Fee-Based Spam Prevention For Lightning

The email provides a detailed explanation regarding the misconception of earning a risk-free return by routing payments through Lightning Network nodes. It corrects an initial assumption about the possibility of doubling funds every two weeks without incurring any risks or expenses, which is deemed unrealistic. The sender clarifies that the operation of Lightning Network involves both expenses and risks, alongside the fact that channels do not operate at 100% utilization rate. This reality contradicts the scenario where a router could expect to double their money in such a short period by merely facilitating transactions.

Further, the email delves into the specifics of how much a routing node needs to lock in as collateral to cover the maximum possible hold fee for routing payments. For instance, the first routing node in a transaction chain must lock in 10k satoshis to cover the potential hold fee for a transaction of the same amount. In contrast, the tenth routing node would need to secure 100k satoshis for the same purpose, due to the cumulative risk involved in being the final link in the payment chain.

Moreover, the correspondence introduces a more realistic financial model for evaluating the costs associated with running a Lightning Network node. It proposes a cost of capital at 19% per annum, translating into a specific rate of return per hour. Under this model, the maximum hold fee a first router would need to pay is calculated based on their hourly rate of return over a set period (336 hours), resulting in a significantly lower figure than initially assumed. This calculation methodically demonstrates the financial commitment required from nodes at different positions within the transaction chain, adjusting the perceived profitability of operating a Lightning Network routing node.