Carsten Otto | Connect the World

You started in 2018 with your first node and in 2020 you decided to build/expand a routing node.
What was the trigger to this?

I think I only started taking care of my node in May 2021, I don’t know about anything interesting (node related) that happened in 2020, possibly aside from moving lnd to a different server and picking the alias “c-otto.de”. I don’t remember what exactly made me take care of my node, but I it was a combination of boredom and a rekindling of my initial excitement about the LN. I wanted to understand what my node was doing, how it is being used, and how I could help the network by running it.

Some of our previous guests said that it’s most likely that in the future smaller nodes will disappear and bigger routing nodes with high liquidity channels will remain. What’s your vision on it ?

Bitcoin and LN are permissionless AND extremely interesting. Because of that I believe there will always be several smaller nodes, run by hobbyists and those who want to do their part against centralization. However, I also think that having more liquidity and having “professional” hardware/monitoring/… is necessary to run a successful node that’s used by many people.

For those who want to run a routing node the most valuable asset is to know where the traffic is.
How do you find this information?

First, you can experiment yourself. If you have good inbound liquidity, you can see which of your outbound channels are used, and which are idle. You can tweak your fees to get more insights. You can open new channels and see if they attract traffic. Other than that, lnrouter.app has some good suggestions, and you can also look at the fee rates of nodes like mine to see which nodes require lots of inbound liquidity.

What mistakes do you often see new node owners make?

I believe many node operators are obsessed with balanced channels, in the sense of 50/50. As the author of rebalance-lnd, which for several years tried to reach this 50/50 target, I know the feeling. However, nowadays I believe that it’s more important to have enough liquidity in channels that are large enough.

On your site you describe channel and fee Policy from your node and some other cool things.
Are 3M sats channels the minimum size if you want to be a routing node?

I think we need more categories for routing nodes. One can be a liquidity battery, where several Bitcoin worth of liquidity are made available so that this node helps you reach your destinations reliably. These routing nodes need larger channels, and I think 10M+ should be the lower bound for “interesting” peers like exchanges or service providers. The other category is “edge routers”. Those need to connect to “dark” corners of the network, or fill gaps between two parts of the network. You don’t need a lot of liquidity for these types of channels, but I believe that on-chain costs make smaller channels less attractive.

Another tool that a lot of members of our community use is charge-lnd. With this script Node Operators can automate setting their fees. Can you explain how rebalance-lnd takes into account the future profit you can make on a channel instead of only using proportional rebalancing with charge-lnd?

Rebalance-lnd only considers the fee rates at the time of starting the script. There’s no history of old fees, no knowledge of “magic” like what charge-lnd does, and the script also doesn’t guess how the future might look like. It’s rather simple, in that sense. The script just assumes that the amount you move around as part of the rebalance transaction is routed to the other side, at the current fee rate. If you move 300k sat to a channel where you charge 2000ppm, the script just assumes you’ll earn 600sat in the near future. It also considers the fees you have to pay for the rebalance transaction, let’s say for example 100sat. In total the profit could be 500sat. If you’d earn more than 500sat by routing 300k sat from the original channel, it would be a bad idea to do the rebalance transaction, and rebalance-lnd wouldn’t let you do it. All of this depends on the fee rate, and everything changes if you charge more or less on those two channels. I don’t want to criticize proportional fees too much because many people seem to be happy with it. To me, it seems wrong to lower fees on a channel just because you have a lot of liquidity. Maybe the high fee rate is fine, and you just need to wait a day or two for some large transaction to come through? Why do you want to raise fees only if you don’t have a lot, why not use the higher fee rate for other amounts, too? It’s tricky.

Some members of our community use Zero Base Fee. Of course to support the algorithm and the network, but some also hope for more routing on their nodes. Do you think setting up Zero Base Fee to get more routing?

Today? No. Tomorrow? No. In a month? Maybe. In a year? Yes! #pickhardtpayments will only pick channels with 0 base fee (and if there is a way to allow channels with a non-0 base fee, those will not be as attractive). As such, if #pickhardtpayments are used, node operators with 0 base fee with see more traffic.

You build the rebalance-lnd script to help you rebalance your channels. It’s a real must have for a lot of Node Operators. Why did you build it and what is the best tip for users who start to use it?

When I started running my node, I heard about the importance of having balanced channels, without really understanding the details of that. However, I wanted to fix the issue for myself and started coding the script, because I didn’t find any other tool or command that could help me rebalance my channels. The current version is very different from the one I started with. Nowadays I suggest node admins to just run the script when they want to have more outbound liquidity in a specific channel, assuming they don’t want to open a new channel to that peer. Just target the channel, make sure your fees are realistic, pick some amount around 100k sat, and go. That’s it. Do that a few times until you’re happy with the results, and maybe add some scripts to automate things if you feel the need.

We saw examples of Node Operators using charge-lnd and rebalance-lnd combined? What do you think of that solution? And what is the most important for users to be aware of when automating?

I don’t think it’s a good idea, and it might be risky. One simple issue can be that you use rebalance-lnd to “fill up” a channel, so that charge-lnd lowers the fees. This way you’d earn less in the future, working against the logic that rebalance-lnd used just a minute ago. Whenever you automate something, you need to work in all the decisions that you usually make manually. All safety checks. Make sure the script doesn’t run too often. Make sure it doesn’t do more than you want it to do, for example “rebalancing” a channel until 100% is on your side. Don’t let a script change your fees unless you’d also change the fees manually.

We heard Rene Pickhardt talk about that larger channels will be preferable in path finding for payments and thus getting Node Operators more routing. Is this true? And what channel liquidity would you recommend to Node Operators that want more Routing on their node?

Yes, the core result of #pickhardtpayments is that larger channels should be preferred as they are the best choice given the limited information one has about the network. However, a large channel is only helpful if it connects the sender to the recipient, or at least helps bringing the payment closer to the recipient. As such, one one side node admins should open just one massive channel to the destination, to optimize the chances of being picked for forwarding requests. On the other hand there’s not just one destination, so instead of opening one massive channel it might be better to open two channels each half of that size. If you operate a node with a few BTC or more, I believe that channels should be at least 10M sat in size, at least for channels to “big players” like exchanges.

Will multi part payments cause node operators to open less huge (WUMBO) channels in the future ?

If #pickhardtpayments are used, I believe people will try to have larger channels, not the other way around. In simple terms, if the algorithm has to pick between a 10M sat channel and a 50M sat channel, the larger channel is far more attractive (due to the probability that it has enough for the amount I try to send). As such, node operators with larger channels may attract more routing transactions, and they may charge higher fees.