How To Run A Lightning Node: A Crash Course Guide For Beginners (2024)

Welcome to the wild wild west of running your own Lightning Node, where the speed of your internet connection or how fast your CPU is can, and absolutely will, make all the difference to your bottom line. But fear not! We’re going to go through how to run a Lightning Node in today’s cut throat world to make sure you don’t make the same mistakes we’ve made throughout the years. So buckle up, grab a cup of coffee (or two), and let’s get straight into it starting off with…

What Is The Bitcoin Lightning Network?

The Bitcoin Lightning Network is a decentralized network of nodes that sits on top of the base, Bitcoin Network. This second layer solution allows for instant, low cost, high volume micropayments all without having to involve trusted third parties like banks or payments processors like Visa or Master Card.

What Is A Bitcoin Lightning Node?

A Bitcoin Lightning Node (also sometimes called a Lightning Network Node or a LN Node) is just a computer that runs special software that allows it to connect to the Bitcoin Lightning Network. It can send and receive Lightning payments as well as route other peoples Lightning payments.

For example, you could use your Lightning Node (and Lightning Wallet) to purchase a coffee if the store accepted Lightning payments.

How Does The Lightning Network Work?

The Lightning Network is made up of thousands of privately owned nodes and wallets. Each node opens one or more Lightning Channels with other nodes allowing them to send and receive payments to each other near instantly.

These channels are linked back to the Bitcoin Network with real Bitcoin Transactions which lock up a certain amount of bitcoin funds in a two-party, Multisignature Bitcoin Address. While the details behind these channels can get quite technical, it enables the network to route payments from one node to another just like your data gets routed through the Internet.

To an average user, they can buy a coffee and pay for it with their Lightning Wallet all without using any banks, payment processors or other trusted third parties. The payment is routed from their custodial Lightning Wallet, through various Lightning Nodes and onto the coffee shop which receives their bitcoins instantly.

Benefits Of Running A Bitcoin Lightning Node

So why would anyone go to all the trouble of running a node? Well besides being able to refer to yourself as a “Node Runner” (who doesn’t like Blade?) there’s other core benefits including:

• Help Secure The Bitcoin Network: By running a Full Bitcoin Node you help increase the decentralization of the Bitcoin Network and become a fully fledged self sovereign individual
• Increased Security & Privacy: As noted in our Advanced Bitcoin Security and Advanced Bitcoin Privacy guides, running your own full node gives you the best level of security and privacy. It’s your node, running the code you choose and no one can take that away from you, spy on you or feed you false information
• Accept Lighting Payments: When you run your own Full Bitcoin Node and Lighting Node you can accept both Bitcoin and Lightning payments from anyone, anywhere in the world at any time. You can receive payments for a business you run, accept donations like we do or do anything else that involves sending or receiving payments. You’re your own bank and payments processor now!
• Increase Lightning Networks Liquidity & Reach: As the Lightning Network is a network, its usefulness and liquidity increases each time a new node is added. Just like a new telephone increases the usefulness of the telephone network for everyone, adding another node increases its reach and amount of value that can be transferred
• Host Lightning Wallets For Friends & Family: You can setup your friends and family with their own Lighting Wallet that connects directly to your Lightning Node. This gives them the best privacy and security without them having to setup anything
• No Trusted 3rd Parties: As your Lightning wallet connects directly to your Lightning Node, you don’t have to trust any third parties to custody your bitcoins
• Learn About Lightning: Through setting up and managing the Lightning Node you will gain experience and understanding of both the Bitcoin and Lightning network. This could be used to help others, get a job in the industry or just expand your knowledge

Last, but not least, is that you can actually earn money (bitcoins) by running a Lightning Node and routing other peoples payments through your channels. For example, if you route a Lightning payment that’s worth 100,000 sats you might charge 0.05% as a fee meaning you’d earn 50 sats.

This all happens automatically once the channels are setup and could be considered a somewhat Passive Income stream. You can open dozens of channels, connect to hundreds of other nodes and route thousands and thousands of payments per month if you’re dedicated enough, potentially leading to some decent returns.

>> Deeper Dive: Why Run A Bitcoin Node?

Setting Up Your Node

We’ve done an entire other article on How To Set Up A Lightning Node already, so we won’t cover this here, but in general the steps are as follows:

• Build a Full Bitcoin Node or buy a custom solution (eg. myNode, nodl, Start9 or Umbrel Home)
• Install your base OS (eg. Ubuntu, Umbrel, RaspiBlitz, MyNode or Start9) and Bitcoin Core
• Wait for your node to fully sync
• Install your Lightning Node Software implementation of choice (eg. LND, CoreLightning or Eclair)
• Install your User Interface software (eg. ThunderHub, Ride The Lightning, Lightning Terminal (Loop), Lightning Node, Core Lightning)
• Fund your node with bitcoin and start creating Lightning Channels with other nodes
• Keep tweaking and optimizing!

As we’ve already covered the main setting up in that above article we’re going to now focus a bit more on that final point, tweaking and optimizing (or “running”) as it’s often one of the harder parts of a lightning node.

Lightning Node Management & Optimization

So you’ve built or bought your node, you’ve transferred some sats over to it. Now what? Well as said above, you’ll first need to open a channel to another node in order to fully connect yourself to the lightning network. We’ll assume you already know how to open a channel, if not, this is a fantastic starter video by BTC Sessions.

Before you dive deep into this though there’s a few things you should know first. For starters, always be aware than any money held by your node is stored in a Hot Wallet. This means that if anyone hacks into it, they’ll be able to steal it, so ensure it’s very well locked down with a long, completely random and unique passwords!

We mean this! Make 100% sure it’s completely random, unique and 30+ characters!

Which Node Should You Connect To?

With that point out of the way, also be aware that choosing which nodes to connect to is a bit of an art with no real set “rules”. It’s possible (but rare) that you’ll see small nodes routing huge sums of payments through you, other times you’ll see large, well connected nodes being the best target.

Often it’s best to connect to a large node at least to begin with, but just know it’s not your only option. At its heart, the idea is to meaningfully enhance the connectivity of the Lightning Network. That’s what will result in the most payments being routed through your node as it has a “useful” route. Figuring out and optimizing this isn’t simple though.

Generally the best strategy is to build up a large number of useful, high capacity channels that provide the network with liquidity and new, cheaper routes that weren’t available before.

Regarding capacity, we wouldn’t recommend anything less than 1M sats as otherwise you won’t be able to route most average payments. If you can manage it, 10M sats for more serious channels is advised. You’ll also want a good spread of small and large channels too, with a few over 10M sats if possible.

What Fee Should You Charge?

Operating a Lightning Node for profit mostly means bringing in routing fees that you charge for routing other peoples payments through your nodes channels. Lightning channels have two separate fees for this:

• Base Fee: These are set fees that are charged for every transaction, this is often set to 0 sats
• Fee Rates: A fee charged based on the size of the transaction, measured in ppm or parts per million. For example, a 500 ppm fee is 0.05% meaning that a 100,000 sat transaction would net you a fee of 50 sats

To increase your revenue you can either increase your fees or get more payments to be routed through your node. However if you increase your fee amounts too much, payments will route via other cheaper Lightning Channels, lowering your revenue, so it’s always a balancing act. To get some rough metrics of what others do check out 5saatoshi.

You will need to start low, then once you see a meaningful amount of traffic being routed through your lightning channel, slowly adjust it up and test what works and what doesn’t.

Performance & Uptime

Your nodes performance, uptime and latency is critical as well. When choosing which route to send a payment through many metrics are used to calculate the optimal route, such as how often the nodes online, how fast and responsive it is and more.

If you run a Raspberry Pi 4 based node with 2GB of RAM and 20 channels it’s going to chug, meaning low response times and slow routing capabilities. As a result, no one’s going to route their payments through you and you won’t make any money.

If you run a baller Windows based PC with 16 cores at 5GHz and a ton of RAM and storage, but constantly have power outages where it goes down for hours or days at a time again, no one’s going to route their payments through you as you’re too unreliable.

If you’re operating through Tor making your connectivity a bit slower than everyone else, no one will use your channels. Lacking in RAM and too many connected peers? Your Bitcoin Full Node will lag and no one will route through you.

Ideally you should have constant monitoring going on so that you can always tell ASAP if your node is down or performing slowly. Ensure it has fast, low latency internet, a powerful enough CPU with enough RAM as well as an uninterruptible power supply so it can power through outages and if you can, make sure it’s using Linux as it’s simply a more stable OS than Windows.

Channel Balancing

Finally you’ll also want to monitor your open channels as over time you’ll find that some get used more than others and eventually end up becoming unbalanced. This is where you have low or no capacity on one side of the channel meaning you can’t route a payment one way or another.

To resolve this you can pay for services such as Loop, but it’s much cheaper to use the other payment channels you operate to do this. This allows you to route funds out of one and into another, hopefully balancing both in the process. You can use other payment channels on the same or other lightning nodes you own it doesn’t matter.

Communities & Backup

Obviously like everything else in Bitcoin, you want to make sure that you’ve fully and properly backup your Lightning Nodes wallet. As said, all money stored on them are in a hot wallet, so protect your seed phrase well and ensure you also back up the Lightning Channel configuration too. We’d recommend doing a backup every week or so.

As a last point, there are many Lightning network communities out there. From 1ML to Reddit, there’s a ton of resources out there and it’s highly advised that you do a good amount of research. One of the best lists we’ve seen is lightning-network.tech.

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