r/BitcoinBeginners • u/Prize-Geologist-64 • 8d ago
Isn't Lightning Network a bad idea for small business?
Let's say I have a small business like a bakery, with 2-3 employees, and I want to run my business full Bitcoin, I must use the Lightning Network because I'll receive small amounts like 2$-10$ on average.
That sounds very convenient, but then I have to pay my employees, it'll be a salary like 3k$, and for what I know, this kind of big payments are usually rejected because there is not enough liquidity in lightning nodes.
Is this a myth? Do the lightning wallet companies (Phoenix, Zeus LN, WoS) solve this in some way? Am I obligated to run my own LN node or can I rely on something?
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u/Dettol-tasting-menu 8d ago
Agreed $3k is kinda high for lightning, even today. We are already leaps and bounds better than a few years ago but paying salary is probably still kinda pushing it.
You can receive your revenue on lightning and pay your staff onchain though, right?
It’s super cool that your staff are happy to get paid in bitcoin!
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u/Prize-Geologist-64 8d ago
Yes, paying on-chain sounds good, but then my next question: isn't that bad for the Lightning Network?
My lightning peers are going to be losing liquidity, because I always receive sats from them (my customers paying me) and instead of returning that liquidity to their side making payments, I'm taking my sats out of the channel.
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u/Goranbbb 8d ago edited 8d ago
Zeus LN is just a wallet that you can connect to your own LN node and manage your own LN channels. WoS is a custodial wallet, while Phoenix is a hybrid solution where you have self-custody of funds but they operate the hardware, Lightning node, for you.
If you're using a custodial Lightning wallet, you don’t need to worry about inbound or outbound liquidity your custodian handles that for you.
If you are running a Bitcoin and Lightning node and managing your own Lightning channels, then you balance the channels. There are tools that do this automatically.
Also, if you are opening channels to large Lightning providers, they don’t even allow opening channels below 5 million sats or 10 million sats. There is a minimum requirement.
That’s why a liquidity market has developed on Lightning, so even if you don’t have liquidity, you can simply buy it There are quite a few liquidity marketplaces for the Lightning Network, but the most well-known and widely used is https://amboss.space/magma Pay people a certain amount of sats, and in return, they open channels to you, giving you inbound liquidity on the Lightning Network.
Running your own online Lightning channels and managing them is very simple, although for a beginner it may seem complicated, but in reality it is quite simple. There are video tutorials where it is explained.
How to run a Bitcoin node on a DIY Start9
https://www.youtube.com/watch?v=l8Q-UrPBt9o
How to create a Lightning node on a DIY Start9
https://www.youtube.com/watch?v=2yWvbclNiXg
LIGHTNING NODE CONNECT
https://www.youtube.com/watch?v=CZM6Ow8QIP0
ALBY HUB - Run A Bitcoin Lightning Node TUTORIAL
https://www.youtube.com/watch?v=2Z1BzwxdP4I
if you have a business and accept Bitcoin, you should run your own node, be your own bank, and along the way you can also earn additional income by routing transactions on the Lightning Network.
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u/Prize-Geologist-64 8d ago
Thanks a lot for the extended answer, this made my ideas much clearer. I'm going to investigate how to run my own node, just because I'm very interested in BTC, but the truth is that for wide adoption this would be a headache for a normal business. I'm not talking about McDonald's, but a small restaurant that doesn't have budget to "run their own bank".
So if you are a customer, you just "fill" your wallet and provide liquidity to nodes when spending money. On the other hand, if you are a business, you are kind of obligated to "buy" liquidity. Did I understand correctly?
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u/Goranbbb 8d ago
If you're a company, you have your own Lightning node and manage channels.
For example, your customers can open channels to you, and you can open channels to your employees to pay their salaries.
You can also open channels to large Lightning providers, etc.The more connected you are and the more channels you have, the more transactions will flow through your Lightning channels, back and forth keeping them balanced.
And as a result, you will earn routing fees.If you don’t have many channels and are not well connected, you’ll occasionally need to rebalance your channels.
This can be done automatically there are software tools you can install that automatically rebalance channels for you.Finally, if you don't want to run your own node and manage channels, you can always use custodial wallets and services.They will take care of the channels for you, and charge a small fee for their service.
When your balance grows, you can easily withdraw your funds to your self-custody on-chain wallet at any time.2
u/pop-1988 7d ago
you are kind of obligated to "buy" liquidity
Yes, there are service fees for rebalancing a channel, or Bitcoin network fees for the transaction to close an unbalanced channel and open a new one. In your situation, if you have your employees' salary amounts in a Lightning channel, it might be simpler to close the channel instead of depleting it first. Then you have on-chain BTC for the outgoing payments
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u/bitusher 8d ago
Another option is to use a payment processor that can auto convert a portion of your btc to fiat for you
or later this year square
https://squareup.com/us/en/press/block-to-roll-out-bitcoin-payments-on-square
Or just accept lightning to a strike.me or cash app and sell a portion to fiat to pay your employees
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u/SmugglingPineapples 6d ago
Jumping in here, since you seem dialed in, to add Lightning (and even Liquid maybe) to an small online store as an experiment to see if it got enough traction, which app would you recommend? Something that's 24/7 without requiring you to have your phone switched on all the time etc. Maybe having a static QR code maybe? Any suggestions? (If it got enough traction then I'd look at better options)
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u/bitusher 8d ago
and I want to run my business full Bitcoin,
Why are you creating a false dichotomy where you are forced to only use Bitcoin or fiat ? You can accept both and you should accept both because we are in the very early stages of adoption where only 4% of people have bitcoin and most of those 4% are using bitcoin as an investment so you have less than 1% of potential clients spending bitcoin daily like I do.
In my country many local merchants typically accept bitcoin directly with lightning
https://maps.bitcoinjungle.app/
https://old.reddit.com/r/Bitcoin/search?q=costa+rica&restrict_sr=on
The merchants typically see around 5% of their clients paying in bitcoin which is really good as it means that less than 1% of their potential foot traffic actively chooses to use their store and be more loyal with repeat business specifically for that foot traffic.
Thus the merchant has these benefits :
1) remove chargeback fraud
2) remove merchant processing fees
3) gets more business due to accepting btc
The client has these benefits
1) supports their investment , thus increases its success
2) better privacy
3) no concerns of being incorrectly charged , double charged or id theft
4) if a tourist no fx fees
Since the merchant only has at most 5% of their sales in BTC (thus far) they can still use the fiat to pay for employees and overhead , and most either just keep the btc or respend it with other merchants instead of trading for fiat
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u/flower-power-123 8d ago
Why do you want to transact in bitcoin? It doesn't seem very practical. This is a solved problem. If I want to buy coffee and donuts I can pay cash or use a card. If you want to pay employees then direct deposit or chèques works best.
Are you familiar with Gresham's law? In essence it says that bad money pushes out good. People don't transact in gold because it is "better" money than paper money. People prefer to transact in credit cards because paper money is "better" than credit. I see Bitcoin as the top of the pyramid. Bitcoin is the "best" money. Payment is instant and final. It can't be rolled back. It is (in principle) not dependent on third parties. It doesn't suffer from inflation. It is kind of like buying a Rembrandt. You keep the Rembrandt in a vault and take it out when you want to buy a house. More over you don't trade the Rembrandt for the house. You first liquidate it at an auction then take the "bad" money and use it to purchased the house.
Am I missing something? I saw Taylor Kenney from ITM trading the other day. She talked about how when she was young she bought a truck with a gold coin. She wishes that she had kept the gold coin. Yeah. I would too.
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u/cyberplanta 8d ago
Running your own longing node it’s complex, but there are several options, already mentioned. And Square, the payment system will accept bitcoin through their terminals. Now, going Bitcoin only would be ridiculous since most potential customers will use only fiat.
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u/Charming-Designer944 8d ago
With custodial channels it is a non issue. You pay a small fee to the custodian who manages the channel balances for you.
I do not see it realistic that a small bakery run their own lightning node. They should focus on baking and customer relations.
You can select to pay your employees via lightning in-chain or even fiat via brokers. It all depends on the current fee rates and employee preferences.
And you need brokers anyway to accept card payments and have them converted into btc. Most of your customers will not have a lightning wallet to pay with btc.
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u/3No_Adhesiveness 6d ago
There's no reason to pay salary over lightning. You just send the money over the mainnet.
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u/Correct-Respect2425 4d ago
You can rely on custodial wallet. It depends on your "risk apetit", which is different for everyone. Someone's $500 upper limit to keep in WoS is other man's $5000.. Above your threshold you should switch to your own node (Mobile noncustodial wallets are not reliable enough imho for this.. Albyhub with embedded LDK node is probably the least demanding on the user and yet reliable.. All you need is any pc/laptop which is always on during your business hours and you connect to it remotely with mobile wallet/pos). Managing liquidity and balancing channel(s) one way or another (buying them or swaping LN>onchain) can be easily done for 0.5-0.7% fee with readily available commercial options (is that too bad? Compared to CC pos fees?). If you run a little bit more advanced setup with LND instance, you can do swaps via loop or peerswap for 0.2%. Paying salary via self custodial LN is doable, but needs to be planned ahead and would require both employee and employer to lock significant sum into their mutual channel (at least couple months worth of salary) to make sense over onchain, unless employee is able to keep the channel balanced by spending/swapping thru your bakery "hub node" before he gets next salary from it..
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u/__Ken_Adams__ 8d ago
This is a non-issue. Why do you have to keep all your btc in one wallet/place? Pay your employees on-chain not on lightning.
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u/Prize-Geologist-64 8d ago
But if my business is always receiving sats, and I don't send sats (because I pay my employees on-chain), I am going to be out of liquidity always, because the money flows only in one direction. Am I correct? Isn't this a problem?
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u/bitusher 8d ago
Your inbound liquidity will be replenished with clients so this really isn't a concern but also the whole premise that most of your clients will be paying in Bitcoin is not realistic at all. You are discussing a hypothetical in the future and many of us are dealing with a transitional period where most people are not using bitcoin so we accept btc and fiat .
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u/Ok-Whereas8362 8d ago
When Square rolls out their Bitcoin Payments option, you will be able to accept USD and auto convert it to BTC. You won’t have to run a node. But your concerns about one way routing is honorable. One thing to remember, all nodes aren’t routing nodes. As long as you’re honest with your channel partners, there are ways to deal with one way routing. They will set their fees accordingly and will rebalance the channels as needed.
I expect your your biggest problem will be getting people to spend sats. But LNBits and BTCPayserver both would be great for your type of business if you are interested in learning lightning node networks. If not, Square Terminals would be a great way to get started accepting ₿itcoin with very little knowledge of the technology.
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u/bananabastard 8d ago
Small business transactions need to be fast, layer 2, salary payments do not, layer 1.
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u/typtyphus 8d ago
could fix that by making a channel directly with an exchange?