Bitcoin, Explained 67: Insights From the 4th Largest Lightning Network Node

In this episode of Bitcoin, Explained, hosts Aaron van Wirdum and Sjors Provoost speak with Sam Wouters, a research analyst at River Financial. River operates the fourth largest node on the Lightning network, and Sam recently published a report detailing unique insights from this Lightning node. At the start of the episode, Sjors first gives a brief update on the bug that brought down LND nodes, discussed in episode 66. He confirms that his assessment of the cause was correct, and explains that a very similar bug has brought down LND once more since recording of the last episode. Aaron and Sjors then go on to ask Sam about the contents of his report, with a focus on three subsections of the report in particular. First, Aaron, Sjors and Sam discuss the current status of fees and liquidity. Sam explains that large Lightning nodes can earn a “return on investment” of several percentages per year by routing payments over the network, but that this does require active channel maintenance to manage liquidity. Second, Aaron, Sjors and Sam discuss why some Lightning payments fail. Sam explains that the success rate of Lightning payments is very high compared to just a few years ago, but that there are two main reasons why payments sometimes do still fail: payment timeouts, and a lack of available routes. The trio speculates why this might be the case. Lastly, Sam outlines some of the challenges and concerns related to running Lightning infrastructure for businesses. Chapters 00:00:00 Sam Wouters and River Financial 00:01:29 Another LND bug and responsible disclosure 00:09:44 River’s Lightning node report 00:14:05 Routing fees and returns 00:15:54 Managing liquidity and vetting channels 00:21:24 On-chain fees and routing economics 00:26:19 Why Lightning payments fail 00:33:48 Probing and Lightning privacy 00:37:35 Payment sizes and reliability 00:41:11 Lightning infrastructure for businesses