Lightning has been on an explosive growth tear lately in terms of more liquidity coming to the network. Since the start of 2021, the network has grown from 33,000 or so channels to more than 65,000. The amount of bitcoin in those channels has grown from around 1,000 BTC to almost 2,500. This is widely viewed as a massive indicator of success, and it is, but it is starting to illuminate a growing divide in attitude about what will actually dominate the incentives of individual node operators in the future. This rapid growth has led to a diminishing return in routing fees for node operators, and some of them don’t care.
Since the launch of PLEBNET (not to say this is causally related, just when it started coming to my attention), I have been seeing more and more Lightning node operators espousing the attitude that they do not care about earning routing fees for running their node. This stands in complete contrast to all of my long-term thinking about how the Lightning Network will evolve financially. And I don’t mean “don’t want to earn a profit” in routing, I mean literally not charging routing fees. This seems completely irrational in terms of economic incentives, and for any misrepresentation of the reasons people want to run a node like this I apologize. To me it seems like people want to engage in this behavior out of a sense of altruism and to maintain Lightning as a “pleb-owned” piece of financial infrastructure. I don’t see this as economically sustainable.
Conventional Thinking Of Profit Incentives
Before we get into the dynamic of profit, let’s just consider the cost side of things. In order to close and open a Lightning channel you have to transact on-chain, which incurs a miner fee. This
