Replying to Avatar ⚡Lightning Goats⚡

The Clarity Act (H.R. 3633) is an Attack on the Lightning Network.

(First try had copypasta issues)

H.R. 3633 effectively transforms any Lightning node earning routing fees—even a single millisecond satoshi—into a fully regulated “Digital Commodity Broker” under CFTC oversight. Operators must shoulder the burden of comprehensive AML/KYC programs, segregate customer funds with qualified custodians, and meet stringent capital and reporting requirements. For large exchanges and custodial services, compliance may be feasible, but for hobbyists and small‑scale operators, these obligations are prohibitively complex and expensive.

The apparent workaround—setting routing fees to zero—only deepens the problem. Zero‑fee channels quickly drain outbound liquidity without any mechanism to rebalance or recoup on‑chain costs. As balances skew and HTLC timeouts rise, routing algorithms bypass these unprofitable channels in favor of better‑managed peers. In practice, a fee‑free node ceases to be a viable routing partner, rendering the “unregulated” option functionally useless for contributing to network traffic.

By forcing a choice between untenable regulation and unsustainable fee‑free operation, H.R. 3633 squeezes hobbyists out of the Lightning ecosystem. Without thousands of small, independent nodes to provide path diversity and resilience, routing power becomes concentrated in a handful of well‑funded custodians. That centralization undermines Lightning’s core strengths—decentralization, censorship resistance, and an open‑access peer‑to‑peer fabric—and jeopardizes the network’s long‑term health.
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Trivium 5mo ago

It looks like section 409 has the protections needed for the Lightning Newwork and any node runners. Full text of the section below:

SEC. 409. Exclusion for decentralized finance activities.

The Commodity Exchange Act (7 U.S.C. 1 et seq.), as amended by the preceding provisions of this Act, is amended by inserting after section 4u the following:

“SEC. 4v. Decentralized finance activities not subject to this Act.

“(a) In general.—Notwithstanding any other provision of this Act, a person shall not be subject to this Act and the regulations promulgated under this Act based on the person directly or indirectly engaging in any of the following activities, whether singly or in combination, in relation to the operation of a blockchain system or in relation to decentralized finance trading protocol:

“(1) Compiling network transactions or relaying, searching, sequencing, validating, or acting in a similar capacity.

“(2) Providing computational work, operating a node or oracle service, or procuring, offering, or utilizing network bandwidth, or other similar incidental services.

“(3) Providing a user-interface that enables a user to read, and access data about a blockchain system.

“(4) Developing, publishing, constituting, administering, maintaining, or otherwise distributing a blockchain system other than a decentralized finance trading protocol.

“(5) Developing, publishing, constituting, administering, maintaining, or otherwise distributing a decentralized finance messaging system or decentralized finance trading protocol, or operating or participating in a liquidity pool with respect thereto, for the purpose of executing a spot contract for the purchase or sale of a digital commodity.

“(6) Developing, publishing, constituting, administering, maintaining, or otherwise distributing software or systems that create or deploy hardware or software, including wallets or other systems, facilitating an individual user’s own personal ability to keep, safeguard, or custody the user’s digital assets or related private keys.

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