- Accepting Bitcoin as a payment method can be very expensive if you’re not careful
- The Lightning Network is designed to allow Bitcoin to scale and become more efficient
- Fees to use the Lightning Network and its security features make it just as expensive as using Bitcoin without any Layer 1 scaling solutions
If you’ve ever tried to run a business that accepts Bitcoin as the sole payment method and you’re using a 3rd party payment provider, then there’s a good chance that you find using Bitcoin rather expensive. Couple this up with poor wallet choice that doesn’t allow you to adjust the network fees you’re paying and you can run into one hefty bill for accepting Bitcoin.
In steps the Lightning Network to try and make Bitcoin more scalable for small transactions. But, is the Lightning Network actually worth it? Many people tend to agree that it’s more of a fad than a useful tool, and I fully agree, especially when you factor in all the fees.
Get Ready to Pay a Small Fortune in Fees
When you make a Bitcoin transaction, you need to pay transaction fees, and it’s these fees that many people hope to avoid by using the Lightning Network. However, in order to fund your Lightning Network channel, you need to make a transaction – hello fee set number one. When you make a transaction in the Lightning Network, it costs you a tiny amount of sats. According to data from 1ml.com this fee is rather negligible as it’s around 0.000001 sats (that’s $0.000000000096149)
Finally, once you’re ready to close your channel and take your Bitcoin back out of the Lightning Network, you need to push the transaction data to the blockchain, incurring yet another transaction fee. According to data from Blockchain.com, the current average fee per transaction is just over $5.70. You’ve made two of these hefty transactions, meaning you’re down around $11.40.
But Wait, There’s More!
As it stands, you need to make sure your Lightning Network wallet is online periodically in order to prevent malicious parties stealing your Bitcoin. This can be done by the other party broadcasting unfavorable commitment transactions that will move the funds in your channel to them. In order to prevent this, you have to make sure your wallet is online once every 2016 blocks, that’s around once every three and a half hours. If for some reason you’re facing a power outage or your wallet crashes when you’re not around to fix it, you open yourself up to potential theft.
You Can Pay to Protect Your Channel
In a bid to fix this, BLW update 0.2-76 introduced Watchtowers. These Watchtowers create a blob of signatures and public keys that are required to punish a user that tries to steal. The blob is saved into a BLW database for safe keeping. Then, after each incoming payment, the Watchtower will check these against the blobs in the database to see if any match. If any of these matching blobs appear then the Watchtower will broadcast a punishment transaction, restoring your Bitcoin to your wallet.
Unfortunately, running a Watchtower of your own is rather expensive, largely due to the cost of the data that it will consume. So, here you’ve got two choices. You can either bite the bullet and run your own Watchtower to protect your transactions or you can connect to a Watchtower.
One popular Watchtower service called Olympus costs 1,000 sats for 50 tokens. Each token gives you 20 blobs (transactions). So, if you’re going to make a lot of transactions on the Lightning Network, you’re going to need to fork out for quite a few tokens. Let’s say you buy a pack of tokens three days, you’re looking at about $10 a year at the current Bitcoin price.
The Final Bill
If you’re running the Lightning Network to process payments and you only cash out your Bitcoin once a year, you’re looking at a total cost of $12.40 at the current Bitcoin price. While that sounds rather cheap compared to other payment provider options for fiat payments, in reality you’re going to withdraw your Bitcoin from the Lightning Network far more often if you’re running a business.
Are There Any Better Options?
If you’re starting to weigh up the costs of using the Lightning Network, then you’re going to want some other solutions. Popular options include using a different cryptocurrency that’s designed for payments and scales well. DASH, Neo, DigiByte, and Bitcoin Cash are all amazing options that are well worth considering if you’re looking to make speedy and cheap transactions.
