Host Your Own Bitcoin and Lightning Network Node

Disclaimer: Don’t be discouraged if you’re just discovering Bitcoin, because this article is aimed at an experienced audience! You can absolutely benefit from the Bitcoin network without understanding or taking into account what follows.

What is a Bitcoin node?

(Bitcoin node = Full Node)

To begin with, the word Bitcoin refers to two distinct things.

• A network: The Bitcoin network is a distributed, peer-to-peer network.
• A token: bitcoin is also the unit used on the Bitcoin network. Its maximum supply will be 21 million bitcoins, with a declining rate of inflation over time, until 2140. It is divisible to 8 decimal places, called satoshis. 1 bitcoin = 100,000,000 satoshis.

Running a Bitcoin node means storing a complete copy of every transaction on the network since its creation. This lets you know the history of token issuance and distribution.

Having a node does not necessarily mean mining bitcoin (participating in its issuance process). It is also possible to use the network without running your own node.

What is the Lightning Network?

The Lightning Network is a second-layer network built on top of the Bitcoin network to address its shortcomings.

The main network was designed above all to be incorruptible and decentralized. It has succeeded brilliantly at this, but the main network is not suited to small everyday payments:

• Transaction confirmation takes 10 minutes;
• Transaction fees range from 10 cents to €30 depending on network congestion (€0.70 at the time of writing).

The Lightning Network enables instant, free bitcoin transactions with an excellent level of security and decentralization.

We’ll cover this topic because it is very easy to add a Lightning Network node to your Bitcoin node.

1. The benefits of a Bitcoin full node

A) Don’t trust any intermediaries

When you use a Bitcoin wallet, it connects by default to the wallet developers’ node. They have no control over your funds, but you trust them to provide you with an accurate view of the network.

There are two major risks associated with delegating this trust:

• Corrupted information: a malicious actor could deliberately provide you with false information about the network.
• Privacy: your wallet communicates your Bitcoin addresses to the service provider so it can check their balances. The provider links your bitcoin addresses to your IP address.

When you run your own node, you consult the ledger yourself and avoid both problems. What’s more, to protect your privacy, you can run your Bitcoin server on the Tor network, which hides your IP address.

B) Don’t trust, verify!

One of the best-known maxims among Bitcoiners is “Don’t trust, verify!”

Bitcoin was created to enable exchanges of value between parties who do not trust one another. They do not need to trust the other party to a transaction, since everything can be verified.

• Bitcoin’s code is open source and freely available for inspection.
• All transactions have been recorded since Bitcoin’s creation.
• The creation of new tokens is strictly limited, predictable, and verifiable in real time.

Once you have installed a Bitcoin node at home, you can verify all these parameters yourself, at any time.

• Does Bitcoin Core’s code contain backdoors? Verify it!
• Is the transaction you’re sending or receiving actually on its way? Verify it!
• Are large wallets selling or continuing to accumulate? Verify it!
• Have Satoshi Nakamoto’s bitcoins moved? You know what to do.

Someone who says, “I don’t own bitcoin because I don’t trust it” has therefore not fully understood how it works. The solution is to verify the specific thing they do not trust.

Unlike a bank, you don’t have to “trust” Bitcoin. It is a neutral protocol in which everything is readable and verifiable.

C) “Vote” by choosing your version of Bitcoin Core

Like the internet, Bitcoin is not managed by any company, association, or corporation. It is a network of participants running compatible versions of the same protocol.

There is no voting right within the Bitcoin network.

Nor is there any representative authority embodied by miners.

As Francis Pouillot puts it so well: “Bitcoin is not a democracy!”

Network participants express themselves by running the version of the protocol they prefer. Everyone is free to modify the Bitcoin protocol and run their own version (provided they have their own node).

The only important condition is to remain compatible with the rest of the network. If you change a parameter intrinsic to Bitcoin itself, you will be separated onto a new network.

For example, if you decided to change the amount of bitcoin in circulation or increase the block size, you would become incompatible with the other network participants (a hard fork).

One of the best-known cases is the creation of the Bitcoin Cash network. Some participants decided to increase the block size of the Bitcoin blockchain, splitting the network into two different, incompatible versions.

Since there is no vote, each user decides which version of the protocol to support and use.

Five years later, we can consider the Bitcoin Cash network to be very much in the minority. Its founders did not manage to persuade users to follow them. The original Bitcoin network has far more computing power (miners) and nodes. This episode nevertheless put the contentious governance of a leaderless network into practice.

I recommend this excellent interview with Francis Pouillot by the “Parlons Bitcoin” channel to understand the conflict between the two versions of the protocol.

2. Explore the Lightning Network!

A) Use Lightning without an intermediary

The Lightning Network is quite complicated to understand. It was therefore important that anyone could use it without necessarily having to understand it (just as anyone can use the bank card system without prior training). Wallet developers such as “BlueWallet” and “Wallet of Satoshi” have therefore built the network mechanics into their apps, allowing your mother to send and receive satoshis.

However, for the sake of decentralization and to avoid trusting anyone, seasoned Bitcoiners will want to manage their funds on Lightning themselves.

They will therefore create the payment channels that make up the network themselves. Their task will then be to choose the best possible peers and manage their inbound and outbound liquidity.

In part 3, we’ll see how to manage your Lightning node easily.

B) Become your own bank—and your family’s

It seems obvious that not every network user will want or have time to manage a Lightning node. However, they can choose to whom they delegate the management of their liquidity.

By default, they will be connected to their wallet developers’ node. However, BlueWallet lets users connect their wallet to a node of their choice. Why not become the liquidity provider for your friends and family?

Indeed, we can easily imagine a future in which every family or village uses a shared routing node. After all, doesn’t every family have its own Wi-Fi router today?

C) Provide liquidity to projects you support

Want to support a platform or a friend in managing their Lightning node? Connect to them!

You can connect your nodes and open a channel together. This will increase your connectivity within the network and provide liquidity to their node.

For example, an online store that accepts Lightning payments through its own node would need inbound liquidity. By opening a channel with it, you will let its customers use that channel to pay for their orders.

You will, of course, be compensated with a small fee for providing this service. Returns from a routing node are fairly low, but it lets you earn a little while remaining the owner of your funds (you manage your private keys). Users only move liquidity between your different channels; your funds remain under your control.

3. How to set up your own node at home easily

The Umbrel solution

Rather than running my Bitcoin node directly on my computer by installing Bitcoin Core, I chose to configure a small, dedicated Raspberry Pi computer.

I then installed the open-source Umbrel software, carefully following the instructions on its website.

This software makes it easy to install and manage a Bitcoin and Lightning node, without any particular technical skills.

Here’s an excellent tutorial on installing an Umbrel node from the Découvre Bitcoin channel!

BONUS: A 3D-printed case for your node

Here is the work of a Bitcoiner who makes cases for your nodes. Each one is custom-made to order!

You can see their creations and contact them on their Twitter account!