How to Earn Bitcoin By Running a Lightning Node
Depending on who you ask, the Lightning Network will either be the long-awaited solution to Bitcoin’s (BTC) scalability woes or a technological experiment that is bound to fail. Regardless of where your opinion lies, you can currently use the Lightning Network - despite still being in beta - to earn a small amount of bitcoin.
What is the Lightning Network?
The Lightning Network is a second-layer protocol that operates on top of the Bitcoin blockchain to enable off-chain, low-cost, high-speed bitcoin transactions through a network of bidirectional payment channels called Lightning channels.
The primary idea behind the Lightning Network is to take the pressure off the Bitcoin blockchain (or any other compatible blockchain) by processing transactions off-chain and only recording the starting and ending balance on the blockchain.
According to the Lightning Network analytics platform 1ML, there are currently over 10,000 Lightning nodes with almost 35,000 payment channels. The network capacity of the LN stands at over 820 BTC (USD 7.3 million). The median base fee for a bitcoin LN transaction is one satoshi (USD 0.00008902).
At the moment, the Lightning Network is used for micropayments, such as social media tipping and small online purchases. Large transactions cannot (yet) be processed over the LN.
Stacking sats with the Lightning Network
Individuals who run Lightning nodes are able to earn a small about of bitcoin by charging a fee to process bitcoin transactions through their Lightning channels.
Alex Bosworth, Infrastructure Lead at Lightning Labs, a developer of the Lightning Network, tweeted in February:
“I'm pleasantly surprised that there is now so much activity on Lightning that my own little node is now routing more than USD 10,000/month. [...] I'm getting paid 0.25% for routing.” That means he earned around USD 25 a month for running a Lightning node at the time.
As Bosworth’s experience shows, the earning on LN nodes are minimal but as activity on the LN picks up, fee income for node operates may increase. Moreover, LN fees incentivize more users to join and operate nodes to grow the network.
How to earn satoshis by running a Lightning node
Setting up a Lightning node requires technical experience that the average bitcoin user does not possess. Fortunately, for the less tech-savvy, multiple companies, such as Lightning in a Box, Nodl.it and Casa are offering solutions that would help start running a node much easier and faster. Coinmine, an "all-in-one" crypto device, also aims to start supporting the Lightning Network soon.
To earn BTC with your node you need to forward transactions from other Lightning nodes via your node. Sending nodes will look for the optimal path the process the transaction, which means your node’s fee must be set at a level that is low enough so that transactions are routed through it while still generating a profit. Alternatively, you can go with your node’s default setting and see how much you earn.
Ensure that your node is funded, by sending BTC to your node wallet address and set up channels with other nodes so that you can start earning BTC by playing your part in the Bitcoin Lightning Network.
While you can earn a few satoshis running a Lightning node, it will definitely not make you a bitcoin millionaire. However, that is not the point.
As Reddit user, dooglus, who runs a Lightning node, said:
“It's best not to think of running a Lightning node as a way of making money, or even of breaking even. It's a way of helping the network and having access to very low fee payments.”