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A Gentleman's Node

In days gone by, a Gentleman was a man of means, who did not work, but who lived on income from his investments and improved lands, and could devote himself to interesting hobbies. Many of these hobbies might intermingle with the man's principles, for example, his particular interest in the permanent abolition of economic oppression.

A typical Gentleman node runner, at his leisure
A typical Gentleman node runner, at his leisure

Because, reasons:

  1. To run an effective routing node, you're going to want to put a minimum of 5 BTC on the node. But really you should put at least 10 BTC. You need big channels, and your BTC needs to sit in these channels consistently, and not move around here and there.
  2. As we've discussed, a Lightning Node is a hot wallet. If you set up your node using best practices, your funds probably won't be lost or stolen. But your BTC will be significantly more "at risk" when compared to keeping those funds in a cold, offline wallet.
  3. The price of BTC is likely to appreciate in the coming years.
  4. Because the price of BTC is likely to appreciate, you are advised to keep the vast majority if your BTC in cold, offline storage, and NOT deployed onto the Lightning Network.
  5. Therefore, if you're going to risk 10 BTC on a Lightning node, you should have at least 90 BTC on a hardware wallet or otherwise in cold storage.
  6. If you keep 10 BTC on your node, and 90 BTC in cold storage, then you're either a company, or you are wealthy amateur, for whom running a Lightning Node could be an interesting sport.
  7. You're unlikely (at least in the short term) to make much money from your routing node. But as a Gentleman, this doesn't concern you, as you're more interested in the cause of ending economic oppression. A Gentleman never thinks of himself first!

To summarize: Running a lightning node is a good fit for a Bitcoin-rich, independently wealthy individual: That is, a gentleman.

It might also be a good fit for a company who has invested in BTC for its treasury, and wants to put some of these funds to work.

Feel free to disagree with any or all of the points I have made above, as I said, this is an opinionated guide.

But I thought routing nodes could make money from fees?

Routing nodes do make money from fees.

However, the (very) rough consensus among node runners (as of early 2024)... is that they don't make much money.

Most analyses have ended up finding that, maybe, if you run a node well, you could make a 1% yearly return on your BTC assets.

1% is not a great return, considering you have to run a hot wallet.

But... actually nobody knows how much routing nodes are making!

The more you dive into forums, telegram groups, and other places where Gentleman node runners congregate, the more you realize something striking:

Nobody actually knows how much node runners are making.

In fact, there are a few reasons why those who run the biggest routing nodes, who might be making the most money in fees, might never tell the outside world how much they are making:

  1. Making money through routing fees requires "discovering" profitable routes between other nodes. Once a node runner has discovered route(s) like this, they are unlikely to broadcast the fact to the world. If they did broadcast this, other node runners might try to replicate their channel graph in order to earn these fees.
  2. There is a strong ethical argument against revealing any information gleaned from a node to the outside world. As we've seen, lightning is very private, but theoretically, if everyone who ran a routing node revealed their interior routing data to the world, an attacker might, for a given payment, be able to piece together at least an "incomplete" route of nodes that the payment travelled.

Routing nodes don't reveal their routing data because...

They don't have to: The Lightning Network is cleverly designed to conceal amounts moving through it. From the view of the public, only the balances of a channel are known to the public.

So, for example, if your node "MyNode" has a channel with "BigOtherNode", and that channel is 0.5 BTC., any member of the public can see that two nodes, with aliases ["My Node", "BigOtherNode"], share between them 0.5 BTC.

But: Members of the public can not "watch" or "see" as payments move through this channel.

The "routing data", that is, the knowledge of the individual payment moving across node's "hop", to another node, is entirely private and secured by the LN's Onion Routing Protocol.

Also: Node operators are Gentlemen, and it's not gentlemanly to provide data that could be used by a threat actor to break the privacy of any payment.

Final thought: Running a routing node is an investment in the future

Ultimately, running a routing node is an investment in the future. You probably won't make much profit, especially when you are starting out, but it's entirely possible that the Lightning Network will, just in the next few years, grow to 10x or 100x or 1000x the size. And of the price of BTC keeps appreciating, it might be in just a few years that running a well-established node could be a very good business.