#GN.

Just spent tonight trying to explain #Bitcoin and also the #LightningNetwork to a friend tonight over whiskey.

He was selling trainers and got asked if he would accept crypto to which he replied "bitcoin only"

(🤜🤛) and they said okay.

He asked me what the best way to accept was and since he only has #PhoenixWallet (why are they not on nostr?!?!), I suggested that but his channel was £30 in total size and the shoes were going to be £120 so first hurdle: liquidity.

We checked what the cost would be to add the appropriate liquidity (£7) and added that and the shipping cost to the amount, relaxed the incoming payment fee limit, and created an invoice and sent it with a small itinery explaining the total (£120 + wallet fees + shipping)

The wallet actually told us that it would charge about £4, not £7 when we created the invoice.

First lesson, buying liquidity is more expensive than just naturally growing your channel via a payment.

Only buy liquidity if you are in a low fee environment and forsee the need for more liquidity later and think the fees might go up at the worst time. Don't do it for a one off payment before attempting to receive it.

The alternative would have been to accept an on chain payment. I wasn't sure what service fees it would charge so I sent myself money to see what it would be instead of him finding out later.

As a sender I pay a mining fee of about £2.35. As a receiver I also pay a mining fee as it injects the new funds into my channel. This was a bit cheaper at about £2.04.

Second lesson, if you're going to pay fees to receive lightning bitcoin, consider accepting on chain and adjust the amount to cover fees, it is comparable in fees, but will likely feel cheaper for the recipient as you demand less and the miners demand the rest, they also have the optionality to pay less as you will only ship the goods when the payment is confirmed.

I imagine that this buyer is not going to understand the lightning payment, and will ask for an on chain address and an amount. I think this because they asked about accepting "crypto" and my confidence in them knowing about Lightning is low. In this case, everything will work out.

I then proceeded to try to explain lightning channels and liquidity and why it is different to custodial wallets like Coinbase that relies on trust like the banks.

Takeaways I could summarise AFTER breaking his brain:

1. Many payments can be completed before paying miners, so 100 payments with a £4 fee is better than 100 payments with £4 fee each (£400)

2. The network works because the funds are stuck in a 2 party address, but you can only play back and forth with the amount in that address (aka channel) -- this one is a little hard to grasp IMO.

3. There is only a limited number of ways to cheat, its cheaper and easier to not cheat and the technology ensures that your partner won't cheat because the chances of getting caught is high and the penalty is high too.

4. Phoenix is your LSP, like an internet service provider, they are your gateway to the rest of the network. So you can only receive from the internet whatever is available in the channel for Phoenix to give to you.

5. There are administration tasks: opening a lightning channel, expanding it, and taking from it... they all require mining fees and sometimes service fees.

6. See point 1, if you keep within your channel limits (he related it to a credit limit but there is no credit), then its all cheap and simple, but in this case, it wasn't simple 🙃.