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I have watched couple of introductions on LN and had some questions, if someone can help: a. What effect does this have on transaction sizing? b. Does the the

I have watched couple of introductions on LN and had some questions, if someone can help: a. What effect does this have on transaction sizing? b. Does the the node owner charge fees for each transaction? c. How are the channel amounts calculated? Do they include mining and node fees?

hayanno 9y ago
a. Transaction on bitcoin's blockchain should be less than ever if everyone start using lightning. b. The node owner do charge fees every time someone use their node : https://bitcoin.stackexchange.com/questions/68767/how-are-fees-determined-in-the-lightning-network https://bitcoin.stackexchange.com/questions/68767/how-are-fe... c. There's not mining in lightning, it's only done on blockchain. What do you mean "channel amounts" ?
keymone 9y ago
a. LN transactions and Bitcoin transactions are different things, i will assume you mean "how does LN affect Bitcoin's chain capacity?" - to use LN you have to make at least one Bitcoin transaction - so called "funding" transaction which opens or refills a channel, afterwards you can make millions of LN micropayments - none of them will affect Bitcoin tx capacity. b. Yes, it's part of node configuration, you can set whatever fee you like, but most probably at this point everybody will just route around you. c. When creating the funding transaction you decide the amount of satoshi to be locked up in a channel for use in LN. Funding transaction is subject to normal Bitcoin transaction fees (x sat/byte, the higher you pay the faster it's committed and your channel becomes usable).
- polyomino 9y ago
  LN transactions are bitcoin transactions though they aren’t broadcast to the blockchain most of the time.
  - keymone 9y ago
    you could argue either way depending on your definition of what bitcoin transaction is. if it's a separate entry in the blockchain then no, LN transactions aren't bitcoin transactions. if it's transfer of value within bitcoin's network with same security characteristics, then yes, LN transactions are bitcoin transactions.
- thisisit 9y ago
  a. I meant bitcoin transaction sizing. Bitcoin fees are driven by transaction sizes and my understanding (edited) is for a LN channel to be opened and closed, the transaction needs to committed to the blockchain. What are the expected size of these transactions? And how does Segwit work for these transactions? b. Thanks for the answer. (Edited): So, it seems the current argument there will be too much competition for nodes hence people will automatically set low or no fees. c. This is unclear to me. Normally, when I am paying for stuff in bitcoin sellers tend to attach an estimated fee for the transaction. Lets take an example, I need to pay 0.1 BTC they will charge 0.101 BTC. The 0.001 BTC is the transaction fee. With LN nodes charging fees on top of it, businesses now will have two fees to account for? Additionally, my understanding now is that there are three fees now: a. Channel Opening fees to miners b. Node fees which might be zero c. Channel Closing fees to miners
  - keymone 9y ago
    > What are the expected size of these transactions? LN deposit/close transactions don't carry any information about LN payments made on the channel, so their size doesn't grow with usage. They are simply 2-2 multisig transactions, so somewhat larger than the minimal 1-in-1-out tx, but probably (didn't check this) not larger than median bitcoin transaction. > And how does Segwit work for these transactions those are always pay-to-witness-script-hash transactions, so they don't even work without segwit: https://github.com/lightningnetwork/lightning-rfc/blob/master/03-transactions.md#funding-transaction-output https://github.com/lightningnetwork/lightning-rfc/blob/maste... > current argument there will be too much competition for nodes hence people will automatically set low or no fees it's not as easy, there are multiple incentives and discentives working here. lowering fees will bring more volume but increase cpu/io load. higher volume also means you need to have more capacity on your channels, which essentially means lots of funds in a hot wallet - a target for hackers. high volume also means you might become target for authorities wanting to track payments in LN. et cetera. > With LN nodes charging fees on top of it, businesses now will have two fees to account for? technically yes, but the fee for deposit transaction is paid only once per channel and merchants (usually) won't be involved with it. it's reasonable to assume that users will mostly fund channels with larger nodes because that brings better connectivity (you don't want to have a channel with starbucks, mcdonalds and burger king, you want single channel with a node that invested in having a lots of channels). as for the three fees you listed - yes (but not necessarily to miners?). the assumption is that you will rarely be opening and closing channels, just like you're rarely opening and closing a new debit card. you'll open with a reliable node that makes you routable, you'll once in a while deposit more funds and eventually you will close the channel. in between you can have bajillion transactions for which you will pay close to zero fees.

hayanno 9y ago

a. Transaction on bitcoin's blockchain should be less than ever if everyone start using lightning. b. The node owner do charge fees every time someone use their node : https://bitcoin.stackexchange.com/questions/68767/how-are-fees-determined-in-the-lightning-network https://bitcoin.stackexchange.com/questions/68767/how-are-fe... c. There's not mining in lightning, it's only done on blockchain. What do you mean "channel amounts" ?

keymone 9y ago

a. LN transactions and Bitcoin transactions are different things, i will assume you mean "how does LN affect Bitcoin's chain capacity?" - to use LN you have to make at least one Bitcoin transaction - so called "funding" transaction which opens or refills a channel, afterwards you can make millions of LN micropayments - none of them will affect Bitcoin tx capacity. b. Yes, it's part of node configuration, you can set whatever fee you like, but most probably at this point everybody will just route around you. c. When creating the funding transaction you decide the amount of satoshi to be locked up in a channel for use in LN. Funding transaction is subject to normal Bitcoin transaction fees (x sat/byte, the higher you pay the faster it's committed and your channel becomes usable).

polyomino 9y ago
LN transactions are bitcoin transactions though they aren’t broadcast to the blockchain most of the time.
- keymone 9y ago
  you could argue either way depending on your definition of what bitcoin transaction is. if it's a separate entry in the blockchain then no, LN transactions aren't bitcoin transactions. if it's transfer of value within bitcoin's network with same security characteristics, then yes, LN transactions are bitcoin transactions.
thisisit 9y ago
a. I meant bitcoin transaction sizing. Bitcoin fees are driven by transaction sizes and my understanding (edited) is for a LN channel to be opened and closed, the transaction needs to committed to the blockchain. What are the expected size of these transactions? And how does Segwit work for these transactions? b. Thanks for the answer. (Edited): So, it seems the current argument there will be too much competition for nodes hence people will automatically set low or no fees. c. This is unclear to me. Normally, when I am paying for stuff in bitcoin sellers tend to attach an estimated fee for the transaction. Lets take an example, I need to pay 0.1 BTC they will charge 0.101 BTC. The 0.001 BTC is the transaction fee. With LN nodes charging fees on top of it, businesses now will have two fees to account for? Additionally, my understanding now is that there are three fees now: a. Channel Opening fees to miners b. Node fees which might be zero c. Channel Closing fees to miners
- keymone 9y ago
  > What are the expected size of these transactions? LN deposit/close transactions don't carry any information about LN payments made on the channel, so their size doesn't grow with usage. They are simply 2-2 multisig transactions, so somewhat larger than the minimal 1-in-1-out tx, but probably (didn't check this) not larger than median bitcoin transaction. > And how does Segwit work for these transactions those are always pay-to-witness-script-hash transactions, so they don't even work without segwit: https://github.com/lightningnetwork/lightning-rfc/blob/master/03-transactions.md#funding-transaction-output https://github.com/lightningnetwork/lightning-rfc/blob/maste... > current argument there will be too much competition for nodes hence people will automatically set low or no fees it's not as easy, there are multiple incentives and discentives working here. lowering fees will bring more volume but increase cpu/io load. higher volume also means you need to have more capacity on your channels, which essentially means lots of funds in a hot wallet - a target for hackers. high volume also means you might become target for authorities wanting to track payments in LN. et cetera. > With LN nodes charging fees on top of it, businesses now will have two fees to account for? technically yes, but the fee for deposit transaction is paid only once per channel and merchants (usually) won't be involved with it. it's reasonable to assume that users will mostly fund channels with larger nodes because that brings better connectivity (you don't want to have a channel with starbucks, mcdonalds and burger king, you want single channel with a node that invested in having a lots of channels). as for the three fees you listed - yes (but not necessarily to miners?). the assumption is that you will rarely be opening and closing channels, just like you're rarely opening and closing a new debit card. you'll open with a reliable node that makes you routable, you'll once in a while deposit more funds and eventually you will close the channel. in between you can have bajillion transactions for which you will pay close to zero fees.