How to install, configure a Lightning Network node and start making money from it [ENG]

How to install, configure a Lightning Network node and start making money from it

coinspot.io

5 min

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The Lightning Network (LN) is currently the most promising solution for scaling on the Bitcoin network. Proponents of LN say that the speed of the Bitcoin network could grow from the current seven transactions per second (TPS) to several million.

This is astronomical scalability in this day and age, and it will probably take decades for the crypto industry to reach this throughput. However, anyone can create and configure their own Lightning Network node today.

We previously provided a detailed explanation of how the Lightning Network works , and in this article you will see a step-by-step guide on how to install and deploy your own Lightning Network node.

What is a Lightning Network node for?

Whenever the number of people wishing to make a transaction on the Bitcoin network increases, the network fee also increases, while the payment processing speed remains very low. This is exactly what happened during the height of market activity in December 2017, when a transaction on the Bitcoin blockchain could take several days or cost $50 if you wanted to send your funds faster. This state of affairs becomes a serious obstacle to the mass recognition of the main cryptocurrency.

Here's why you should create and configure your own Lightning Network node:

• if you are really interested in the success of Bitcoin, then creating a node will contribute to greater decentralization of the Bitcoin blockchain and the LN network;
• you will be able to send and receive micropayments (or even large payments) almost instantly and at a very low commission;
• you will be able to earn a small income from transactions that go through your payment channels.

How to install and configure a Lightning Network node

There are several Lightning Network implementations, however this guide will only cover Eclair as it is the most user-friendly and user-friendly.

Download and set up the Bitcoin blockchain: First of all, you should download Bitcoin Core (this is the Bitcoin wallet and its blockchain) and run it.

The Bitcoin blockchain takes up over 200 GB, and you must have enough hard drive space to accommodate it. While the blockchain is loading, you can edit the configuration file by making the required settings.

Open the bitcoin.conf file in the application - select Settings → Options → Open Configuration File. (An alternative is to navigate to C:\Users\[user]\AppData\Roaming\Bitcoin in your file system).

If you cannot find the file in the Bitcoin folder, then you need to create it. To do this, create a .txt file in Notepad and paste the following lines:

testnet=0

server=1

rpcuser=username [username]

rpcpassword=password [password]

txindex=1

rpcport=8332

zmqpubrawblock=tcp://127.0.0.1:29000

zmqpubrawtx=tcp://127.0.0.1:29000

addresstype=p2sh-segwit

deprecatedrpc=signrawtransaction

Replace "username" and "password" with your own information. Close the text file, saving it as bitcoin.conf. Make sure you end up with a .conf file and not a .txt file. Next, all that remains is to wait for the entire blockchain to be synchronized. This may take several hours or days depending on the speed of your Internet connection. Once synchronization is complete, you should restart the program.

Download and configure Eclair. You should download the LN node implementation called Eclair. Next, open the clair.conf file in the C:\Users\[user]\eclair directory. Be sure to click “View hidden files” in the “Explorer” settings of your computer on the “View” tab. Enter the following lines in the clair.conf file:

eclair.chain=mainnet

eclair.node-alias=”node-alias”

eclair.bitcoind.rpcport=8332

eclair.bitcoind.rpcuser=username [username]

eclair.bitcoind.rpcpassword=password [password]

eclair.bitcoind.zmq=”tcp://127.0.0.1:29000″

eclair.server.public-ips = [“xxx.xxx.xx.x”]

eclair.node-color=”ffffff”

This will connect Eclair to the Bitcoin Core mainnet. The "username" and "password" must exactly match what was entered in the bitcoin.conf file.

Eclair and Bitcoin Core must run simultaneously. If everything is working fine, then the Eclair node should open as an interface, not an error message. In the bottom row you will see your private LN public key. In the lower right corner you can confirm your connection to the network.

Channel opening

Finally, it's time to open channels and start sending/receiving Lightning Network transactions. You can use a special search engine for LN - the site 1ml.com, which allows you to find the required nodes, study important statistics and even provide a snapshot of the network.

When you find the node you want to be associated with, click Channels →Open Channel, then copy the node address and paste it into the Target Node URI. Your Capacity (bandwidth) cannot exceed the available balance of your Bitcoin wallet.

Fee rate is your node’s commission, which you set yourself in order to allow this or that payment through your node. The commission must be fair. Don't set your fees too high, otherwise no one will want to make payments through your node. You can also use the standard rate that Eclair software recommends.

If you want other network users to find your node, you need to check the Public Channel box.

Click Connect to create your first payment channel. The State section will indicate WAITING_FOR_FUNDING _CONFIRMED - until the transaction is fully confirmed in the blockchain; After this, the label will switch to NORMAL.

Your node can only send and receive payments on the Lightning Network. Therefore, you need to send the payment to yourself from another Lightning Network wallet or ask a friend to make a payment from their wallet so that you can open a receiving channel. Once you've done this, you'll be able to easily send and receive Lightning Network payments.

Although the LN system allows you to receive instant payments with small fees, it is still in beta testing (the network is not fully developed). Do not store your investment funds in Lightning Network wallets; and most importantly, do not send large payments on this network. There is always a small chance that you could lose your funds. In any case, you should be careful when handling your money.

If you want to send bitcoins worth more than $200, then you are better off using the regular Bitcoin network. The Lightning Network has not yet fully entered our lives, and all of the above can be considered as a call to join the experiment and gain some experience with payments on this new network.

However, you can probably find hundreds of online stores that accept LN payments, and shopping there can also be of practical benefit to you.

The process of setting up the Lightning Network seems a little difficult, but it can end up being very rewarding for you given the low fees and instant transactions of this Bitcoin network.

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