Blockchain developer proposes ratecards for Bitcoin Lightning node fees

Developer Lisa Neigut, known as NiftyNei, has posted a new proposal to allow Bitcoin Lightning Network nodes to advertise tiered rates for forwarding fees. Her proposal would enable operators to broadcast Lightning node fees using four standardized tiers based on the capacities of their nodes.

Node operators could charge a proportionately higher rate for channels that leave a buffer of outbound capacity to transmit future transactions. The proposal suggests setting four tiers based on the percentage of capacity left open for future transactions. Neigut suggests default tiers at 0-25%, 26-50%, 51-75%, and 76-100%; and suggests four, 16-bit integers to represent these percentage ranges.

She mentioned that more formal rate cards could also allow negative fee rates for some tiers. The current system of broadcasting fees through the so-called “gossip” text messaging system does not make it easy to set negative fees.

In the proposal, Neigut suggested that node operators are already adjusting their fees based on their channel capacity. The developer said the four-tiered rate cards could provide a more efficient way to broadcast their intentions than using Lightning Network’s gossip messaging.

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Of course, allowing negative fee rates would get rid of payment base fees. It could also provide incentives to increase inbound capacity for frequently used channels. 

Neigut credited Clara Shikleman for initially proposing negative fees as well as ZmnSCPxj’s comments on the variability of a Lightning channel’s liquidity value.

Reactions to Neigut’s Lightning node fees proposal

Someone on the Lightning-Dev mailing list asked how users could estimate fees when they open a Lightning Network channel without using a third-party service to collect that information. 

A member of the mailing list known as ZmnSCPxj answered, “The sender optimistically tries a route with a particular fee rate, and if that fails, tries another route”.

“If the path at the lowest cost fails, you just try at another route that may have more hops but lower effective cost, or else try the same channel at a higher cost.”

The LN «fee ratecards» proposal is awesome
The introduction of negative fees will have a significant impact on your ability to easily rebalance channels, but could also reduce routing fees for most operators

This ties nicely with the valve control idea of @renepickhardt

— Gigi ??? (@GuerillaV2) September 28, 2022

Influential Bitcoin analyst at Galaxy praises Neigut’s Lightning fee proposal.

The few reactions to the tiered rate card proposal on Twitter were mostly positive. Gigi, a Bitcoin mining analyst at Galaxy Digital, called it an excellent way to rebalance channels and reduce fees.

Who Is Lisa Neigut?

Lisa Neigut joined Blockstream as a software engineer in 2018. Her previous experience includes a position as a software engineer for Square and Android developer for Etsy. She is an influential Bitcoin and Lightning Network developer.

Her projects include developing the “Prometheus” plugin, which could send data from c-Lightning nodes to Prometheus to generate graphs of node statistics.

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