Lightning node id
Node ID. This is a unique identifier of your lightning node and can be used to find your node on various websites, like Amboss. Space, 1ML and others.
How does a Lightning node work?
A lightning network channel is a transaction mechanism between two parties. . Individual payment channels between various parties combine to form a network of lightning nodes that can route transactions among themselves. The interconnections between various payment channels result in the Lightning Network.
How many channels are in the Lightning Network?
Network capacity. In its nearly three-year history, the Lightning Network has grown to hold a bitcoin capacity of almost 3,000 BTC, with about 17,000 nodes operating on the network and 73,700 unique channels connecting nodes from across the globe.
How do you open the Lightning channel Umbrel?
Return to the Umbrel Lightning page/tab. Click on the “OPEN CHANNEL” button. Paste the copied info from lnbig.com into the Lightning address field and put the channel size into the Amount field — in this case, 100k sats is the channel size. Click on the green “OPEN CHANNEL” button.
Is running a Bitcoin node profitable?
While there are no monetary rewards, running a full Bitcoin node comes with its own intangible benefits. . This is especially important if you plan to conduct multiple bitcoin transactions in a day. It also contributes to the overall security of Bitcoin’s network.
Do you need a Bitcoin node to run a Lightning node?
In order to access the Bitcoin network and set up a Lightning channel in a truly decentralized and non-custodial way, you’re going to need to run your own node. . You can either program this yourself or use one of the pi-focused bitcoin node software clients that offer their own implementations of Bitcoin Core.
Can I make money running a Lightning node?
Let us circle back to the original question, «Are Lightning Nodes Profitable?» The answer is yes, but the profit you earn may not always be measured in satoshis.
Why should I run a Lightning node?
By running your node, there’s no need to trust intermediaries with the custody of your coins. Moreover, you don’t have to worry about trusting another node’s information because you will download the blockchain’s entire history into your node. 3. You can earn some sats by routing payments.
What is Bitcoin Taproot?
The Taproot upgrade batches multiple signatures and transactions together, making it easier and faster to verify transactions on Bitcoin’s network. It also scrambles transactions with single and multiple signatures together and makes it more difficult to identify transaction inputs on Bitcoin’s blockchain.
How do you open a channel on Lightning?
Opening a Lightning Channel
Two parties open a Lightning channel by depositing bitcoin in a 2-of-2 multisig address. This transaction is recorded on the Bitcoin blockchain, and when this transaction is confirmed, the Lightning channel is opened.
Is litecoin the Lightning Network?
A Lightning Network is also available for Litecoin. LND ships with Litecoin support built in, so you can connect to this Lightning Network using the same LND that you use to connect to the Bitcoin Lightning Network. You will also need to install the litecoind or ltcd backend and sync the Litecoin blockchain.
What is a Bitcoin node?
A computer on the Internet that has a complete or abbreviated copy of the Bitcoin blockchain. There are full nodes, lightweight nodes and mining nodes, the latter adding transactions to blocks on the blockchain (see Bitcoin mining).
How do I access Umbrel node?
Open a terminal on your computer and enter ssh [email protected] , the password is moneyprintergobrrr . On version 0.3. 3 or later, the password is your personal user password instead.
Is Umbrel a Bitcoin wallet?
Bitcoin Core Wallet on Umbrel.
Is Umbrel free?
Umbrel is available for free and all of our source code is on GitHub.
Transactions 
Electrum 
Address 
A Complete Guide On The Lightning Network In Bitcoin
The Lightning Network is designed to fix the scalability issue of the Bitcoin blockchain, which can help the users to send or receive Bitcoins almost free. The transactions between two parties happen on the Off-chain/Layer 2. The Lightning Network is the most promising innovation that has helped the Bitcoin blockchain problem, and in this blog, I will be explaining everything that you should know about the Lightning Network —
What is a Lightning Network?
The Lightning Network is a 2nd layer of the Bitcoin network, which is known to handle off-chain transactions. The off-chain transactions happen between two parties. A Lightning Network channel makes transactions easier between two parties where they can send or receive transactions from each other. The scalability of the Bitcoin blockchain can be enhanced through the Lightning Network because it runs on the 2nd layer of the Bitcoin blockchain.
The scalability is the barrier restricting the Bitcoin blockchain from scaling properly, and the Lightning Network, which charges low fees and settles the transactions off-chain, helps the Bitcoin blockchain. Moreover, the Lightning Network has solved the problem of creating micro-payments like buying coffee with crypto is possible now, which speeds up the processing times and reduces expenses related to the Bitcoin blockchain.
Though the Lightning Network has solved the scalability issue in the Bitcoin blockchain, some issues are yet to be solved: malicious attacks and low routing fees.
Founders of the Lightning Network —
Thaddeus Dryja and Joseph Poon were two researchers who proposed the Lightning Network in 2015 in a paper titled “The Bitcoin Lightning Network.” The discussions of the payment channels were made by Satoshi Nakamoto, the anonymous creator of the Bitcoin Blockchain. The discussion of payment channels made by Satoshi Nakamoto was shared with his fellow developer Mike Hearn, and later, the discussion was published in 2013.
In 2016, the Lightning Labs were founded by Dryja and Poon, and there were a few other contributors, all of them focused on developing the Lightning Network. And finally, with various changes, the Lightning Network became compatible with the Bitcoin blockchain.
SegWit-based soft fork launched under Bitcoin in 2017 to free the space under each block for more transactions and remove a bug called transaction malleability. With the help of this bug, the user can lie to the network, fake transactions, and keep Bitcoins in their wallet.
In 2018, Lightning Labs launched the first beta version of its Lightning Network on the Bitcoin Mainnet. And thus, Twitter founder Jack Dorsey began their involvement in this project.
Lightning Network — Current State —
There has been impressive growth in the Lightning Network since its first beta launch in 2018.
As of 14th August 2022, the Lightning Network has boosted upwards of 17,796 online nodes, 87,122 active channels, and over 4,589 BTC capacity.
The figure 4,589 BTC is more than 300% compared to the mid of 2021, reflecting the explosive growth of the Lightning Network.
Twitter has rolled out a new tipping feature known as Tips, where the tipping can be done with the Bitcoin with the Lightning Network using Strike, a payment platform built on the Lightning Network that allows users to send and receive Bitcoin between two parties.
Moreover, Bitcoin can only handle 7 transactions per second (TPS). But, the Lightning Network helps solve those limitations by achieving 1 million transactions per second.
What is a Lightning Node?
The responsibility of the Lightning Network node is to monitor the underlying blockchain where it holds the token. Funds can be stolen from the user if the Lightning Network fails to do this responsibility.
Moreover, the responsibility of the Lightning Network node is to keep track of who holds what in their payment channels under the Lightning Network.
What is the difference between the Lightning Network Node and Bitcoin Node?
A Lightning Network node verifies the validity of the transactions between the users. And a Bitcoin node verifies the different transactions performed on the Bitcoin network.
The Upgrade of the Lightning Network —
Lightning Labs released the beta version upgrade of the Lightning Network Daemon (Ind), which is an implementation of the Lightning node. It includes the latest protocol upgrades, including Taproot and Musig2, making it a 0.15 beta version.
Ind is a component under the Lightning Network that handles various aspects like generating payment invoices, managing a database, revoking payments, etc. The latest update aims to help developers to create solutions under Bitcoin’s Lightning Network.
Conditional Smart contract under the Lightning Network —
Hashed Timelock Contract (HTLC) is a conditional contract under the Lightning Network. Using Hashed Timelock Contract (HTLC) reduces counterparty risk as this smart contract is a time-based escrow that will require a cryptographic passphrase to access the funds.
In short, the user has to perform 2 actions to access the funds — Enter a proper cryptographic passphrase and claim funds within a specific time. The user can lose their funds if they enter an incorrect cryptographic passphrase or if there is a delay in claiming the funds.
Bitcoin Scalability Issue —
As Bitcoin started gaining popularity, more transactions started happening on the blockchain. Blockchain is a technology that is a shared database that allows participants to check their transactions which are recorded under distributed ledger. The transactions performed on the Bitcoin blockchain are known as on-chain transactions.
Though every user or node receives copies of the transactions, every miner validates all the transactions, and thus, during high transaction volume, the transactions can bring down the system.
Thus, Bitcoin faces a scalability issue, which means there is an issue when more transactions are happening on the network. Thus, if Bitcoin needs to process more data, the networks need to scale, and it can allow more transactions to process efficiently.
How does the Lightning Network Protocol Work?
The Lightning Network protocol provides a peer-to-peer payment channel between two different parties. Once the channel is established between two parties, the payment channel allows unlimited, inexpensive, instant transactions. The Lightning Network acts as its own ledger for its transactions which could be anything for smaller goods or services, and those transactions won’t affect the Bitcoin network.
The user can create the payment channel by locking a certain amount of Bitcoin in the network. Once the Bitcoin is locked into the network, the user can invoice the amount to whatever seems fit for them. If the user wants to keep the payment channel ongoing, they must add Bitcoin consistently.
With the help of the Lightning Network, two parties can do the transactions without informing the Bitcoin blockchain. As all transactions within a blockchain do not require approval by all nodes, this strategy speeds up the transaction time. The routing transactions of Lightning Network nodes are formed by combining payment channels between the two parties. Therefore, the Lightning Network is said to combine many payment channels linked together.
Two parties can close the payment channel once the transaction is finished. The database on the payment channel is combined under one transaction and is sent for the recording to the Bitcoin mainnet. Combining dozens of small transactions under one transaction helps the nodes to validate the transaction in less time. And, without payment channels, minor transactions come in the way of bigger transactions, which congests the networks and require more nodes to validate.
Smart contracts are created between two parties when using the Lightning Network. The agreement rules cannot be broken as they are coded in the contract. Once the users agree to the requirements in advance, the contracts are created, and the Smart Contracts ensure that contract fulfillment becomes automatic. Once those contract requirements are met, like a customer paying the transaction amount, the contract fulfillment is done automatically without needing the assistance of any third party. Once the payment channel is validated under the Lightning Network, the transaction becomes anonymous. No one could see individual transactions, but only the total transfer value could be seen.
The transaction can be possible without any restriction on the off-chain/layer 2 of the Bitcoin blockchain. Off-chain transactions can be trusted because once the transaction is completed, the combined data is sent on the Bitcoin mainnet blockchain for recording once the payment channels are closed. As the layer 2/ Off-chain protocol has its own ledgers, the ledger always integrates back to the mainnet of the Bitcoin blockchain.
Importance of Watchtowers under Lightning Network —
Watchtowers act as a protector of the blockchain and identify malicious users who cheat other users within the channel under the Lightning Network. Moreover, Watchtowers monitors the Bitcoin blockchain 24/7 on behalf of their users. This helps the users that they are safe and can’t be cheated by anyone when they are offline.
Watchtower is an ecosystem of third parties that the users employ for their on-chain transactions, which is relevant to their lightning channels.
For the services of the Watchtowers, they receive a fee from the users, and two existing monetization methods can be deployed. The two monetization methods are subscription services and penalty transaction fees.
With recent developments in Watchtowers, they play a crucial role in the Lightning Network with scaling.
3 problems with the Lightning Network —
Though Lightning Network solves the Bitcoin blockchain problem by taking the transaction off-chain/ layer 2 and thus, it can process micro-payments between two parties.
But still, the Lightning Network doesn’t solve the whole problem of the Bitcoin blockchain and comes with 3 problems —
1. Opening and Closing Channel in Lightning Network —
Opening and Closing channels are divided into two costs under the Lightning Network between two parties. Though the Lightning Network provides unlimited transactions between two parties, opening transactions or deposits must be made via on-chain transactions on the Bitcoin network.
The two parties can make multiple transactions on the payment channel. Once the transactions are settled, and the users want to close the payment channel, the closing transaction has to be recorded on the Bitcoin blockchain for the settled amount.
2. Routing Fees —
Apart from the transaction fees required for Opening and Closing the payment channels, there is another fee known as the Routing fee, required to transfer the payment between the channels.
3. Susceptibility of the Nodes —
To send and receive payments, nodes on the Lightning Network should always be online. As the user uses private keys to sign in, thus, there is a possibility of the coins being stolen, and there will be a risk if the computer storing the private keys is compromised.
The Lightning Network provides the safest method to store cryptocurrency assets: Cold Storage.
3 ways to close the Payment Channel —
You can close the payment channel in 3 ways under the Lightning Network —
1. Collaboratively —
If one party in the payment channel initiates the channel’s closure in the Lightning Network and the other approves it. Then there will be no time lock, and the money is ready to be spent once the approval is confirmed. One of the best ways to select the payment channel is in the Lightning Network.
2. Unilaterally —
If the party wants to close the channel, then the party can initiate the closure of the payment channel in the Lightning Network even if the other party does not approve. This results in a time lock, and the other party can dispute the closure known as “Breach Remedy.” But if the other party does not dispute the closure, the funds will be free to use once the time-lock expires. This is also an acceptable way to close the payment channel in the Lightning Network.
3. Breach Remedy —
As a Lightning Network, transactions are timestamped. There is a possibility that one party attempts to cheat another party or breach trust by unilaterally closing a payment channel. This action results in a time-lock, and during this period, the party who was cheated can recover their funds and swap the entire payment channel using “Breach Remedy.”
Pros and Cons of Lightning Network —
The Pros of the Lightning Network —
The most important pros of the Lightning Network are cheaper and faster transactions which enable micro-payments. Without the Lightning Network, the users had to wait an hour to validate even a simple transaction and would have to pay high fees on the Bitcoin blockchain. Every small transaction comes with a longer wait because miners validate bigger transactions as they provide bigger rewards for mining the blocks.
The Lightning Network benefits from the Bitcoin blockchain protocol because the Lightning Network is the 2nd layer or handles the transaction off-chain. This means that the user can use the Bitcoin network for bigger transactions and can use the Lightning Network for smaller transactions without worrying about safety. The Lightning Network payment channel also provides private transactions, which means only the overall package is visible to other users, and individual transactions are hidden.
Atomic Swap is a technique where there is an exchange of cryptocurrencies between separate blockchains without any involvement of a third party. Atomic swaps are helpful compared to cryptocurrency exchanges and offer instant swapping with little to no fees or wallet transfers.
The Cons of the Lightning Network —
The user should have a compatible wallet to take advantage of the Lightning Network. Finding a wallet for the Lightning Network is easy, but the initial funding has to be done through the Bitcoin wallet, which costs a fee. So, to use the Lightning Network wallet, the users have to lose some Bitcoins from the Bitcoin wallet. Once the funds get transferred to the Lightning Network wallet, the user must lock their Bitcoin funds to create a payment channel.
Sending Bitcoin funds between different wallets can be annoying, so many new users are avoiding it. Though some wallets can manage both on-chain/ layer 1 and off-chain/ layer 2 transactions without paying fees, this will improve the convenience over time.
If the user decides to pull some funds back from the payment channel in the Lightning Network, then the user has to close the payment channel, and then he can receive the fund. But there is no possibility that the user can pull some funds from the existing fund and remain the payment channel open.
One of the major problems in the Lightning Network is offline transactions. If one party closes the payment channel while the other party is offline, the party triggering the closure can steal the fund.
Also, there are bugs in the Lightning Network, such as stuck payments, which means outgoing transactions don’t check for verification. Though the Bitcoin network can refund the stuck payment, it can take days because the first priority is the valid transaction over the stuck ones.
Closing Thoughts —
We can see the massive growth of the Lightning Network since its launch in 2018, and if the Lightning Network continues to grow in the future, there will be a demand for more wallet developers to integrate Lightning Network support. And this can speed up transaction times under the Lightning Network.
Lightning Guide
This page aims to help people understand a little more on the mechanics of Lightning and how it interacts with the underlying Bitcoin network. We aim to achieve this by using simple terminology and without getting too deep into the technicals, although there will be some further reading linked for those that want to take things a step further. Thanks to the developers of the various applications that interact with Lightning, many of the concepts outlined here are obfuscated away behind simple user interfaces. However, it always pays to have a good base level of understanding to help a user be more aware of what is happening when they send or recieve a payment via Lightning.
Table of Contents
Get started
Theory is great but there’s nothing quite like getting your hands dirty! Once you’re set up, feel free to send me an invoice for a few sats to test your setup.
Download Breez, backup your seed phrase and you are ready to receive via Lightning. Your channels are managed for you (for a small fee) and you can even send/receive Bitcoin on chain. The app will deal with this on your behalf using submarine swaps and will send or deposit the equivalent amount of sats via Lightning. Here is what that process looks like.
If you want to do things through your own node, then using an implementation such as myNode or RaspiBlitz makes set up easy. They come pre packaged with node management tools like RTL and Thunderhub and make connecting mobile wallets like Zap or Zeus very simple. Here is a simplified workflow for using these processes…
- Setup your node
- Enable Lightning and create a wallet
- Decide how much you want to open the channel with based on your expected spending habits
- Fund your new on chain wallet with the desired amount of sats
- Identify a suitable channel partner using the advice below and obtain their node’s public key
- Open the channel using RTL or Thunderhub and wait for it to be confirmed on the blockchain
- Select a mobile wallet and connect it to your node using the guides relevant to your chosen node/wallet combo (this is completely optional as RTL or Thunderhub can be used to transact, but are not mobile native).
- You can now send some sats over Lightning using your own node
- See the steps outlined here for gaining some inbound liquidity to allow you to receive sats
The Bitcoin and Lightning stack
The Bitcoin ‘base layer’ (the blockchain) cannot facilitate enough transactions to allow billions of people to use it every day. For example, if a couple of million people suddenly wanted to start using the network daily for everyday purchases, the transaction queue and fee rate would quickly spike as people compete to get their transactions processed. To alleviate this and enable the network to scale to cope with the expected exponential increase in transaction numbers, a layered system is being worked on and rolled out, much like the Internet Protocol stack.
Of course these transaction levels could be drastically increased by using a centralised database, similar to the current financial system we have today. But that wouldn’t be very ‘Bitcoin’, would it? Transactions could be censored, privacy would be non-existant and we would be no better off. Enter the original ‘layer 2’ Bitcoin solution, The Lightning Network.
The Lightning Network is scaling solution built on top of the Bitcoin protocol. It facilitates smaller, near instant payments between users at very low cost. It prevents the need for every transaction made to take place on the Bitcoin ‘base layer’ whilst still ensuring that the value being transacted abides by the rules of the Bitcoin network. It is trustless, with no centralised databases and every part of the Lightning Network starts from and finishes up, on the Bitcoin blockchain. Users can exit ‘layer 2’ and return to the base layer at any time they like.
Channels
The Lightning Network consists of thousands of two party payment channels. These payment channels enable those two users to pay one another back and forth as many times as they like, almost instantly and with no blockchain fees.
A channel is opened by one or two users locking up an amount of sats into an on chain ‘funding transaction’ that creates a 2 of 2 multi-signature wallet on the Bitcoin network, with each user receiving one of the keys. The opening channel ‘state’ will reflect the amount a user contributes and each party will sign off to say that they accept this is correct. This ‘sign off’ is actually an unbroadcasted Bitcoin transaction containing the signature of both parties which are passed to one another via the Lightning network. These signed but unbroadcasted transactions allow either party to close the channel at any point and ensures the sats contained within are returned ‘on chain’ to their rightful owner.
Simple illustration of a channel open transaction
Each time a payment is made from person A to person B, sats are pushed from one side of the channel to the other (think beads sliding along an abacus). The two parties then sign a Bitcoin transaction to reflect the updated channel balance of each and pass across to the other participant. This process can be repeated an unlimited amount of times and these signed transactions are only ever broadcast to the Bitcoin network in the event of a channel closure.
Simple illustration of a direct channel payment
Who to open a channel with?
You can open a channel with pretty much any network participant you like, however there are a number of things to consider before doing so…
- Is it someone you are likely to be transacting with often? If they are, it makes sense to have a direct channel open to minimise routing fees.
- Are they a reliable peer? If they are offline regularly this will cause you issues when sending or receiving transactions.
- Are they well connected? If you only have 1 or 2 peers, it pays for them to be fairly well connected so that you can route transactions through them across the network. This will become clearer in the next section on transactions.
- Are they trustworthy? This is covered in detail below, but your peer has the option (although unlikely to succeed) to attempt to cheat you when closing a channel. It can save you some hassle to choose a peer you know or a public node entity that is commonly accepted as being an honest node operator
You can compare these stats and many more when choosing a peer at 1ml or use a simplified version here that gives nodes an aggregated score based upon a combination of things like uptime, liquidity and how well connected they are. It then displays the best 5%.
Channel Closures
Much like a channel open, a channel closure is an on-chain Bitcoin transaction. Channel closures occur when one or both parties want to settle their balance back to the Bitcoin network. There are three types of channel closures that can occur with Lightning and in all instances the fees are paid by the person that opened the channel.
Collaborative close
Where one party initiates a channel closure, communicates this with their channel partner. Both parties agree to close the channel and the most recent state is broadcast to the network and each participant receives their sats back to their on chain wallet. This scenario covers the vast majority of all Lightning channel closures.
Force Close
Where one party closes the channel without the consent of their counterpart. These types of closures generally occur when one of the channel parties is unreachable. For a force close to take place, one user simply broadcasts the most recent channel state known to them. Once a force close is confirmed onto the blockchain, the user that initiated the force close will have their balance locked for a set amount of time. This enables their counterparty to see the channel close and come back online to confirm the channel state. If this does not happen, the party that closed the channel’s on chain funds will become spendable after the lock time (usually 2016 blocks or two weeks) has ended.
Disputed close
A disputed close arises from a force close being initiated. If the initiating party publishes an old channel state that favours them and pays them more sats back on chain, the party having the channel closed on them can dispute the closure if they disagree with the outcome. To trigger this dispute they simply bring their node back online within the lockout period (typically 2016 blocks or 2 weeks). Alternatively if that isn’t an option because their node is in a different geographical location, they may have chosen to set up a Watchtower service that will monitor their channels and act on their behalf for a small fee.
If the party creating the dispute can successfully publish a more recent channel state than the one broadcast by their channel partner, their node will be able to publish a Justice transaction and claim the entire balance of the channel. The threat of such a scenario is enough to ward off most dishonest Lightning operators for fear of losing all of their funds.
Transactions
Lightning transactions are settled within a few seconds and cannot be recalled, undone or subsequently altered. The clever thing is, Lightning achieves this without the need to wait for a block confirmation on the blockchain whilst still maintaining Bitcoin’s security principles because any Lightning participant can settle on chain whenever they like.
Being able to do fast and cheap payments to a single user might be beneficial if you are conducting many transactions but don’t forget that each channel has a blockchain footprint of two on chain transactions, so opening a channel to do just a couple of payments is counter productive. Lightning is not always the answer. So what happen’s when a user wants to make a Lightning payment to someone they don’t have a channel open with, surely they don’t need to have to open channels with every person they want to transact with?
Thankfully not, this is where the Lightning Network starts to shine! Provided you have 1 or 2 channels to fairly well connected nodes, you can route transactions to people you aren’t directly connected with, via people you have a direct connection (a channel) with.
Alice routing a payment to Dan, despite not having a direct channel with him.
This type of multi-hop transaction is carried out in a trust free way using a process called onion routing. This method allows for secure transfer of ‘messages’ known as Hashed Time Locked Contracts or HTLC’s. HTLC’s are structured in such a way that each ‘hop’ only sees the information they need to take their fee and continue the payment to the next participant in the route until it reaches the final destination, the recipient.
Here is a simplified run down of what happens for the transaction above to be successful. It sounds complicated, but it all happens under the hood in a matter of seconds.
- Dan sends Alice an invoice (a payment instruction) for 10,000 sats. This is generated by Dan’s Lightning wallet and can be sent to Alice via any communication method
- Alice receives the invoice and opens it with her Lightning wallet. She checks the details and confirms the invoice payment
- Alices Lightning node uses it’s knowledge of the Lightning network to look for a suitable path to route the payment to Dan
- Once a route is found, the initial hop goes to Bob, whom Alice has a direct channel with
- Alice’s message to Bob says that if he sends 10,001 sats to Carol, he can keep 1 sat for himself
- They update their channel state
- Bob sends a message to Carol to say that if she sends 10,000 sats to Dan, she can keep 1 sat for herself
- They update their channel state
- Carol sends a message to Dan, which Dan has a secret to unlock, allowing him to claim the 10,000 sats from Alice
- They update their channel state
- Alice’s wallet tells her the transaction was successful
There are no ‘real world’ identities in Lightning, the names above are purely for illustration purposes. Each participant has a Node Public Key which acts as their ‘Lightning ID’.
Drawbacks
Whilst the Lightning Network provides a fantastic scaling solution for Bitcoin, it of course has some limitations. These are outlined breifly below…
Channel management — If a user makes a lot of payments in a single direction, channels can become unbalanced, meaning that all of the funds are stuck on one side of the channel. This then requires the user to take action by balancing their channels. This can be done by circular rebalancing (paying yourself out of one channel and into another) or via a submarine swap service that allows you to drain off or fill up an existing channel for a small fee. Most of the common Lightning node management tools have some form of swap service built in.
- Get someone else to open a channel to you. Certain companies like LN Big will reciprocate any channels opened with to them
- Spend some sats ‘away’ to the other side of the channel
- Purchase some inbound liquidity from a service like Lightning Pool
- Use a submarine swap service
Channel Size — If a user opens a channel for 1 million sats and then needs to make a payment of 1.5 millions sats, they cannot do so without the use of Multi Path Payments which allows the use of more than one payment channel controlled by a single user to route a transaction. Fortunately, this is fast becoming standard practice and hugely increases the user experience and improves payment success rates
Route liquidity — If Alice wants to send a large payment to Dan over Lightning, she needs all of the people on her chosen route to have at least that amount of channel balance otherwise the payment will fail. This only really becomes an issue for larger payments.
Hot Wallets — Due to the nature of the Lightning network, a user’s Lightning node needs to be online 24/7 to acknowledge and sign transactions back and forth. This means that it is advisable that users do not lock up large amounts of bitcoin without taking proper security and backup precautions.
Do I need to use Lightning?
There is no right or wrong answer here. At present Bitcoin fees are still fairly cheap which makes on chain transactions acceptable for 95% of users. But for those who regularly transact using smallers amounts, Lightning presents the opportunity to save on fees and also benefit from near instant transaction settlement.
Do I need a node?
Much like Bitcoin, you don’t need a node to interact with Lightning, but running your own is the most private and secure way to do so. If you aren’t trusting your own, you are trusting someone else’s. Fortunately, most of the common Bitcoin nodes come packaged with a Lightning implementation too. Check them out in the Lightning tools section below.
Who maintains the Lightning Network?
The Lightning network is an open protocol that many people work on and contribute towards, all implementations work to the B.O.L.T open standard and the common implementations are completely interoperable. They are…
Is there a ‘Lightning coin’?
No, Lightning transactions essentially transfer ownership of bitcoin from on person to another.
Why do payments fail?
Payment failures occur for many different reasons, however the most common is that the node you are transacting through cannot find a suitable payment route to the destination.
What does balanced channels mean?
Having a balance channel simply means that you have a fairly equal amount of sats on both sides of your channel. Think of it like an abacus where there are an equal amount of beads on each side. This ensures the user is in the best position to send or receive via Lightning, it is also beneficial for those wanting to earn sats by being a routing node, though that concept is for the more advanced user.
Using the example below, the blue balance on the left is the ‘local balance’. This represents the size of the balance on my side of each channel and is how much I can spend within each. The green balance on the right is the ‘remote balance’. This represents the size of the balance on my peer’s side of the channel and is how much I can receive within each.
Channel balance graphs from Thunderhub
How do I balance my channels?
The two most common Lightning node management tools Ride the Lightning and Thunderhub make this very simple within the user interfaces. Click the links for video demo’s of both.
What happens if my node breaks while I have open channels?
The optimal solution is to revive your node and avoid the need to close your channels in the first place, however this won’t always be possible and this is where backups are crucial. You can import your Lightning Wallet seed and static channel backup file into another Lightning Node which will trigger a closure notification to all peers and return your sats back to your on chain wallet This process is possible through the command line but is the easiest way to do so is through interfaces like RTL or Thunderhub. Another outcome could be that a Lightning peer may notice that you are offline and choose to force close the channel (hopefully in an honest manner), this will return any sats in that channel back to your on chain wallet.
Why do my channel balances change over time?
This is likely because someone has routed a transaction through your node. This has the effect of moving some of the balance from one side of the channel to the other. If you do not want this to happen, you can specify that your channel is private at the time of opening. This effectively shields it from view for the rest of the network.
How do I get my sats off Lightning?
You can close a channel, which will refund your balance back to your on chain wallet. Alternatively, if you have received a lot of Lightning payments and your channel balance is getting full, you can complete a loop out which will drain a percentage of your channel balance back to an on chain wallet, freeing up some channel capacity for you to receive again. The reverse operation (loop in) can be used to ‘top up’ your channel balance if you have made lots of payments and no longer have sufficient outbound liquidity.
CoinOS offers another good solution for swapping between on chain and off chain with ease. Be sure to use the non-custodial option to negate any third party risk.
Can I make my channel larger after I have opened it?
No, channel sizes are fixed at the time of opening. However, you can leverage multiple channels at the same time using Multi Path Payments.
Can I make money on the Lightning Network?
Yes, technically you can earn sats via routing. However, the gains to be had vs the node and channel management required put this practice out of reach for the average Lightning user.
How much does it cost to open or close a channel?
That depends on the current state of the Bitcoin mempool at the time and the fee rate negotiated with your channel partner.
What is Keysend?
Keysend is a development that allows for spontaneous payments to be routed without an invoice.
What are MPP?
Multi Path Payments allows a user to send payments that are larger than the capacity of their single largest channel by utilising the liquidity of more than 1 channel at the same time. This needs to be active at the node level
If after reading this guide you want to try Lightning for yourself but think you’d benefit from a more personalised tuition approach, I offer private support calls.
# Lightning Network (LN) and BTCPay Server
This guide will show you how to set up your Lightning Network (LN) node in BTCPay Server and guide you through the basics.
BTCPay Server currently offers three implementations of the Lightning Network:
Before you proceed, please understand that the Lightning Network is still in the experimental stage. Using the Lightning Network can put your money at risk. Do not use more than you can afford to lose.
Take time to familiarize yourself with the risks associated with using the Lightning Network.
If you choose to run the internal Lightning Node in BTCPay Server, consider:
- Any lightning network node operates at 2 levels: on-chain and off-chain.
- The LN implementation of choice will create an on-chain hot wallet that will be used to fund the off-chain payment channels.
- Make sure you back up the on-chain hot wallet seed (see below instructions for the individual implementations).
- The seed in step #3 can only recover the on-chain funds, although it is necessary for the off-chain operation.
- Off-chain funds locked in channels cannot be backed up using a single-seed. Read the documentation issued by your LN implementation of choice.
- Off-chain recovery mechanisms are under active research and development. Erasing your BTCPay Server or unsafe/unsecure operation of the computing environment (e.g Filesystem corruption, compromised keys) can lead to permanent loss of funds.
As the technology matures and develops, mechanisms for proper backup will be easier to implement in BTCPay Server. As of v1.0.3.138
(opens new window) , LND is the only lightning network implementation that allows for lightning seed backups with BTCPay Server.
# Choosing the Lightning Network implementation
First, read here about using pruned Bitcoin nodes with lightning network implementations before deploying.
On the installation, you’ll have the option to choose the implementation.
For web-interface installations, you can simply select the implementation from the drop-down menu. For other docker
- For Core Lightning (CLN) use export BTCPAYGEN_LIGHTNING="clightning"
- For LND use export BTCPAYGEN_LIGHTNING="lnd"
- For eclair use export BTCPAYGEN_LIGHTNING="eclair" AND export BTCPAYGEN_ADDITIONAL_FRAGMENTS="opt-txindex"
Finally, to begin using Lightning, your blockchain needs to be fully synced.
# Lightning node configuration in BTCPay Server
# Connecting your internal Lightning Node
Irrespective of the LN implementation deployed, the process of connecting your internal Lightning Node in BTCPay Server is the same.
- Choose a store
- Go to "Lightning" > Select "Use internal node"
- Click "Save" > See "BTC Lightning node updated" message
- Go to "Public Node Info" > The node should appear "Online"
If the internal connection fails, confirm:
- The Bitcoin on-chain node is fully synchronized
- The Internal lightning node is "Enabled" under "Lightning" > "Settings" > "BTC Lightning Settings"
If you are unable to connect to your Lightning node, try restarting your server or reviewing our troubleshooting guide. You will not be able to accept lightning payments in your store until your Lightning node appears "Online". Try to test your Lightning connection by clicking the "Public Node Info" link.
# Connecting an external Lightning Node in BTCPay Server
BTCPay Server offers the option to connect to an external Lightning node. To configure it:
- Go to "Lightning" > Select "Use custom node" if there is no Lightning node configured.
- Go to "Lightning" > Select "Settings" > Select "Change connection" > Select "Use custom node" to modify an existing connection
- Add the configuration details matching the lightning implementation used > "Test connection"
# Getting started with BTCPay Server and LND
# Control your LND using Ride The Lightning (RTL)
The easiest way to use LND implementation with BTCPay Server is to use the [Ride The Lightning]https://github.com/Ride-The-Lightning/RTL) (RTL) service. A web user interface for the Lightning Network, RTL allows you to operate your node without leaving BTCPay Server, from your browser.
To initiate RTL in BTCPay Server, Go to Server Settings > Services > Ride The Lightning > See information.
# Control your LND using Zap
For remote use of your LND node on iOS or PC, you can use Zap wallet integration
\ Besides Zap, there are a few more wallets that allow remote control of the LND node, [the Nayuta wallet](https://nayuta.co/) and the [ZeusLN](https://github.com/ZeusLN/zeus). Both of which have not yet extensively been tested by the community.
# Control your LND using Lightning Joule
To remotely control your LND node via web browser, you can use Lightning Joule. \
# Control your LND via the command-line: lncli
LND can be accessed via the command-line using the shell script bitcoin-lncli.sh .
If you’re on Docker make sure you’re in docker directory.
Run ./bitcoin-lncli.sh —help` to see a full list of commands or check the full API documentation
# Getting started with BTCPay Server and Core Lightning (CLN)
# Control your CLN using Ride The Lightning (RTL)
The easiest way to use CLN implementation with BTCPay Server is to use the [Ride The Lightning]https://github.com/Ride-The-Lightning/RTL) (RTL) service. A web user interface for the Lightning Network, RTL allows you to operate your node without leaving BTCPay Server, from your browser.
To initiate RTL in BTCPay Server, Go to Server Settings > Services > Ride The Lightning > See information.
# Control your CLN via the command-line: lightning-cli
Similar to lncli , CLN can be accessed via the command-line using the shell script bitcoin-lightning-cli.sh .
If you’re on Docker make sure you’re in docker directory.
Run ./bitcoin-lightning-cli.sh help to see a full list of commands or check the full API documentation
# Lightning node backup
Before you start transacting using your new lightning node, consider backing up the on-chain wallet. Steps:
- for LND: storing a copy of the LND seed. Go to "Server Settings" > "Services" > "LND Seed Backup" and select "See information"
- for CLN: storing a copy of the hsm_secret
Acknowledge the limitations of off-chain payment channel backups and associated risks.
See backup FAQ if you are running the BTCPay Server instance with Docker.
# Funding your on-chain wallet
Now that your lightning node is active, before opening lightning payment channels, you will need to fund the on-chain wallet.
The on-chain funding process can be performed in two ways:
- via the Ride The Lightning (RTL) UI interface
- Select a "Store" and go to the "Lightning" section
- Under "Services", select "Ride The Lightning"
- In the RTL app, go to "On-chain", select "Receive" under the "On-chain Transactions" menu
- Select "Generate Address" and use it as the destination for the allocated funds
- via the command-line using bitcoin-lncli.sh or bitcoin-lightning-cli.sh
Once your on-chain lightning node is funded, it’s time to connect to other nodes on the network and open payment channels.
Check out Payment channels for recommendations on opening payment channels, liquidity management and more.