LN+ asked over 3 years ago
What fees should I set?
What are the optimal channel fees to set on my Bitcoin Lightning Network channels?
1 Comment
LN+ Admin wrote over 3 years ago
You can set fees per channel on your side. These fees determine how much your node charges to other nodes for routing transactions through your node.
There are also two types of fees:
There are also two types of fees:
- Base fee: This is charged no matter what the amount of transaction is.
- PPM fee: This fee is based on the size of transaction.
Both fees are typically set in millisatoshis (mSAT). This is one thousands of a Satoshi. A very small amount.
Base Fee
You should set the base fee to zero, because it helps with multi part payments (MPP).
However opinions vary. There are same services like chatting which operate with extremely low volumes or single satoshis. If you receive lots of such transactions and you mind it, you may want to set a base fee to discourage the use of your node for such purposes.
However opinions vary. There are same services like chatting which operate with extremely low volumes or single satoshis. If you receive lots of such transactions and you mind it, you may want to set a base fee to discourage the use of your node for such purposes.
PPM Fee
Parts per thousand. The current default default is 1 mSAT, which is 0.0001% of the transaction. And generally you can set it anywhere from 10 to 1000 depending on how popular the channel is for routing transactions.
To put it into a practical example: If somebody sends through 1M SATs on a channel with a 100 PPM fee, you will earn 100 SATs.
Naturally, the higher the fees the more you earn but it also makes it less likely that the sender node will choose your channel to route the money. Typically nodes are configured to look for channels with the lowest fees.
You can experiment setting the fees really low to establish a base line for how many transactions you would route normally, and then gradually increase them to see if the volume of transactions starts dropping off.
Also, be aware that fees may vary over time. Other nodes may satisfy a certain route or they may drop off giving you an opportunity to charge more.
To put it into a practical example: If somebody sends through 1M SATs on a channel with a 100 PPM fee, you will earn 100 SATs.
Naturally, the higher the fees the more you earn but it also makes it less likely that the sender node will choose your channel to route the money. Typically nodes are configured to look for channels with the lowest fees.
You can experiment setting the fees really low to establish a base line for how many transactions you would route normally, and then gradually increase them to see if the volume of transactions starts dropping off.
Also, be aware that fees may vary over time. Other nodes may satisfy a certain route or they may drop off giving you an opportunity to charge more.
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