The lightning network is a second layer payment protocol that operates on top of the Bitcoin blockchain. It’s one of the solutions put forward to solve the bitcoin scalability problem.
This refers to a limitation of the amount of transactions the bitcoin network can process. It currently has an average block creation time of 10 minutes and a block size limit of 1 MB as a result, managing only 3 to 7 transactions per second.
With more demand for transactions coupled with a stagnating transaction processing capacity, fees for sending bitcoin has surged. With the Lightning Network enabling cheap off-chain micro-payments, users can benefit from reduced network fees with this implementation.
You can set up a lightning node using the Lightning Network Daemon (LND)implementation. This is one of three lightning implementations. The other two are C-Lightning and Eclair.
An LND node is comprised of a full bitcoin node (btcd implementation) and the LND infrastructure itself. A large portion of the time involved in setting up a lightning node involves syncing the blockchain data which is well over 200GB. This process can take up to seven days depending on the processing speed of your server/computer.
Lighting node operators make money by routing transactions. The more connected a node is, the more fees it can collect. You can run a node on a Raspberry Pi once you have synced a full copy of the Bitcoin Blockchain.
The costs involved are just the cost of a Raspberry Pi and an Internet connection.
The LN client has an autopilot setting that will automatically connect to the nearest peers. You can also manually connect to any peer if it’s accepting connections and you know its URI.
You could lead the effort to have local merchants in your locality accept LN-enabled Bitcoin payments. So rather than have each merchant open a channel with each customer, your node could be the one that connects merchants to customers.
The LND autopilot feature could be used to manage channels. When sending payments, the client will find the shortest and cheapest route to the destination. A node operator’s job is to create channels with as many local merchants and businesses, so their node is part of the shortest route from customer to merchant.
Your node would have channels open with each merchant node. Any customer that connects to your node can then reach all the merchants on your network, instead of making separate connections. You then collect fees for routing customer payments through your merchant channels.
The more merchant channels you have open, the more transactions you can route and the more fees you collect. You can start out with whatever liquidity you can afford. So if you fund a channel with $100, that is the maximum amount you can transact over that channel.
It also seems the Lightning Network is catching on with altcoins – first Litecoin, now Stellar.
https://www.coindesk.com/stellar-goes-lightning-2018-launch-target/
I see routing fees ranging between 1-10 satoshis once LN payments go mainstream. The biggest adoption might actually come from IoT devices, like the one the Japanese company was testing. If your node routed one million payments a day at 1 satoshi each, that adds up to 0.01 BTC per day. If you charged 10 satoshi each, 0.1 BTC per day. A decent server and good fiber connection could probably handle such transaction volumes.
As long as BTC price is higher than production cost, mining will remain profitable until there is no mining reward. However, that isn’t scheduled to happen until 2140. Mining also requires huge startup capital costs, which makes running LN nodes a better alternative for some. In the end, both the miner earning 12.5 BTC per block and the LN node operator earning 0.01 BTC per day, benefit as greater adoption drives Bitcoin prices higher.
https://en.bitcoin.it/wiki/Controlled_supply#Projected_Bitcoins_Long_Term
So instead of hodling Bitcoin you can use it on these channels..since this market has gone haywire of recent.