Lightning Fees

Lightning fees are dramatically lower than on-chain Bitcoin fees. Instead of paying by transaction size, you pay routing nodes a small amount for forwarding your payment.

Why Fees Matter for Agents

Aspect	Impact
Micropayments	Fees must be tiny for small amounts
Routing	Fees affect path selection
Economics	High fees make some payments uneconomical
Predictability	Fees are known before payment

Fee Structure

Lightning fees have two components:

Base Fee

Fixed amount charged per forwarded payment, regardless of size.

base_fee = 1000 msat (1 satoshi)

Proportional Fee (Fee Rate)

Percentage of payment amount, expressed in ppm (parts per million).

fee_rate = 100 ppm = 0.01%

For 100,000 sat payment:
proportional_fee = 100,000 × 100 / 1,000,000 = 10 sats

Total Fee Calculation

total_fee = base_fee + (amount × fee_rate / 1,000,000)

Example:

• Amount: 100,000 sats
• Base fee: 1000 msat (1 sat)
• Fee rate: 100 ppm

fee = 1 + (100,000 × 100 / 1,000,000)
fee = 1 + 10
fee = 11 sats

Fee Comparison: Lightning vs On-Chain

Payment Size	Lightning Fee*	On-Chain Fee**
100 sats	~1 sat (1%)	~200 sats (200%)
1,000 sats	~2 sats (0.2%)	~200 sats (20%)
10,000 sats	~3 sats (0.03%)	~200 sats (2%)
100,000 sats	~11 sats (0.01%)	~200 sats (0.2%)
1,000,000 sats	~101 sats (0.01%)	~200 sats (0.02%)

*Assuming 1 sat base fee + 100 ppm, single hop **Assuming 1 sat/vB, ~140 vbyte transaction

Key insight: Lightning wins for smaller payments.

Multi-Hop Fees

Fees accumulate across each hop:

Alice → Carol → Dave → Bob
        fee=5   fee=3

Bob receives: 100,000 sats
Dave charges: 3 sats → Dave receives 100,003
Carol charges: 5 sats → Carol receives 100,008
Alice sends: 100,008 sats

Fee Accumulation

def calculate_route_fee(amount, hops):
    """
    Calculate total fees for a route.
    hops = [(base_fee, fee_rate), ...]
    """
    total = amount
    for base_fee, fee_rate in reversed(hops):
        fee = base_fee + (total * fee_rate // 1_000_000)
        total += fee
    return total - amount

Typical Fee Ranges

Node Type	Base Fee	Fee Rate	Use Case
Hobbyist	0-1 sat	0-50 ppm	Community support
Routing node	0-1 sat	50-500 ppm	Balanced
Well-connected	1+ sat	100-1000 ppm	Premium routes
Private	Variable	Variable	Custom agreements

Zero Base Fee

Some nodes set base_fee = 0 for:

• Better micropayment support
• Path selection algorithms favor them
• Philosophy (proportional-only)

Setting Your Fees

Via LND

# Update channel fees
lncli updatechanpolicy \
  --base_fee_msat 1000 \
  --fee_rate_ppm 100 \
  --chan_point abc123:0

Via Core Lightning

lightning-cli setchannel CHAN_ID 1000 100
# (base_fee_msat, fee_rate_ppm)

Dynamic Fee Strategies

def adjust_fees_by_liquidity(channel):
    """Higher fees when liquidity is scarce."""
    local_ratio = channel.local_balance / channel.capacity

    if local_ratio < 0.2:
        # Low outbound, charge more
        return {"base": 2000, "rate": 500}
    elif local_ratio > 0.8:
        # High outbound, charge less to encourage flow
        return {"base": 0, "rate": 10}
    else:
        # Balanced
        return {"base": 1000, "rate": 100}

Fee Optimization for Agents

Minimizing Costs

1. Fewer hops: Direct channels avoid intermediary fees
2. Low-fee routes: Use pathfinding with fee limits
3. Batch payments: Combine when possible (MPP)

Setting Fee Limits

# LND: Maximum fees
routes = lnd.query_routes(
    pub_key=destination,
    amt=amount,
    fee_limit={"fixed_msat": 10000}  # Max 10 sats
)

Fee Budget

def calculate_fee_budget(amount, max_percent=1.0):
    """Calculate max acceptable fee."""
    return int(amount * max_percent / 100)

# For 100,000 sats with 1% max
budget = calculate_fee_budget(100000, 1.0)  # 1000 sats max

Fee Economics

When High Fees Make Sense

• Unique routes: Only path to destination
• Large payments: Fixed cost amortized
• Time-sensitive: Pay for reliability

When Low Fees Matter

• Micropayments: Fee > payment = useless
• High volume: Fees compound
• Competition: Others offer lower rates

Break-Even Analysis

For routing nodes, profitability requires:

revenue = (payments_routed × avg_fee)
costs = (channel_opening + rebalancing + operations)

profitable if: revenue > costs

Fee-Related Failures

Error	Meaning	Solution
FEE_INSUFFICIENT	Your fee too low	Increase fee limit
INCORRECT_CLTV_EXPIRY	Fee changed	Refresh route
Route not found (with budget)	No cheap route	Increase budget or direct channel

LNURL and Zero Fees

Some services absorb fees:

• LNURL-pay: Service pays routing fees
• Lightning Address: Provider handles fees
• Custodial wallets: Internal transfers free

Related Topics

• Routing - How fees affect path selection
• Liquidity - Rebalancing costs
• Invoices - Fee information in invoices
• BOLT-07 - Fee announcement format

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Machine-Readable Summary

{
  "topic": "lightning-fees",
  "key_concepts": [
    "base-fee",
    "proportional-fee",
    "ppm",
    "multi-hop-accumulation"
  ],
  "typical_values": {
    "base_fee_msat": "0-1000",
    "fee_rate_ppm": "1-500"
  },
  "formula": "total_fee = base_fee + (amount × fee_rate / 1_000_000)"
}