As Bitcoin’s second layer, the Lightning Network brings a lot of improvements. Its features instant payments that can scale to a throughput which rivals with Visa’s, and most importantly it’s very private. It can also do everything that altcoins like Ethereum already do (NFTs, DeFi, tokenization, advanced smart contracts), but in a more elegant and cost-efficient way.
Yet in spite of these advantages, lots of people don’t onboard the Lightning Network simply because they don’t understand what it is, how it works, and how they should participate. In order to facilitate everyone’s understanding, I’m going to try to explain the essential terminology by using practical examples and analogies. And if you’re older than 10, you’re going to get it.
You Need Your Own Bitcoin & Lightning Node
First of all, in order to run the Lightning Network, you’re going to have to run your own node. We live in a decentralized world, doing our best to builds products and services without trusting third parties. Ideally, you should purchase dedicated hardware for your node – and you already have pre-built solutions like:
- RaspiBlitz (about $350, there’s European and US distribution);
- MyNodeBTC (about $339, you can buy it from their store);
- Nodl ($529, you can buy it from their store);
- Start9 Labs Embassy (about $289, no hard drive included, you can buy it from their store).
If you want to lower these expenses and undergo a nice DIY weekend project, you can buy yourself a RaspBerry Pi 4B with 4GB of RAM, a 1 TB SSD of your choice (it should be a reliable brand, though), a 32 GB SD card, a heatsink case to keep your RaspBerry Pi cool throughout summers and resource-intensive processes, and some cables. Watch this step by step tutorial by Ben Arc to better understand what you need to do in order to run RaspiBlitz.
If you don’t want to buy a dedicated device, there are at least two popular ways of running a Lightning node on your computer. The more advanced one involves using Electrum wallet (full guide can be found here), and the more basic user-friendly option will take you down the Linux path with Umbrel. And if you’re up for a bigger challenge, you can also run RaspBerry Pi OS on your Windows or Mac computer or turn to virtual machines.
But the recommendation to run a dedicated device concerns efficiency and security reasons: the RaspBerry Pi is very power-efficient and environmentally-friendly (it will only cost you a couple of dollars a year to keep it running 24/7), and a device which performs only one task has a lower attack surface than something that’s used for opening e-mails, installing third party software, and accessing dubious web pages.
So if you can get a RaspBerry Pi to run this node, you should. It’s not very affordable at this point, but it will only get better in time as the technology gets older and we get faster and more innovative hardware.
Lightning Nodes Are Islands, Channels Are Roads
One common misconception about the Lightning Network is that running a node is enough to get connected with the rest of the network. Though the node is an essential prerequisite, the next step in your journey involves opening channels with people.
To better understand the concept, think about your node as an island which just emerged in the middle of an ocean. Your goal is to build roads with everyone with whom you will be transacting. More roads mean that you’re going to have more connections and better shortcuts to reach certain destinations.
The size of your channels is also important, as they enable larger transactions. It’s as if your bridge to another island only allows for vehicles of a certain weight to travel – the sturdier the bridge, the more weight it can support during one trip.
These roads go both ways: you can build them with other islands (and this increases your sending capacity) or other islands can build them with you (this increases your receiving capacity). A well-connected island is going to need both.
When sending money to any given island on the map, you’re going to take one of the existing roads. If you have a direct road, then everything is straight-forward and you can make a transaction according to the size of your channel. But if the two of you are connected by somebody else’s road, then you must pay a routing fee (basically a transit toll).
Ideally, you should open channels with every node on the network to have direct connections – but that’s impractical and impossible to accomplish at scale. When millions of bitcoiners will be opening at least one channel each every day, it’s going to be hard to have the funds, time, and energy to keep up with the growth of the Lightning Network. But routing is highly efficient and also has some privacy benefits: just like in the case of the Tor network, every relay node adds an extra layer of encryption and anonymity.
If you build roads, you can also collect fees from those who use your infrastructure to get to their destination. Being an intermediary for other transactions can have financial benefits, and most Lightning wallet managers allow you to choose how much you want to collect from those who use your route. Just keep in mind that it’s usually the shortest, fastest, and least expensive road that gets chosen. So unless you connect some obscure islands that others ignore, you should think twice before setting a high fee. At scale, these small earnings should subsidize for the electricity costs involved in running your node.
Lightning Network managers such as RTL (Run the Lightning) will allow you to open private channels. This means that only you and the node with which you’ve built a bridge can see and use this piece of infrastructure. While it has some privacy benefits (nobody else will know about it), it also doesn’t route other transactions so it doesn’t really support the network and won’t earn you routing fees.
The size of you channels (or weight resistance of your roads) is not permanent and you can resort to rebalancing in order to extend or reduce capacities. You’re going to pay fees for the operation, but it’s healthy to keep an eye on the ongoing operations and re-prioritize according to your observation. More popularity and use can benefit from better capacity.
Last but not least, remember that channels are easier to take down than roads. At the click of a button, you can close the channel and take the funds back to the base layer of Bitcoin. Every time you open a channel you pay a transaction fee to BTC miners, and you do the same when you close channels. To avoid overpaying for these operations, check my guide on how to pay lower transaction fees.
The Lightning Clients: LND, c-lightning, eclair & Nayuta
Just like roads can get built from different materials which come with their pros and cons, the Lightning reference client also has four versions which have pros and cons of their own. Historically speaking, LND by Lightning Labs is the most popular implementation and it’s also the one that’s used by RaspBerry Pi node operating systems (with the exception of Start9 Labs’ Embassy, which also comes with c-lightning). Thanks to the large spectrum of applications and network effects, it’s the most friendly for inexperienced users.
Blockstream’s c-lightning is more refined and better for developers, and it’s built in the C programming language (hence the name). However, it has fewer applications and is mostly used by exchanges and services which need more reliability. It’s also designed to enable atomic swaps between assets on Blockstream’s Liquid sidechain and BTC Lightning. This can be useful if you want to perform a peg-out without using the KYC services of a Liquid federation exchange. If LND is like Windows, then c-lightning is a robust Linux distribution that isn’t very friendly with untechnical users.
ACINQ’s eclair is also a popular option, as it’s written in Scala and supports both Java and Java Virtual Machine plug-ins. Since many Android OS applications are written in Java, this implementation is very useful for mobile wallets. Phoenix and Eclair are two of the most popular mobile wallets, and you should definitely give them a try.
Last but not least, we have Nayuta – a Japanese company which started working on a Lightning client so lightweight that even a RaspBerry Pi Zero can operate it. More recently, they have released an alpha version of Nayuta Core and they also focus on the development of mobile wallets.
The Easiest Way to Ride the Lightning
Ideally, you should run your own node and do everything by the book. But if you only want to dip your toes into what Lightning is and how it works, you can try a mobile wallet like Blue Wallet, Breez, or Eclair.
Blue Wallet takes the cake for having the best user experience of all bitcoin wallets out there. It’s also very customizable, allowing you to both connect to your own node or else rely on the company’s infrastructure. And if you want to receive a Lightning payment, you install the app on your phone, generate an invoice for the amount that you want to receive, and then gasp at the speed of the transaction. Blue also has a desktop version, thus being one of the most convenient ways to start using the Lightning Network.
Breez Wallet is special because it opens a channel for you. After you deposit funds and wait for at least 3 network confirmations, you’re good to go. The fact that this simple user experience happens in a non-custodial way which boosts your sovereignty is admirable. It can’t compare with your full node experience, but it facilitates the advantages of Lightning with some elegant tradeoffs.
And then there’s ACINQ’s Eclair Mobile, which runs a light version of a Lightning node directly on your mobile phone. You can also connect to your full node by accessing the advanced settings, but even by default it’s excellent for financial sovereignty. It would have been great if it was also available on iOS, but this might be due to Apple’s limitations. If you have a large enough SD card, you can even run the full validating node on your phone.
If you’re looking for a way to receive your first funds on the Lightning Network in an effortless way, then sign up to social media tipping and payment services such as Tippin.me and Bottle Pay. And if you have some Lightning Network funds that you need to convert to bits on the Bitcoin mainchain and you have no channels to close because you’re full-custodial, then try a service such as ZigZag.
Open Your First Channel With Bitcoin Takeover & Make A Donation!
If you would like to start your Lightning journey and open some of your first channels, please consider mine. You’ll get connected to many big services, as well as regular community members who provide inexpensive routes.
If you would like to support my work and keep me going, you can send me a donation. And for your generosity, I will list your name in the Hall of Patrons (please send me an e-mail so I can know which name to add).
Node public key in text form (for people on mobile phones): 032ef154317acbb4077182eb1e74c75bdb81580fb51c3461c14c062491f9f6723d
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