Channel Mining
With LN Node, users can earn via Channel Mining, an innovative way to earn rewards by providing liquidity and facilitating transactions on the Lightning Network.
Last updated
With LN Node, users can earn via Channel Mining, an innovative way to earn rewards by providing liquidity and facilitating transactions on the Lightning Network.
Last updated
Channel Mining Rewards is limited to one channel per LN Node
To be eligible for the Channel Mining earnings (estimated 10%+ APY), users would need to prepare to open a Channel with Lnfi:
Minimum channel capacity: 1,000,000 sats
Maximum channel capacity: 10,000,000 sats
*The channel capacity cap will be lifted in the future
Channel Mining is fully secured by Lightning Network without the need for intermediaries or third-party trust as funds are held under users’ self-custody on the Bitcoin mainnet. Additionally, the funds provide liquidity and opening payment channels, actively contributing to the Lightning Network ecosystem. This sets Channel Mining apart from most existing BTC Layer 2 (L2) or bridging solutions. Here's a simple explanation of how it works and why you can earn from it:
Provide Liquidity: Set up your LN Node, then deposit some of your Bitcoin and lock it in your Lightning channel, making it available to facilitate transactions in the Lightning Network.
Facilitate Transactions: Your channel helps facilitate transactions between other users, making the network faster and more efficient.
Earn Rewards: Incentives are given for providing this contribution to the ecosystem, your locked Bitcoin in the channel will earn you a percentage return.
In the current phase, creating either $BTC channel or Taproot Assets channel will earn you rewards in $TRICK/$TREAT based on the APR calculation. The funding source for $TRICK/$TREAT Rewards is allocated from the existing Lnfi Team Allocation.
channelCapacity is the effective $BTC capacity in the opened channel.
Effective $BTC capacity = Local Balance (Balance on Your LN Node available for deposit to Lnfi Node)
Red = local balance = BTC on your balance. (✅Benefit from Channel Mining)
Yellow = remote balance = BTC on Lnfi's balance (❌Does not benefit from Channel Mining)
miningRate varies by the type of LN Node. e.g. LN Node OG Series has a miningRate of 120%.
channelMiningPower demonstrates the efficiency of the channel in performing Channel Mining.
duration is the number of active days mined during the calculated period.
totalChannelMiningRewards is a monthly rewards amount decided by Lnfi or, at a later stage, protocol token holders through a governance proposal.
channelMiningRewards is the monthly rewards amount that the user would receive.
Random snapshots will be consistently taken throughout the month, and their averages will be calculated to determine the final amount.
Channel mining rewards will be distributed every month.
In the context of the Bitcoin Lightning Network, a payment channel can be closed by either party involved in the channel. There are two types of closures: cooperative and uncooperative (or forced) closures.
Cooperative Closure: This is when both parties agree to close the channel. It typically results in lower fees and faster settlement on the Bitcoin blockchain. Both parties sign a closing transaction, and the channel is closed in a mutually agreed manner.
Uncooperative (Forced) Closure: This can occur if one party decides to close the channel without the cooperation of the other party. This type of closure usually happens if there is a dispute or if one party goes offline for an extended period. The party initiating the forced closure broadcasts the latest state of the channel to the Bitcoin blockchain. This process involves higher fees and a delay, known as the "penalty period," during which the other party can contest the closure if they have evidence of a more recent state.
Yes, there are some risks associated with losing assets deposited into a Lightning Network channel, but these risks can be mitigated with proper precautions.
Node Security: If your LN Node is compromised (losing of seed phrase or your private keys), an attacker could potentially steal your funds. It's crucial to ensure the security of your seed phrase and private key and to follow best practices for cybersecurity.
Network Fees: High on-chain fees can impact your ability to close channels profitably, especially during times of high network congestion.
