Bitcoin mining has graduated to the big leagues, from the humble desktop computer to the garage and now to the factory floor that is data centres that dominate hash power generation.
As more hash rate comes online, the competition for fees and the block subsidy rises, and with the halving on the way, a big chunk of those rewards will be reduced for each block mined.
This eventually leads to rewards per miner becoming smaller in Satoshi terms; as each miner starts to stack payments with their pool, it might become harder to withdraw as balances are smaller, coupled with the fact that on-chain fees continue to rise, and certain miners will be stuck with waiting for inflexible and possibly higher payment thresholds.
To offer up a solution, NiceHash, one of the many mining pools competing for miners’ hash rate, has announced they’ve beaten other pools like OCEAN to become the first to offer Lightning Network payouts for miners.
This is exciting news for some Bitcoin miners as it offers miners more flexibility when accessing their capital with faster and more efficient payouts and could encourage the pleb miner and garage mining operation to get back to hashing if they are confident that payouts come around a lot sooner.
What’s the big deal about Lightning Network?
For those unfamiliar, the Lightning Network is a revolutionary technology built on top of the Bitcoin blockchain. This second layer allows for faster, cheaper, and more scalable transactions compared to traditional Bitcoin transactions.
This is particularly beneficial for smaller miners who deal with infrequent, smaller payouts and have had to leave it with the mining pool because they’re not worth moving on-chain or having to deal with an increased cost of moving funds in the future. Each time you withdraw, you increase the number of UTXOs in your wallet, meaning you require more on-chain resources to perform a transaction when it’s time to make a payment.
NiceHash heats up competition for hashers
NiceHash has been quiet on the Lightning front despite offering payouts for some time; it’s been more of a well-kept secret. Prior to this announcement, they already offered manual Lightning Network withdrawals. However, the new ability to set up a withdrawal address takes it a step further by enabling fully automated and instant payouts directly to an external Lightning Network address.
Setup takes a few seconds, and payment shouldn’t be an issue, as NicheHash has a pretty robust routing node. NiceHash runs Lightning Network payouts without 3rd party partnerships, with everything hosted in-house. The mining pool operates one of the oldest and biggest Lightning Network Nodes on the planet. Currently, there are more than 1,250 opened channels and more than 180 BTC in capacity.
Benefits for miners
This advancement offers several advantages for miners using NiceHash:
- Faster Payouts: No more waiting for slow blockchain transactions. Miners receive their earnings every 4 hours, significantly improving cash flow.
- Reduced Fees: Forget about hefty transaction fees on the Bitcoin blockchain. Lightning Network transactions are significantly cheaper, boosting your overall mining profits.
- Increased Flexibility: Miners have the freedom to choose their preferred Lightning Network wallet for receiving payouts, offering more control over their finances.
How to get started with Lightning payouts?
If you’re already mining with NiceHash, you can easily take advantage of this new feature. Simply update your settings to choose a Lightning Network address for your payouts. New miners can sign up on the NiceHash platform and experience the benefits of instant Lightning Network payouts from the get-go.
Payouts can be set up to support Lightning withdrawals by updating your Split Payment option. This feature was initially set up to allow miners to divide mining proceeds among multiple wallets, help with coin control, or divide payouts with organisations and allocate specific percentages to each address.
To set automated Lightning Network payouts, navigate to Rig Manager and follow these steps:
- Open Payout Settings inside Rig Manager
- Enable Split Payment
- Add a Lightning Address
- Set 100% to the newly added Bitcoin Lightning Network withdrawal address
- Click Apply
Note: The minimum percentage is 1%. You can also set 100% to an external address for automated withdrawals to your external Bitcoin wallet. If a withdrawal fails for any reason, the unsuccessful portion will be transferred to the organisation’s user wallet. From there, it can be manually withdrawn by either the owner or a member of the organisation.
Lightning Network mining payment fees
If you’re planning on sticking with NiceHash for the long term or you want to avoid paying routing fees, you can set up a channel directly with NiceHash and enjoy 0 fees.
This can be pretty helpful if you’re getting regular satoshis stacking in your NiceHash account; you can quickly deploy it to rebalance your channels.
If you’re not running your own Lightning node and you’re planning to use a third party or an LSP, check if they have a direct channel with NiceHash first, or simply pay the fee for dynamic routing at the time of payment.
This is Lightning, of course, so it will be way cheaper than on-chain in any case, so it might not be that big a deal.
What is the minimum Lightning Network withdrawal amount?
The minimum Lightning Network Mining withdrawal is ten satoshis.
But that doesn’t mean you’ll always be able to request a withdrawal for that low fee; sure, if you have a direct channel, go nuts with frequency.
But if you’re using a third party, consult your wallet provider or exchange first about the minimum number of satoshis you can deposit.
What Lightning Network wallets are supported?
NiceHash doesn’t support invoices or keysend payments, and the only way for their node to action a withdrawal is with wallets that support the now popular Lightning Addresses.
Lightning Address is a protocol that allows users to send and receive Bitcoins via LN to an email-like address instead of an invoice; in other words, it is like an email address but for Bitcoin.
If your wallet doesn’t support Lightning Addresses, you’ll need to migrate to one that does or use a Browser wallet like Alby that can route payments to your node or wallet and set up an address there.
ASICs and Lightning nodes get cosy
NiceHash’s instant Lightning Network payouts mark another step forward for Bitcoin mining. Offering faster, cheaper, and more efficient transactions sets the industry standard, forcing other pools to offer the same service or risk losing their hash power to competing pools.
This type of competition in the space is much needed, as it breeds innovation and getting miners to support the wider Bitcoin ecosystem like layer twos brings much-needed liquidity, too.
Having ASICS feed Lightning nodes with liquidity could provide new avenues for mining pools and miners alike; instead of only focusing on earning from securing the main chain, they can deploy idle capital to Lightning and try to earn routing fees, too.
Mining pools will need to continue to improve their offerings to differentiate themselves; this could be through proposals like FediPool or even assigning a peg-in system for side-chains to allow miners to withdraw their funds on the Rootstock or Liquid side-chain instead of the base chain.
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