such activity, with over half a million low-value messages sent in just a few days. While these transactions contribute to network activity, they can also burden the node without any financial benefit, especially if there's no base fee set on channels. To opt out or mitigate this impact, node operators have a couple of options:

  1. Adjust the Minimum HTLC Setting: By increasing the min_htlc setting on your channels, you can effectively filter out these low-value transactions. This setting controls the minimum size of transactions that your node will process, allowing you to exclude the smaller, likely advertising-related transactions.
  2. Implement a Base Fee: Setting a small base fee for forwarding transactions can ensure you're compensated for the resources used in processing and storing these forwards. This approach turns the increased traffic into a potential source of revenue, albeit small.

For Non-Custodial Wallet Users
Users of non-custodial wallets have fewer options to filter out these transactions, especially if keysend is enabled. The primary method to opt-out is:

  • Disabling Keysend: If you're running your own node, you can disable keysend. This will prevent your node from receiving these unsolicited advertising transactions, giving you control over the messages you receive.

For Custodial Wallet Users
Users of custodial wallets have some level of control depending on the features offered by their wallet:

  • Setting a Minimum Notification Threshold: Some wallets allow users to set a threshold for transaction notifications. By setting this threshold above the typical value of advertising transactions, you can avoid being notified about them. You'll still receive the payments, but you won't be disturbed by promotional messages that fall below your set limit.

Future of Lightning Network Transaction Advertising

As the Bitcoin Lightning Network continues to evolve, the landscape of transaction advertising through this platform is poised to undergo significant changes. Here's a look at some likely developments in the future:

Growth in User Reachability
The number of users reachable via the Lightning Network is expected to grow. As more people adopt Bitcoin and become familiar with the Lightning Network, the audience for these transaction advertisements will expand. This increased user base will offer advertisers a broader, more diverse audience, enhancing the reach and potential impact of their campaigns.

Emergence of Niche Services
Just like Satogram.xyz has carved a niche in transaction advertising, it's likely that more services will emerge, each catering to different aspects of Lightning Network advertising. These services could offer specialized features, target specific demographics, or provide unique advertising formats, thus enriching the ecosystem with more options and flexibility for advertisers.

Wallet and Node Updates for Spam Management
With the rise in transaction advertising, it's probable that wallets and Lightning Network node implementations will release updates to better manage what could be perceived as spam. These updates might include more sophisticated filtering options, enhanced user control over what types of messages are received, and improved notification settings. Such features will aim to balance the needs of advertisers with the preferences of network users.

Increase in Advertising Fees
As transaction advertising becomes more popular and the network grows in user density, it's likely that the fees for sending advertising messages will increase. This could be a result of market dynamics where higher demand leads to higher prices or as a measure to regulate the volume of advertising traffic on the network. Higher fees might also improve the quality of advertisements, as advertisers will need to ensure a good return on investment, potentially reducing low-effort or less relevant advertising content.

0 Comments

Please login to post comments.