Welcome to part one of setting up a bitcoin lightning node. In this introduction, I will be attempting to answer one of the most common questions by those interested in possibly running their own lightning node: “Why should I run one?” This is a good first question, as anyone who spends a few minutes researching what running a lightning node entails could easily be debating with themselves whether or not it is worth the time or the effort. After all, why not just stack bitcoin and hold it in cold storage? Well, I will not say that anyone should dump their whole stack into their personal lightning node. However, it may be wise to allocate a small portion of your bitcoin savings to running a lightning node.
The first and ultimately most obvious reason to run a lightning node is so you can spend bitcoin on goods and services in a much more convenient way. Unlike paying with plastic cards with corporate logos on them, with lightning you don’t need an account with a third party or deal with associated theft or card scanner risk. With lightning, all payments are final near instantly. The tradeoff is that your channels must have adequate reach to the wider network. Thankfully, as of 2023, this isn’t too bad since the network has grown tremendously since its original launch and there are many guides (such as this) on how to best choose what other nodes to open channels with.
You can spend from your node on a desktop through a management application such as thunderhub. When you are on the go, you can use an app called Zeus which can easily remotely connect to your lightning node for on-the-go payments through Lightning Node Connect or other methods.
Benefits of Nodes Compared to Wallets
You may ask, “Well I can spend sats with a bunch of different mobile lightning apps so why should I run a node?” This is true, however, only running your own node will give you the added benefit of increasing your node’s inbound liquidity every time you spend! This is a nice bonus because the best routing nodes have at least half their total capacity as inbound liquidity, and you will more likely earn a small passive income for this over time. To learn more about the concept of a low-time preference routing node, check out this article.
Another added benefit is privacy. When you spend from your lightning node, you are not telling multiple third parties what you buy or your spending habits. When you spend with a Visa debit card, for example, your bank knows exactly when, where, and how much you spent, as well as the card issuer. This is a privacy hit because these companies often sell your data to advertisers or worse. Some argue it is best to limit the exposure of spending habits to these organizations to avoid allowing them to develop a profile of you.
Spending from your own lightning node from anywhere in the world comes with an extreme sense of financial empowerment. When you realize that you can go anywhere in the world and have access to money where there is no middleman, you will never want to go back to the old, cumbersome, and slow methods.
Earning sats on your node
Once you have your node set up, you can also learn about how to use it to earn sats. There are several ways to earn sats with your lightning node. We will go over a couple here, but you can definitely get creative! Find out how many ways you can earn sats with your node.
The first and most obvious way to earn sats with your node is through routing fees. Your node will collect routing fee income when it forwards payments for the network. If the network decides that your node will forward a payment, the liquidity balances of your node’s channels will move, and slightly increase. The slight increase will be the fee your node collects for providing the service of routing payments.
Routing payments is a simple concept to understand but very complicated the more you learn. I recommend as you build your node just be aware that they may be happening, and be happy when they do. Over time you can learn more about how to optimize your node for routing other payments. For a more basic understanding of how liquidity functions on the lightning network, check out this video.
Selling channel liquidity
Another way to earn sats with your lightning node is you can actually be paid to open channels. There are those out there that want high-value nodes to have channels with theirs so badly that they are willing to pay for it. A great marketplace for this is Magma. The average APR for those selling channels is just under 3% as of June 2023. Not bad! And very little risk. The only requirements you need to sell on Magma is a high-quality node and capital to open channels with.
Creative ways to earn
Other ways are a bit more fun. You can use your node to receive zaps on nostr, get sats back from The Bitcoin Company, or build your own shops using BTCPayServer. You can paywall content and play games on THNDR games, and much more, and receive all proceeds to your node. Creativity is key!
Uncle Jim for your friends and family! With Lightning Node Connect you can actually use your node as a backend for many wallets that your friends and family can use. This is extremely powerful and helps reduce the impact that nodes with massive liquidity will have on the health of the network!
The knowledge gained from learning to run a lightning node could be invaluable in the future. The Lightning Network is growing at a very steady but fast pace, and those with knowledge of how it works are few and far between.
This knowledge puts you in a very small category of the population, and those in the future looking to learn will look to people like you to teach them. Thankfully, learning is not as troublesome as when the Lightning Network was first gaining traction. There are many tutorials, resources, videos, and communities of node runners to join to ask questions, discuss ideas, and make friends if you wish.
One of these communities is the Voltage discord, but there are many others on Telegram and around the internet.
The main takeaway from this article should be that like bitcoin itself, those who start a node now may have extreme benefits in the future. If the Lightning Network takes off and becomes the global financial rails, you will experience some of these benefits and much more. You can start and use a lightning node with very minimal upkeep.
Those who choose to min-max and spend hours every week trying to squeak out a profit are not the norm. It is important to have LOW TIME PREFERENCE when you are starting your lightning node journey.
Open one channel, try to buy a gift card from bitrefill, the bitcoin company, or somewhere else. If that payment doesn’t succeed, try opening another channel. There are many communities that can help you get started including plebnet telegram and the Voltage discord.