If you have even a passing interest in Bitcoin and it’s future, you should be running a Bitcoin Lightning Network Node.
I know, I know, you probably think that running a Bitcoin node is only for “shadowy super coders” or hard-core Bitcoin enthusiasts with a technical background. You probably even heard Elon Musk say recently that “the average person is never going to be running a full node. But in fact, NOTHING could be further from the truth. Especially today, in light of recent developments.
And in this post, I’m going to explain not only what a Bitcoin node actually is, but also, the many reasons why you – yes, you – should definitely be running one.
What Is A Bitcoin Node, Anyways?
Before we dive into the reasons, I really quickly want to explain just what a bitcoin “full node” actually is – and what it isn’t. I can’t tell you the number of times I mention to people that I run a full node, and am met with all kinds of questions that demonstrate their lack of understanding. Questions like:
“Doesn’t that consume a ton of electricity?”
“Whoa, so you’re actually mining new Bitcoins?”
Or
“Damn! How much are you making every day?”
So first things first, what is a Bitcoin node?
Think of it this way: As you probably already know, The Bitcoin “blockchain” is a decentralized ledger, duplicated and independently maintained on hundreds of thousands of computers all over the world. Each of these computers has its own copy of the blockchain – which is around 500 gigabytes at the time of this recording – and each one of them independently verifies each block, and therefore, each transaction.
A “full Bitcoin Node,” therefore, is just a computer that maintains its own, entire copy of the blockchain. This might sound resource intensive, but because of the decisions that have been made throughout the years by the Bitcoin developer community, you can actually do this on a simple, $100 Raspberry Pi and a cheapie 1TB SSD. I’ll explain why in a second, when we compare the idea of mining versus running a full node.
Here’s one thing that’s important to understand: no matter how you interact with the Bitcoin blockchain, you’re using a full node – whether it’s yours or not. That node is serving you the information you need when you receive transactions or check balances, and is broadcasting your transactions to the rest of the network, too. In the early days of Bitcoin, everyone running Bitcoin was actually running a full node. But over time, this changed to make Bitcoin more user-friendly, mobile, and so on. Today, in most cases, my wallet provider – someone like Trezor, BlueWallet, or WalletOfSatoshi – is letting me use their full node to verify and send transactions. We’ll touch on that again later.
Now, you’re probably wondering:
What’s the difference between running a full node and mining?
Great question. This can be confusing, because mining operations are, in fact, running a full node in order to be able to stay up-to-date with the Blockchain, and know which problems they need to solve in order to find the next block.
There is a BIG difference, though, in what these types of nodes do. In the case of mining, extremely powerful computers – or whole warehouses full of computers – are using immense amounts of computing power and electricity to solve extremely difficult mathematical and cryptographic problems in order to find the next block.
A full node, on the other hand, is just verifying that the given solution is correct. You see, whereas a full node does independently hash and verify each transaction and each block, it does so only in the way that a math professor checks an exam with the answer key in hand. This is why running a full node takes so little processing power – and can be run on a computer the size of a credit card, with less than $5 a year in electricity costs. It’s a lot easier to verify the correct answer than it is to actually find it. This is one of the core tenets of the Bitcoin Blockchain, and the reason it’s so much more decentralized than something like Ethereum. Bitcoin’s community believes that anyone, with simple, cheap hardware and a slow internet connection, should be able to run a full node, ensuring that many people will, and that the blockchain remains highly decentralized.
Ok, so now we know what a Bitcoin full node is, and what it isn’t… but why the heck would the average person spend even $300 of their hard-earned money to build a full node? What do you actually stand to gain from it?
Let’s start from the top, with perhaps the most attractive and “sexy” reasons, and then work our way up to the more philosophical ones.
1. Access To The Unfettered Lightning Network In A Non-Custodial Way
I don’t know about you, but the first time I actually used The Lightning Network was through my own node. This is because using The Lightning Network requires a full node, where the funds will be stored in so-called “payment channels.” Traditionally, this meant that you either needed to use a custodial lightning service that would create channels for you and hold your funds on their own node, or run your own node to access lightning in a non-custodial way. Of course, in the last few months, a few different types of non-custodial solutions from folks like Breez and Bluewallet have cropped up allowing you to create a Lightning Node on your phone, but truth be told, if you really want to have full control over your funds, without trusting anyone at all, you need to set up your own Bitcoin + Lightning Full Node.
This is doubly true if you want to run more advanced applications of The Lightning Network, such as the BTCPay payment gateway and Point-of-Sale terminal, the LNBits wallet manager that allows you to create subaccounts for friends and family, and more.
2. Earn Money Routing Transactions
OK, let’s get to the good stuff. Probably the most attractive aspect of running your own Bitcoin Lightning Network Node is the prospect of earning some money routing transactions.
Yes, that’s right. Though your average node does not “mine” transactions, and therefore doesn’t earn any Bitcoin on the layer 1 blockchain, you can in fact earn money by routing payments on The Lightning Network.
By creating large channels and maintaining liquidity in both directions – in other words, the ability to both receive payments on channels and send payments on other channels – you can act as an intermediary between people trying to make payments. By doing so, you’re able to charge a small fee as a percentage of the amounts routed.
Many people online will tell you that there’s no real money in doing this – and that the profits amount to a few cents every day. But truthfully, many people who take running their routing node seriously are earning tens of thousands of dollars a year doing so, as one tweet from Lightning Labs’ Alex Bosworth recently revealed. Though there is definitely a “long tail” here, there’s also money to be made for those who are willing to commit a large amount of Bitcoin into channels, and a large amount of time and energy on managing their node properly.
If you’re interested in improving your rankings and performance as a routing node, I suggest checking out my playlist of Lightning Network Tool Tutorials.
3. Truly Understand Bitcoin (and Lightning Network)
Warren Buffet famously said, “never invest in something you don’t fully understand.” But let’s face it: Bitcoin can be confusing, complex, and difficult for the average person to understand. I mean, how does it all actually work?
This complexity and inaccessibility is compounded when it comes to Bitcoin’s second-layer, Lightning Network. Even experienced Bitcoiners can get confused by how Lightning works. Channels? Multi-signature wallets? Hashed Time Lock Contracts? It can be a lot.
That’s why, in my experience, the best way to truly understand Lightning (and Bitcoin as a whole) is to actually tinker with it – using your own node. (For those of you who don’t know, my “fiat job” is teaching accelerated learning online, so I can confidently tell you that the best way to learn is by doing!) Fortunately, without risking or committing huge amounts of capital, you can play around with both Bitcoin and Lightning, open some channels, make some payments, receive some payments, and get a feel for how it all works.
But, in my opinion, you won’t truly understand the inner workings of Bitcoin or Lightning if you use one of the easy-to-use, “done for you” wallets out there like Breez or Muun. If you really want to understand and internalize the decentralization of Bitcoin or the revolutionary potential of Lightning Network, you have to go through the steps of setting up your very own node.
4. Support the network
As I mentioned before, decentralization is one of the most important aspects of Bitcoin. It’s what makes Bitcoin resistant to government sanctions, censorship, fraud, theft, or acts of terrorism against the network. Bitcoin cannot be shut down or hacked, because in order to do so, you would need to shut down and/or hack hundreds of thousands of computers all over the world – at the same time.
By running your very own full node, you are contributing to this anti-fragility. Of course, it’s unlikely that there will ever be a situation in which every other node is destroyed, and your node is the one that must be used to restore the Bitcoin blockchain to a functioning network. But, with each additional node that goes online, the network becomes stronger. Each additional Bitcoin node is one more failsafe against attack or shut-down attempt. Each additional node acts as a relay point, providing the blockchain to 10 other new nodes downloading the blockchain. And of course, each additional node provides just a little bit more computing power in verifying the work of the miners, ensuring that they are doing an honest job in mining Bitcoin, securing the network, and powering transactions.
So, while most of the credit typically goes to the Bitcoin miners for securing the network, the fact of the matter is that full, non-mining nodes are just as important in securing the network, by providing decentralized and censorship-resistant backups, and by policing the miners themselves.
If you have money invested in Bitcoin, then you no doubt want to see the system succeed, and defend it against hackers, governments, and so on. The best way to protect your investment – besides maybe writing to your politicians and continuing to orange-pill your friends and family – is by contributing to the ecosystem, in any way you can. For most of us, that may not mean running mining rigs or developing new protocols for the network, but rather setting up a full node on your desk at work.
5. Trust No One
Another one of the key ideas in Bitcoin is “don’t trust, verify.” The entire foundation of Bitcoin is the idea that we shouldn’t have to trust our peers, intermediaries, banks, governments, or anyone else in order to conduct commerce. This is a truly revolutionary idea in the history of humanity – the idea that we can interact with a system, and with others, without actually having to trust anything or anyone.
….and yet, every time you use a Bitcoin wallet that depends on a node you don’t run, you are, in some small way, trusting someone else. You are trusting that their node is 100% up-to-date, that they haven’t tampered with the node, that they aren’t supporting any weird hard-forks of the code, and that they will keep the node online so that you’ll be able to access your funds. Granted, because you can take your backup seed phrase to any other wallet – assuming you use a real wallet and not something like Coinbase – that level of trust is minimal. But it’s still not 100% trustless.
This is where running your own full node, from a philosophical standpoint, really makes sense. No matter what wallet I’m using – whether the one on my node, or my “cold storage” wallet like a Trezor or Keystone, I am verifying transactions through a node that I know is reliable, honest, up-to-date, and trustworthy. I know that my node is reliable because I have watched it independently verify every single Bitcoin transaction ever created, dating back to January of 2009.
6. Privacy
Yet another one of the key tenets or values in the Bitcoin community is that of privacy. Bitcoin transactions are anonymous, with varying levels of privacy depending on how you use the network, and on whether you’re transacting on the main-chain or Lightning Network. Since the beginning of Bitcoin, the idea that you should be able to transact without revealing your identity has been increasingly enforced with layer after layer of privacy-focused improvements and features.
…and yet, the way that most people interact with the Bitcoin blockchain gives them minimal – if any – privacy whatsoever.
How can this be? Well, as I mentioned before, every time that you use a wallet app such as Trezor, Samourai, BlueWallet, etc, you are relying on their Bitcoin full node, and their servers. This means that in order to send a transaction, you are unwittingly associating your IP address with your wallet address, and hoping that they don’t store this information somewhere. The same is true of using a Block explorer to search for transaction history, whether your own or someone else’s. You are communicating that your IP address is linked to or interested in that transaction or address, and hoping that nobody takes note. Granted, modern Bitcoin wallets generate a new address every time you do a transaction, and chances are, most block explorers are not logging your IP address – but how can you be sure? And what’s more, how can you be sure that your internet service provider, the NSA, or some other government body isn’t storing that information? If Edward Snowden has taught us anything, they probably are.
When you run your own, full node, on the other hand, you don’t need to give up this level of privacy for convenience. You transact through your own node, submitting transactions to it, which are then submitted to the rest of the network – sort of like a VPN. What’s more, most full nodes today run on the TOR network, a highly private onion routing service, making them extremely hard to locate or trace. What’s more, you can easily install your very own block explorer such as Mempool.space on your own node, so that you don’t have to worry about your IP being logged if you want to look at the history of a transaction or browse any aspect of the history of the blockchain. You can do it all locally, on your own node.
While you’re probably not too worried about this level of privacy, you should be. Recently, with the ill-advised infrastructure bill, the US Government has begun taking draconian measures to try and KYC, or “Know Your Customer” participants in blockchain transactions, and it’s only a matter of time until they try to gain more insights into who is doing what on the blockchain. They are already trying to demand that wallet developers gather and submit information about their customers – how long until they start demanding for the IP addresses and transactions of those same customers – or digging through the petabytes of data the NSA collects on citizens worldwide every year? Though I’m sure many wallet developers are tried-and-true Bitcoiners who will do everything in their power to resist this type of tyranny, they are nonetheless highly visible targets for the government to go after when looking for information – just like they’ve already done with the exchanges.
The best way to defend yourself against this is to support the decentralized nature of Bitcoin. Run your very own full node, behind a TOR proxy, and use it for any and all transactions or searches you do of the Bitcoin Blockchain.
OK, but, how?
Hopefully, I’ve convinced you that it’s worth your time and money to set up your very own Bitcoin node. But how do you do it?
In the past, setting up a Bitcoin node was tricky, and required you to understand a little bit about software. This was doubly true if you wanted to set up a Lightning Node alongside it.
But today, it literally couldn’t be easier. In fact, all you have to do is follow the instructions on https://getumbrel.com. You simply download a piece of software, and the Umbrel operating system, and flash that operating system onto an SD card. Then, you plug in the power cable, an ethernet cable, and the USB cable from your solid state disk, and you’re done. Yes, seriously, it’s that easy, and within a few minutes, you’ll be able to log in and watch the progress as your machine verifies the blockchain. Within a week, you’ll have the entire blockchain, and you’ll be able to start reaping the benefits.
You’ll find everything you need, including links to which gear to buy, on Umbrel’s website… But, if you check the link in the description, I’ll share with you some of the optional, “fancier” pieces of equipment that I’ve used to upgrade my node.
Oh, and make sure to check out some of the links below, where I’ll share some video tutorials that have helped me get up to speed on Lightning Network and operating my own node.
So, there you have it. The 6 TOP reasons for running your very own Bitcoin node, plus how to actually do it.
I really hope you’ve enjoyed this post, and if you have, please take a moment to share it with a friend, and subscribe to my Bitcoin-focused YouTube channel, where I’m putting out new content every single week just like this.
Take care, and Happy HODLing!