The lowdown on Lightning nodes

Today we’re looking at a well-known scalability solution of the Bitcoin blockchain, the Lightning Network, and the software that connects them: Lightning Network nodes.

Commonly referred to as Lightning nodes, their main responsibility is interacting with other nodes that make up the network in order to send and receive bitcoin.

But before we get into exactly what they’re used for, we need to take a step back and look at the Lightning Network itself.

What is the Lightning Network?

The Lightning Network is a “layer 2” payment protocol that can be layered on top of an existing blockchain like Bitcoin. The idea behind it was to decongest the existing network, resulting in faster transactions and lower costs. It manages to reduce traffic on the blockchain’s base layer by creating payment channels off-chain in which users can transact with each other.

So, that’s a brief look at the Lighning Network. But where do nodes come in?

What are nodes?

Nodes are essentially points of connection in a network. They are designed to exchange all the latest blockchain data with each other to ensure that all nodes stay up to date. One of their main roles is to determine whether a transaction is valid or not, then accept or reject it. They store blocks of transactions, then transfer this information to the other nodes in the network.

The Lighning Network consists of nodes and channels. Each payment channel is situated between two nodes.

What do Lightning nodes do?

That brings us to Lightning nodes. Their two main purposes are to monitor the underlying blockchain – Bitcoin, in this example, and interact with other Lightning nodes in order to transact funds.

How does it do this? Money is transacted on the Lightning Network with so-called Lightning channels. The Lightning nodes’ task is to keep track of how much money each user has in a channel.

Lightning nodes differ from nodes on the main chain in the way that they verify transactions. While nodes on the Bitcoin network must verify every transaction, Lightning nodes are only required to verify the transactions that directly interact with the network.

The more nodes there are, the stronger the network becomes, since they are its basic building blocks and they result in a greater number of payment channels. This means that many people choose to run their own, personal Lightning nodes in order to access faster, cheaper payments on top of a network like Bitcoin.

What are the pros and cons?

As with anything, Lightning nodes come with advantages and disadvantages. Let’s have a look at some.

A potential problem with the Lightning Network is that it could become too centralised. This could happen if particularly well-funded nodes with thousands of payment channels become too powerful and start acting as central hubs through which most of the traffic flows. It’s been said that this would create the sort of middlemen blockchain networks were designed to eliminate.

But Lightning nodes and the Lightning Network certainly come with plenty of positives, too. For one, it acts as a long-term solution to Bitcoin’s scalability problem. It also manages to significantly lower transaction fees while doing so.

Another plus is the way in which the Lightning Network gives users more control, since anyone can run their own Lightning nodes. Running your own means you can contribute to the network yourself, as well as have full custody of your cryptocurrency, rather than having to trust an intermediary with it.

Running a Lightning node also presents a way to earn bitcoin, by forwarding transactions from other Lightning nodes through your own one. It might sound complicated, but there are several guides out there showing you how to get started.

Would you consider running a Lightning node and earning a passive income from it? Let us know your thoughts!