Bitcoin On-Chain

• Function: Acts as the fundamental layer for monetary transactions, predominantly for savings and enabling payment layers through smart contracts.
• Users: Several million private and business entities.
• Technology: Basic Bitcoin full node.
• Benefits: Highly secure and straightforward to operate.
• Risks: Transactions can be costly and slow when the fees are high.

Side Chain Solutions

• Function: Offers an on-chain-like experience with fewer drawbacks. Example: Liquid and Rootstock.
• Users: Those needing confidential, offline and large bitcoin transactions.
• Technology: Simple wallets or a sidechain node.
• Benefits: Easy handling of any transaction amount. Cheap and relatively fast.
• Risks: Potential risks with the sidechain federation.

Routing Lightning Node

• Function: Facilitates payment routing across the Lightning Network.
• Users: Services numerous Lightning nodes for payment routing.
• Technology: A lightning node with hundreds of channels of varying sizes.
• Benefits: Quick, reliable, and potentially revenue-generating through routing fees and selling channels.
• Risks: Resource-intensive in terms of time and money. Lots of funds in hot wallets.

Non-Custodial Merchant or Exchange Lightning Node

• Function: Geared towards businesses for receiving and occasionally sending larger payments.
• Users: Businesses and bitcoin exchanges.
• Technology: Node with sizable channels to mostly routing nodes.
• Benefits: Low costs and risks, efficient and dependable payment for customers.
• Risks: Requires continuous maintenance.

Custodial Wallet and Merchant Payment Lightning Node

• Function: Optimized for high-frequency, bidirectional payments.
• Users: Businesses catering to millions of clients.
• Technology: Robust nodes linked to Routing Lightning Nodes and merchants run by professional node infra operators.
• Benefits: Revenue from transaction fees and value-added services.
• Risks: Security concerns due to large customer funds.

Family and Small Business Lightning Node

• Function: Provides Lightning Network connectivity for a closed user group.
• Users: Family or small business associates.
• Technology: Nodes with private or high-fee channels to discourage routing and associated risks. Uses LNBits or similar account management software to separate out accounts.
• Benefits: Low cost and risk, with stable performance.
• Risks: Partial trust required for users.

Hobby Lightning Node

• Function: Personal nodes for individual or small business use. For example Umbrel or Phoenix wallet.
• Users: Private individuals.
• Technology: Few channels connected to relevant nodes.
• Benefits: Trust-free operation and full control over capacity and funds.
• Risks: Limited receiving capacity unless incoming channels are purchased.

Fully Custodial Accounts

• Function: Instant wallets for sending and receiving payments. Ex. Wallet of Satoshi or Speed Wallet.
• Users: Private individuals and small businesses.
• Technology: Basic wallets without a dedicated node.
• Benefits: Easy to use, no maintenance required. Access to various value added services, such as a bridge to debit card systems, stable coins, gift cards, mobile top-up systems, subscription services, etc.
• Risks: Dependence on custodian security. All funds and payment related meta information is at risk.